Kensington Park Properties might be down and out but its ambitious $500 million Kensington Park residential development at Orewa could shortly rise from the ashes of receivership.
Receiver Korda Mentha has instructed Colliers International to sell the development on the local and international markets in an effort to have the high quality, international award-winning project resurrected and finished.
Through his company Kensington Park Properties, Auckland developer Patrick Fontein had a masterplan to build 750 houses and apartments, walkways, reserves, lake, extensive landscaping, shops, pool and gym over five years in a medium to high density development on 15 hectares.
About 50 homes were finished and another 65 were under construction when Kensington Park Properties collapsed in September, owing $57 million to three financiers and more than $4 million to mainly local subcontractors. The biggest debt is $41 million, owed to first mortgagee BNZ.
Colliers International director John Goddard says when a project of this size fails it can be hard to pick up the pieces, particularly in a property market that is being buffeted by a global credit squeeze and economic meltdown.
“In this case it is different. Korda Mentha, BNZ and Rodney District Council, working in tandem and closely with Colliers International, are determined to find a buyer or buyers who can pick up the project and finish it to the urban and built form laid down in the masterplan.”
Goddard says all parties agree the integrity of the masterplan is sound. “There has been a substantial amount of investment in infrastructure on the site and the development didn’t fall over because the masterplan was flawed, it failed because the developer was under-capitalised and the residential market tanked.”
The development’s subcontractors have been vocal through the press about losing money. Diane Maxwell, BNZ external relations manager, says the bank had carefully assessed the risk associated with lending to Kensington Park Properties for the development. “The bank processes involved making advances against the quantity-surveyor approved drawn down certificates on a cost-to-complete basis. All drawdown payments were met up to the point the bank was asked to appoint receivers.”
Colliers International is selling the property through an Expressions of Interest campaign closing on February 24. Goddard says the campaign will be directed to parties who can buy the project in its entirety. “That is not to say those who are interested in stages will be excluded from registering their interest. It is accepted flexibility will be required in an uncertain market.”
“We believe interest will come from local and international buyers who will carefully evaluate the opportunity because the project’s fundamentals haven’t changed.”
Korda Mentha receiver Grant Graham says the development has good bones and it is a rare opportunity for a developer or developers to finish the development in its current form. “Patrick Fontein is clearly a developer with vision. He created project which the market and council embraced, but he had a company infrastructure, that in a financial meltdown, was unsustainable.”
The development is on the former Puriri Park camping ground features a 5.5 kilometre walking trail and boardwalks through bush areas. It was to be the first community in the country to have fibre optics delivering phone and broadband services to every home.
Following green principles, Kensington Park Properties had plans to treat stormwater on site via a lake system which separates sediments. Grey wastewater was to be recycled and used to irrigate gardens in public areas.
The luxury housing estate was partly inspired by a resort town in Florida used for the filming of the movie The Truman Show. The development recently won CNBC Asia Pacific prizes for the best overall development and best project marketing.
Graham says while Kensington Park Properties failed, the development itself is not at fault. “Developers who have contacted us already have expressed surprise at the quality of the project and it had no shortage of buyers from families to older residents for the existing and contemplated homes.”
Kensington Park was the first project where the Rodney District Council used a case management process to co-ordinate resource consents and customer service director Lloyd Barton says it led to some good urban design outcomes.
“The project had the hallmarks of being a flagship and extremely successful development for Orewa. “We will do whatever we sensibly can to get it up and running again and completed.”
Although there were plans for 750 homes, Barton says if a new buyer follows the masterplan’s urban and built forms the council will more than likely be negotiable on reducing the number of houses and apartments on the site.
“The development has resource and building consents for seven per cent of the project and we will work collaboratively with a new buyer to issue the remaining consents if the masterplan is followed, as it has support from residents and neighbours.
.“It would be an incredibly difficult exercise to water down the philosophy of the masterplan and we would prefer not to have to enter into any negotiation over the development’s urban form.
Barton says while the council’s objective is good housing density on the site, it is flexible and realistic enough to realise there will need to be discussions about volume. “We don’t want the site sitting idle.”
He says the worst scenario would be a dumbing down of the masterplan. “We are determined that will not happen. The council won’t allow anybody to build what they like, despite the economy being in recession and the residential market going backwards.”
Property and land adviser Andrew Stringer says Kensington Park’s higher density environment is supported by local authorities because it is a more efficient use of scarce resources. “It also addresses to a degree the issue of housing affordability – the lower the land content; the relatively cheaper a property can be built for.”
He says medium to high density housing projects are only successful when good amenities are part of the development. “Kensington Park is one development that has been carefully thought through and the building blocks are already there for a comprehensive reserves network, pool, walkways and extensive landscaping.
“To be exceptionally successful and attract a broad range of residents, the amenities have to be of vastly superior quality than typical public reserves and pools. Kensington Park has been successful in the market and there had been strong sales demand until the development company fell over and the residential market went south.”
Stringer says when the market shows signs of recovery, a new owner will have a head start because of the significant amount of upfront investment in infrastructure and support they will receive from the council for the masterplan.