The developers of a $12 million luxury apartment block in Auckland have put the entire site on the market for sale, after failing to find buyers for the individual units.
The owners of 719 Remuera Road, on the border of Remuera and Meadowbank are prepared to sell at a loss, amid turmoil in the wider residential development market in the city.
The block comprises five high-end apartments, which had been priced between more than $2m and $3.5m at the end of last year. It is now for sale with a tender closing April 4.
The listing agent, Bayleys’ Jock Kooger, told OneRoof that the vendors’ price expectations for the entire block will be below cost.
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“The estimated value on completion was in excess of $12m,” he said.
“The developers have said they are open to entertain all offers, possibly even sub-$10m range. This is the first time the completed block has been on the market for sale as a whole, they’re not for sale individually.”
The vendors bought the site in October 2021, at the height of the market, for $7.291m when the unfinished property had been put up as a mortgagee sale by Bayleys.
Kooger, who brokered that sale with colleague Robert Ashton, said that an earlier deal for well over $8m had fallen over, so the “sinking” vendor had to sell.
At that time, the half-finished apartment block had been beset by lengthy construction delays and expensive cost over-runs.
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Kooger estimated that the new owners would have then spent some $2m-$3m to complete the build.
"It was a good buy at the time, apartment values were right up there, the developers would have figured out the on-sell values.
“It took them a year, they ripped out and changed everything except the bathrooms, put in really nice kitchens, flooring, all sorts,” he said.
Building company Bufton Construction, which has also completed developments for Kāinga Ora and built the Quest hotel in Wellington, finished the concrete and steel structure with what they describe on their website as “high-level architectural finishes inside and out”.
The penthouse apartment of 719 Remuera Road has a luxury finish and views around Auckland to the Sky Tower. Photo / Supplied
The developer ripped out most of the earlier interiors to add better quality kitchens and finishes. Photo / Supplied
Kooger said that the new-build apartment block would appeal to investors as it met the reduced tax bright-line length and interest deductibility requirements. He said buyers with a longer term plan would look at the opportunity to split separate titles and expected interest from those looking for a live-in investment or a specialized rental or boutique lodge.
“You can buy this below replacement cost and de-risked as it has all been completed,” he said.
“It’s a fantastic time to buy if you can get hold of funding. There’s no better time. A lot of developers are waiting for this moment.”
Kooger said that this year the handful of developers trading were cashed-up and ready to pick up opportunities.
“There are a lot of opportunities - any developer would sell at a loss just to get rid of the debt. Some of them are paying up to 15% interest, with no income. I know of some who have bought for $3.6m and would sell for $1m less,” he said.
“Smart developers would rather take the loss and keep rolling [on other builds] rather than sit on a project.”
The market has witnessed several high-profile development casualties of the downturn in New Zealand, and the sharp tightening of credit.
The listing agent outside the unfinished site in 2021. The current owners bought it in a mortgagee sale for $7.291m and finished in 2022. Photo / Supplied
Beachcroft Residences, in Onehunga, Auckland, is one of several developments to have come unstuck. Photo / Fiona Goodall
The biggest development to have come unstuck in recent years was Beachcroft Residences, a block of 85 apartments in Onehunga. The development was beset by lengthy construction delays and huge cost over-runs that have nearly derailed the entire project. A new buyer for the semi-completed development is currently doing due diligence on the site, according to reports.
Pete Evans, Colliers national director for residential property development and project, said large scale developers – those looking at projects of 50 to 200 units prepared to spend $20m to $100m – were doing deals this year because they are in a good position to negotiate.
Many stepped away from the market as it peaked in 2021, but can now come back in asking for terms that give them a year to line up consents and construction before they have to pay for the site.
“They do all the work and will be ready to go when interest rates come down, inflation is down and we’re seeing more population inflow from immigration,” he said.
“There will be a lot more transacting because these developers have the ability to buy better.”
James Wilson, director of valuations at OneRoof’s data partner Valocity, agreed that the “big guns” - large-scale developers - have more capital to sit out the tough times, and are ready to come back into the market.
“Particularly those with capital funding or overseas investors who are not reliant on pre-sales of apartments off-the-plans before they can start building,” he said.
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