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Dunedin City Council's Delta rescues Hanover at Jacks Point

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.
 

More by Chris Hutching

Comments and questions
23

This article gives some indication of why residential section proces are so high.

60k per section for development costs, singnificantly for running around asking permission from the government to develop your own land. Most of these costs should not exist, and/or should be recovered over 40 years rather than adding onto the cost of the section.

That leaves $220k for 100 square meters of raw land, or $2.2million per hectare. Raw land should only cost $50k per hectare, for prime agricultural land, even at today's agri-bubble prices.

And that is just the section prices, not the construction costs, also over-inflated by excessive compliance costs and building regulations.

Nice of the Councils (or their henchmen investment companies) to rescue these outfits using the ratepayers money.

First Christchurch with Henderson now Dunedin with Watson & co.

Does it not occur to these guys that there is a reason those section aren't selling?

This stinks to heaven, if I would live in Dunedin, I would organise a major campaign to revolt against such obvious boy work schemes funded by ratepayers!!

The old boys network is alive and well, instead of spending on infrastructure and creating jobs, mates bail out mates, this stinks to the highest level. What possible reason would the ratepayers of Dunedin have for investing in this! Jacks point is a joke from the day it was conceived, Fletchers are bailing because the havent sold a single property & their showhome has been on the market for three years.

When firms get involved in areas that are not their expertise. then that is when things go wrong. Something smells wrong with this deal

what is it when things go wrong the idiots come out to play. surely the business plan didnt have Delta owning property. Delta have been sucked in to a looser takes nothing scenario "this is as good as it gets" " what other option do you have" the other option was to wind up the developer and work with the Bank in a syndicate to move the property. Being the sole owner of something you didnt initiate - goodness knows what will pop out of the woodwork.. be like the Sofitel QTN .. units sold with no land title and the owners didnt realise.

I'm speculating that Delta had to take sections to limit their debt exposure to Jacks Point, as services to the development ran over budget and are supposedly in the tens of millions.
Don't know if its buying work or recouping its losses.... probably a little of both..

I was in Queenstown last week, in fact Mark Hotchin was on the return flight! - Had a drive around Jack's Point - like a ghost town, can't see much future there even at the new low prices they are still too optimistic and Dunedin City council likely to lose money - big money!

There were only two sites where any work was happening, one show home was closed nobody visiting the Fletcher one and only half a dozen cars in the golf club carpark even though it was a perfect day in the first week of the Winter Festival.

Dunedin City ratepayers will be interested to know of this approx $25,000,000 purchase - if financed it will eat approx $1.8m of interest every year the sites sit idle.

So, on a one day visit to Jack Point, Robert can give a definitive answer on its housing potential, its golf course popularity, and its general prospects. Very dangerous, Robert, to make statements without broader research. For example, the day I drove in to look over Jacks Point, there was activity, a busy club house and I couldn't get on the course for quite some time. Unlike you, I came away with admiration for those who had the guts and vision to undertake such a development.

where the hell is Rodney Hide.......... Probability having a Pinot at rancho hendo in Gibbston valley.

Yet again the DCC proves it is a joke - only interested in blowing more ratepayers dough. They are building there own shopping mall in town too - just another way of trashing the cities cash for the benefit of some mates I guess. They make themselves the laughning stockof the country - but the locals don't know as the mafia owns the newspapers and radio station. They govt should step in and dismiss the council really.

You can see the headlines in a few years "DCC have decided we are not in property developement and are selling to Shaddy Dev Co"

Under questioning after the deal closes DCC acknowledge "yes we did take a bath and lost a few million"

After NBR look at the companies office, yes the directors of Shaddy Dev Co were involved in the collapse of NonTransperant Finance Co in 2008.

Pehaps Mark manages to buy the property back by mortgaging his home on Paratia Drive.

The money go round, or should I say the bad loan go round continues with the Dunedin Rate Payer firmly in the gun sights.

Hi there. Hope y'all read this -
there is a quick and easy way of destroying a council forever - and its simple. get together all your mates, all the people who hate what the council does. Gather e in a church hall - and get the number big, say 10,000 + - there are easily that many disgruntled in Dunners.
Find something very specific that you object to - and there should be quite a few lawyers in Dunedin who can help you draft what laws are being broken. Who knows, perhaps the RMA is being violated !
At any rate this is going to have to stick up in court.

The big mistake is to attack the council - this accomplishes nothing, as the council structure has legal protections. This is the great answer -

10,000+ charges, laid through the Police, against individual council members responsible for having a law or some other violation broken under their aegis. $5000 fine x 10000 = $500 million => a prison term for the guilty party.

And assembly and discussion is legal - should a councillor read this and attempt to break up such a meeting YOU'VE GOT HIM ! you can, as group, lay 10,000 + charges of breaching the Human Rights Act, and then put the fear of God back into the Council.

Governments should be afraid of their People, not People afraid of their Governments.

V

I am just astounded and disappointed. Time and again this happens. A country of people tough as nails, and a great competitive sporting country. And yet no one ever stands up to the corruption, stupidity--mind boggling stupidity, and greed of the old boy network. Not all of them off course. But the fact that everyone puts up with it, no one demands recourse. It is just shocking and hugely disappointing.

The holes in the ground, half finished developments, and pensioners working, are the country's monuments to these foolish tyrants.

Acceptance just breeds more bad behaviour.

And of course the councils...shame on them.

The following is public information that is available through the Companies Office.

Dunedin City Holdings Ltd
Mike Coburn - Director

Delta Utilities Ltd
Mike Coburn - Director

Luggate Village Holdings
Mike Coburn - Director
John Darby - Director

Head of the Lake Holdings Ltd
Mike Coburn - Director
John Darby - Director

Jack's Point Ltd, plus all the holding companies
John Darby - Director

Delta Utilities purchased sections in the Luggate Village development, which is owned by Luggate Village Holdings.
Delta Utilities purchased sections in the Jack's Point development which is under the control of Head of the Lake Holdings.

These are facts. This is what is being done in our name. This stinks.
Richard Walls says "If you don't like it, find somewhere else to live". I say we run these guys out of town.

Interesting comments most of which are based on hyped speculation. One of the most outlandish being..

"Dunedin City ratepayers will be interested to know of this approx $25,000,000 purchase "

Before getting too carried away with the doom and gloom, money being lost, Council handouts, take a look at the bigger picture.

The "global" real estate market is hurting at present, but it will always turn around. Those who get in now, especially in a market such as Queenstown, will have participants on this post eating their words. Jacks Point is no exception.

I'm not involved in Jacks Point but I know the project and have a very good understanding of the market in general. I can also confirm many of the comments on this post are far from accurate.

Watch and learn.

This is nonsense - the Audit Office should investigate. If it is legal the law should be changed so councils don't have the power to do this.

Who the hell cares if you think real estate is a good bargain. This wasn't an arms length transaction. There are plenty of other good investments out here why this one?

What is shows is that someone believes that the people of Dunedin like it up the ass.

Unless they stand up they probably do

Is NBR really sinking to such a level as to allow "up the ass" comments on its web site -- not to mention the completely unchecked speculation going on.

Whatever is true is certainly not in the comments above and probably not in the article either.

Sounds like envy more like, that they managed to get away with such a large con.

If its so great why has property prices dropped by 50% out there?
And why did Darby sell off his interests 12 months ago?
Awesome investment from the same people that brought you such great economic ventures as the Dunedin Stadium.

Activity and a busy clubhouse....... I guess the recession is over!

http://www.sharechat.co.nz/article/32c856c3/jack-s-point-land-doubles-in-value.html
http://www.seaholdings.com.hk/press/04%20May%20Jacks%20Point%202-e.pdf

Ruboc is owned by Mike Coburn, Director of Delta and Dunedin City Holdings, (formerly?) CEO of Jack's Point Ltd.
Ruboc owns/owned 15% of Jack's Point as indicated in the PDF
Ruboc's Registered Office is with G S Mclauchlan in Dunedin
Principal Stuart Mclauchlan is Director of Delta and Dunedin City Holdings

So, whose sections REALLY got sold in this deal?

The prices they are asking sound a hell of a lot to me. How many people can afford a $750,000 holiday home? Expect the prices to come back another 20 to 30%...
Whats the council buying sections anyway? too get screwed over again!!!

The previous comment 'Jacks Point' sums up the intellect of most respondents re JP itself. Clearly Richard you will never afford $750,000 which is incredibly good value at what will one day probably out shine other Darby developments such as Milbrook at which you can currently buy a holiday home for 2.9 million (do you know how much that is?). You probably couldn't afford the food in the "Club House" run by Amisfield which is spectacuar, and the outlook heavenly. Nothing is selling in this market- if you had brains you could invest in Jacks Point for the future. For the rest visit JP before you comment.