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New Zealand property investors lose millions after developer goes bankrupt

Dan McEwan was adjudged bankrupt in the High Court at Auckland over a $978,000 debt. Troubled finance company Hanover Finance told the court it was also owed $4 million by McEwan.

But the debts could be much higher. McEwan's lawyer had earlier told the Auckland District Court that his 70 year old client, who claims his only source of income is a pension, owed in excess of $100 million.

McEwan also faces being sentenced in the District Court for breaching the Securities Act by offering investments without a registered prospectus or investment statement.

The maximum penalty is a $300,000 fine but as McEwan is bankrupt it is not clear what the court may do.

McEwan led the Investors Forum, a group which held seminars to promote property investment and offered the opportunity to buy shares in developments many of which failed.

The latest is the former Dunedin Chief Post Office which was to be redeveloped as a Hilton hotel. South Canterbury Finance, which is owed $5 million, has put the property to mortgagee sale.

McEwan bought the building in 2006 for $7 million and sold apartments and suites in the yet to be built development. The property has a current rateable value of $5.7 million.

A large scale redevelopment of the spa town Waiwera, north of Auckland, has also run into problems. In a letter to investors last week, McEwan's son Kelly said the land's value had fallen by 40% and was likely to go to mortgagee sale.

Some property investors have lost everything. Entrepreneur Basil Walker attended one of McEwan's his first Investors Forum seminars. Now he is owed $1.68 million he invested in a Queenstown property that was never developed and subsequently went to mortgagee sale.

The Walkers have lost their house over the failed deal, and do not hold out any hope of seeing their money again. Walker says McEwan revalued the property for development purposes and took $3 million out of it.