Published 8 April 2008
3 former owners of North South Finance Ltd have set up a new property finance business, DBR Ltd, opening the first day after their 2-year restraint of trade ended.
North South Finance was formed in November 1999, offering short-term finance, bridging loans & general mortgage finance. Dominion Finance Holdings Ltd made an offer for it at the end of 2005 in a move to expand its own loan book and settled on the $38 million purchase on 31 March 2006.
North South’s owners were property investors Brett & Ross Lornie, lawyers Craig Alexander & Debra Dorrington, Mark Auld and the company’s chief executive, Darryl Eastgate, & his wife Karen. After the sale to Dominion, Mr Eastgate initially stayed on before setting up his own small finance business.
He & Lornie family interests own DBR, with Mr Eastgate & Brett Lornie as directors.
In North South’s first year under Dominion ownership, it increased net profit after tax by 124% to $8.4 million ($3.75 million the previous year) and total assets by 24% to $139.7 million ($112.9 million). In the next 6 months, to September 2007, North South increased net profit after tax by 26% to $3.4 million on revenue up 13% to $12.3 million. It increased total assets by 7% to $147 million, while total liabilities rose 6% to $130 million.
6 months before the Dominion purchase, North South said it had a $75 million loan book funded from first-ranking secured debenture stock & $9 million of shareholders’ funds. At the new business, the shareholders have put in $7.5 million and have secured a $20 million facility from ASB Bank which, as Mr Eastgate said today, “is no mean feat in this market”.
He said the big difference between their North South business & DBR was that “we’re not debenture-funded this time round”. The focus is again short term – less than 12 months – & bridging arrangements, “bread-&-butter first-mortgage stuff, not sexy mezzanine”.
Mr Eastgate made a telling comment about the success of the North South operation, the similar intent of the new business and the difficulties other financiers have got themselves into with mezzanine operations topping up banks’ priority securities: “We never did a lot of that (mezzanine) at North South – it never made sense in the old days to get 20% on mezzanine when you could get 16% on first mortgage (including a 2% fee). Why take the extra risk?”
Brad Mower, who joined North South in late 2005 and stayed on after the Dominion takeover, has moved to the DBR startup as senior manager, writing business. In a property market where many are unable to source any finance, Mr Mower said DBR wasn’t about to rush headlong into a multitude of loans, but it has signed up its first client in the first week.
There’s plenty of banking experience in DBR, and plenty of property knowledge as well. Mr Mower spent 23 years working for the Bank of New Zealand, Countrywide Bank & AMP’s property finance unit, mostly in business banking & property finance sales roles. DBR director Brett Lornie was chief manager property finance for the National Bank (and also Countrywide) for 10 years and the Lornie family owns & manages a large property portfolio, mostly Auckland retail.
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Attribution: Phone interviews, story written by Bob Dey for this website.