Showcase Auckland hotel Westin Lighter Quay in chaos

As many as 100 lay-offs are tipped at the five-star development in Auckland's Viaduct Basin following High Court action by approximately 100 unit titleholders to cancel the leases on the 114 rooms.

Receivers Korda Mentha is acting as receiver for Bank of Scotland, the primary creditor to the $130 million development, which was undertaken by businessman Nigel McKenna, through his company, Melview Viaduct Harbour.

The receiver intends to try to operate the hotel on the remaining 60 rooms and has barred unit owners from accessing their properties, while declining to take up an offer of arbitration.  The unit holders offered to buy out the remainder of the development and re-establish a basis for the whole hotel complex to remain operating.

The hotel is fully booked during next year's Rugby World Cup.

"There is a very real potential here to badly damage New Zealand's tourism brand, throw into disarray the plans of hundreds of guests booked for the 2011 Rugby World Cup, cost jobs and be a black mark against New Zealand's international reputation as a safe place to invest," said Graham Wilkinson, a lawyer acting for the 100 unit titleholders.

The owners had offered to buy out the Melview assets in the hotel, which is managed as a web of separately titled properties, including the restaurants, bars and other revenue-generating guest services, under the Westin brand.

Receiver Michael Stiassny issued a statement saying "no reasonable offer was tabled."

Wilkinson said while Melview had offered investors in the complex guaranteed returns for three years, these were not paid, and buyers discovered they were liable for hidden costs of more than $2.5 million annually in rent for the commercial spaces in the complex. 

Auckland City Council rates had also been found to be unpaid, said Wilkinson.