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Receivers Take Over Queenstown Project Of 'National Importance'

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, May 26 NZPA - Entrepreneurial property developer Nigel McKenna says the $1 billion Queenstown project associated with two companies put into a shock receivership today is of "national importance".

Mr McKenna described Kawarau Falls Station as "an infrastructure project of national importance to our tourism industry".

He claimed it would create the first convention facility for Queenstown capable of seating 1000 people under one roof, though the town already has a $6 million sports complex used for big functions.

Mr McKenna tonight confirmed that two of his companies backing the Kawarau Falls Station development have been put into receivership by receivers appointed by Bank of Scotland (BOS) International.

BOS has a first mortgage securing up to $513m on construction of the project's first stage -- where construction is reported to be 70 percent complete -- two international hotels and an extensive upmarket residential development.

Hanover Finance has a second mortgage securing up to $150m. Funding for a second stage was to be provided by Fortress Credit Corp with Hanover as second mortgagee.

Today's announcement has highlighted nervousness in Queenstown, where over-committed property developers who bought at the peak of the local real estate market have become desperate to sell as the global recession bites deeper.

An ambitious $2 billion, 33ha development of a new township, Five Mile, next to the airport, was put into receivership by Hanover last year and put up for sale with only a few excavations on the site.

Mr McKenna tonight moved to fend off any domino effect on other companies with which he is involved: he issued a statement saying none of the other companies in his Melview Group are affected by the receivership.

He emphasised his hotels division, which manages The Westin and The Quadrant in Auckland and the Holiday Inn in Wellington were unaffected.

One of the receivers, Brendan Gibson from KordaMentha, said Kawarau Falls Station was a complex development being built in multiple stages.

Mr Gibson said his immediate task was to understand the costs and revenue of the project, but construction would continue for the next few weeks before a final decision was made on the project.

A building company has 50 staff and sub-contractors working on the project.

Mr McKenna said that first stage was on budget, fully consented and paid up to date, as of today, after 30 months of construction. It was due for completion within five months, with the first two hotels opening their doors by early 2010.

Mr McKenna is reported to have pre-sold large parcels of the project to two UK-based buyers, a slice worth about $100m to a private investor, and another larger share to Blue Sky Capital for more than $300m.

The 6.4ha site at Kawarau Falls Station, the only north-facing high-density residential site in Queenstown, was intended to have 1100 units and 13 buildings, boulevard-style streets, restaurants and parks, when completed in 2011.

The two hotels under construction in the first stage are the 177 room Westin announced in November 2006, and a Quay West-branded apartment-style resort hotel -- with 195 guest rooms .

An Intercontinental Hotel with 221 rooms was announced in July 2007.

A fourth hotel is expected to be Melview's own brand Quadrant.

The three-stage complex is expected to be worth more than $1 billion, and to become the single largest employer in Queenstown, with about 880 people working on and off the site.

The NZ Superannuation Fund was this week reported by the Sunday Star Times to be in talks to underwrite the property development, but neither the Super Fund nor Mr McKenna was prepared to comment on the proposal.

The newspaper said the Super Fund was willing to underwrite the project, but the parties had not been able to agree on the terms and negotiations are continuing.

Most of the funds used for the project so far are likely to have come from Hanover, but the requirement for an underwrite agreement probably came from BOS as its funding lines started to be drawn down, the newspaper reported.

NZPA

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