Dunedin City Council's Delta rescues Hanover at Jacks Point
Chris Hutching | Thursday July 9 2009 - 08:03am
Dunedin City Council-owned electricity contractor Delta has bought 100 sections at the 700-lot Jacks Point development in Queenstown that were earmarked for troubled Hanover Finance.
Jacks Point developer John Darby confirmed that Hanover had not been in a position to settle on the last 100 of 350 sections it had contracted to purchase.
“Before these deals occurred there were 50 built sections in the Highlands area and another 50 larger sections in the N6 and N7 areas that Hanover was due to settle on." Mr Darby said
"They couldn’t settle and Delta had come on the scene so we did a bit of a swap around involving two other areas, N2b and N3 that were earmarked for Fletcher Residential.
“They comprised the last 50 of the 200 sections Fletchers had contracted to buy. But they hadn’t been built yet so it made more sense to sell them the built sections at the Highlands that Hanover couldn’t settle on.
"We also had another 50 available sections for Delta. The upshot was that Delta took out 100 sections and Fletcher settled earlier for its last 50 sections,”
Hanover had recently re-launched the Highland sections at prices between $280,000 to $325,000 for 1000sq m compared with $550,000 to $650,000 two years ago.
Mr Darby said Hanover was probably “a little ambitious” in its original pricing. He said the re-pricing of real estate at Jacks Point made for attractive buying.
The word he was hearing from local realtors was that inquiry levels were building but actual sales were still slow.
He noted that residential property as an asset class continues to outperform other investment classes.
Commentators often failed to appreciate that different sectors of the property market were performing better than other sectors and averages and medians tended to over generalise what was occurring.
Mr Darby and his development partners still retain some development land at Jacks Point and involved in the neighbouring 700-lot Henley Downs development, largely sold down to Australian company, Babcock & Brown, currently selling assets and raising capital to reduce debt.
Mr Darby estimated it would be a couple of years before further development took place there.
Meanwhile, lines company Delta has expertise in servicing new sub divisions but has recently become involved as an owner, buying a half share from Jim Boult in an uncompleted 150-lot sub division at Luggate.
Delta spokesman Steven Wilson declined to reveal details about the latest deal but disagreed that Delta was “buying work”.
The company hopes to recoup its investment relatively quickly based on historical sales levels. But the current level of section sales at Queenstown is low. In May there were nine section sales in the area taking on average 106 days to sell.
The price paid by Delta remains confidential but the company is expecting a margin above 15% after development costs of about $60,000 per section.
Roughly half this cost relates to compliance issues, resource management and building consents and development contributions to the local council.
The Fletcher Living precinct at Jacks Point of about 40 constructed homes are being advertised at between $795,000 to around $12 million, similar to levels they were originally launched at a couple of years ago.
Other property advertised on Tradme and various real estate web sites offer properties for sale “by negotiation”.
The golf course and clubhouse at Jacks Point have been completed but a proposed commercial and village development around the clubhouse and lake, in conjunction with Canadian resort company Intrawest, have been placed on hold until market conditions improve.
The precincts at Jacks Point are marked on maps available on its web site of the same name.
