BELLA VISTA FINANCIALS DIDN’T ADD UP – SOURCES
Bella Vista Homes was destined to fail, according to ex-workers from the failed Tauranga development and a detailed examination of its financial records.
Those involved in the collapsed subdivision say the numbers behind the Pyes Pa development never added up, leaving it short of critical infrastructure, such as retaining walls. They say that houses were sold for less than they cost to build.
Some properties in the development, which left the owners of 21 shoddy houses battling Tauranga City Council for compensation, had a build budget of $1550 a square metre and could never have turned a profit, former staff and contractors said.
They believe the upfront money from the price of the land was spent on other building projects and the losses on the builds themselves meant the company would eventually be faced with liquidation.
One of the first homeowners in the development said he was told by Bella Vista Homes director Danny Cancian, ‘‘I lost $100,000 on your house.’’
Documents reveal the house cost $342,000 to construct, but Cancian only charged $275,000 for it.
Compounding these losses was the missing retaining wall that eventually sparked safety fears and resulted in the homes being declared unsafe. It would have cost between $3 and $3.3 million to construct – but money was never budgeted for it.
‘‘I’ve always wondered why that retaining wall was never built first,’’ one of the homeowners, who declined to be named, said. ‘‘That was the major cause of our problems.’’
A report by QC Rhys Harrison comparing all the sales data condemned Bella Vista Homes’ sales ethics and confirmed numbers also crunched in an investigation by Stuff.
Harrison said Bella Vista Homes (BVH) was taking money for houses it could never have delivered.
‘‘The company was offering a good-quality product in a desirable location for a low cost,’’ Harrison said.
‘‘BVH’s homes manifested a chronic lack of proper workmanship, reflecting a systemic degree of professional and commercial ineptitude,’’ he said in his report.
‘‘The evidence suggests that BVH could not have successfully built the houses to an acceptable standard within its agreed cost constraints.’’
Harrison said the most obvious failure was the lack of retaining walls.
‘‘If BVH had costed the . . . retaining walls into its contract prices evenly across 21 properties, it would have added another
50 per cent to the base building contract price.’’
Documents from firms Kwanton and Veros Property Service Ltd sighted by Stuff put an estimated build price at
$2350sqm.
An industry expert consulted for comparison put his absolute best price for the time period, with next to no profit, at $2200 per square metre.
Even with large margins on the land, paid upfront by homeowners, the losses from the builds dragged any profit down to below zero.
Bella Vista Homes director Danny Cancian said he kept reducing the prices of the first houses until they came down to a point where people would buy them.
‘‘Sold that back to them for
$210,000 . . . sold the back one for $265,000, which was all profit. ‘‘The first ones were cheap. I started them out on Trade Me and got no interest, so dropped them until we did. The market decided the price.’’
He paid $135,000 for the sections and said it cost only $40,000 to subdivide them. This formula gives an upfront profit margin in land alone of $2.3 million.
GST equated to $570,000 on the sales, leaving $1.73m ‘‘on paper’’ in June 2016. House builds were funded through progress payments. Despite this buffer, less than a year later, Bella Vista Homes was in liquidation with
$4.1m in debt to contractors, building suppliers and IRD.
Calculating the losses from the reported house sales shows Bella Vista was losing between $67,500 and $110,000 per house if the cost to build remained constant.
Cancian said ‘‘$1.3 million in cash’’ went to his former business partner and that the partner got most of the profit.
But this payout did not occur until 12 months after upfront fees were paid. On top of that, he said $250,000 was spent on wages during a five-month period where no work was being completed due to council orders.
When asked whether Bella Vista Homes was making money, Cancian replied that yes, of course it was.
Asked why Bella Vista Homes didn’t have any, he said the answer was complicated.
Cancian said there were other business interests Bella Vista Homes was trying to start at the same time the development stalled.
‘‘These projects were funding those ones,’’ he said. ‘‘I was trying to get the next ones off the ground.’’
Questioned about the building cost of the houses, Cancian said the office lady didn’t know how to assign costs to houses.
‘‘We ended up finding $400,000 worth of invoices sitting in a top drawer that hadn’t been put into Xero.
‘‘They weren’t putting right invoices to what jobs so couldn’t get a clear picture of what our costs were.’’
However, others involved in
‘‘If BVH had costed the . . . retaining walls into its contract prices evenly across 21 properties, it would have added another 50 per cent to the base building contract price.’’ Rhys Harrison QC
the development believe it was clear the financials didn’t stack up.
EY, the firm tasked as liquidator, said several suspicious transactions were made by Bella Vista Homes into companies of which Cancian was the director at the time.
Cancian confirmed Bella Vista Homes was used to purchase building materials which he said were then onsold to Canconstruct Ltd, of which Cancian was a former director, but has since been replaced by his wife.
These materials were used to construct houses on Gyle Place that sold for a total of $2.5m after Bella Vista Homes went into liquidation.
Cancian said this was done to take advantage of bulk-buying deals.
Andre Stewart, who has been left without a home because of the debacle, said he could not understand where all the money homeowners were putting into the company went.
‘‘We assumed the money we paid him was going to be paid out to the subcontractors who were building the houses, but it obviously hasn’t been,’’ he said. ‘‘It must be somewhere.’’