The private developer of a $40 million residential and retail project on the Onehunga waterfront has pulled the pin after four years of delays and a more than doubling in costs.
Erson Developments, owned by Anne and Bruce Clegg, told the 50 buyers of apartments in the development they had abandoned the project after delays and cost overruns made the development uneconomic to finish.
Initial estimates were for construction costs of $40m, although that's understood to have ballooned to about $85m with construction costs rising about 10% a year and as the developer grappled with mounting bills to deal with, after consent delays and design changes.
Teak Construction, the main contractor on the ill-fated project, will leave the Beachcroft Ave site after four years of being stymied by technical and consenting issues that required design changes to the façade, cladding and roofing systems.
Project manager Matt Currie, of Crux Partners, said the remaining buyers of the pre-sold units will be released from their contracts and will be paid their deposits, some of which date back to early 2017.
It is understood several original buyers had already opted out by using their sunset clauses while the project sales team, Bayleys Projects, had stopped marketing the property by the middle of last year.
Erson was granted consent to build the six-storey development in what was a special housing area almost six years ago because at least 10% of the units were to be classed as affordable housing.
That saw a handful of the one-and-two bedroom units offered at between $595,000 and $620,000, with the remainder of one-to-three bedroom units ranging from $695,000 to $1.3m.
In a note to buyers on Tuesday, Currie said the delays, combined with projected cost escalation, meant that “Erson no longer had sufficient financial resources to take the project through to completion”.
Currie said the Cleggs were now seeking expressions of interest from other developers who may wish to acquire and complete the development.
He said there was no guarantee that a new developer would want to retain existing pre-sales, given the market appreciation during the past four years that would see the apartments well below market value.
Teak, which lists more than 500 projects since its formation in 1992, had managed to complete work on the building’s superstructure, install the roof, and wrap the building ahead of the building consent for the façade.
The development, originally designed by CBA Design, is the largest property venture for the Cleggs, who had planned to live there on its completion.
The couple own and run the 320-hectare eco-tourist Tangiaro Kiwi Retreat in Coromandel. Their financiers are understood to include ANZ Bank.
Not happening, Beachcroft grinds to a halt (Image: BusinessDesk) Tried to salvage
Rodger Shepherd, the former chief executive of PMP NZ and Mercer and a 10% shareholder in Erson, was initially brought on board as project manager.
In March last year, the Cleggs handed the project to Currie and partner Mark Taylor, to salvage the project. Shepherd stepped down as a director in May last year although remains a 10% shareholder in the development firm through Triplex Management.
Bayleys Projects began marketing the property in 2016, advising purchasers in March 2018 that they’d met the sales threshold and were ready to start construction.
After Teak broke ground on the Beachcroft Ave site in September 2018, by May 2019, Bayleys advised the buyers that good progress was being made and purchasers will be “sipping cocktails from their balcony in no time”.
However, disappointed buyers who had contacted BusinessDesk last year, said they'd dubbed the development 'Fawlty Towers' after myriad delays and a lack of information from the developer.
Currie said while the developer had tried to salvage the project, the scale of the project and the challenges which they have faced have exceeded their ability to manage these issues.
"This situation was never Erson’s intention and has also caused a great deal of distress and financial hardship to the Cleggs."
