Bank funding woes crash another big Auckland apartment project

As banks tighten up funding for major apartment projects across Auckland, one of the more notable – the St James apartments on Auckland’s Queen St – has come crashing down for buyers of off-the-plan units.

Despite apartment buyers being asked for more money and most agreeing to pay, Relianz, the development company of the Li family, has pulled in the pin on the development, saying it has run into difficulties with funding, despite all the apartments being sold. It will keep assessing the funding market over the next few months.

The buyers will be refunded their deposits along with interest. The buyers paid a 10% deposit in what was one of the city’s biggest apartment projects, expected to take three years to fully build in an increasingly expensive construction market.  

The $250 million, 309-apartment 30-level tower was to wrap around the historic St James Theatre, which is to be restored. It was to have 2000sq m of retail at the ground level and 195 car parks. Relianz says it will still carry out structural and seismic work for the theatre restoration.

The apartments were popular, with more than 170 sold before marketing began. They were bought mainly by Auckland owner-occupiers and investors at the time, with 20% going to buyers in China.

Inno Capital owned by John and Michael Chow and Clint Webber warned in October that Auckland’s property market was in a liquidity crisis, with Australian-owned trading banks recalibrating their capital adequacy ratios and New Zealand branches having to repatriate billions of dollars over the next five years, a full land market and developers making wrong assumptions about the feasibility and timing of their projects.

Mr Webber said the run on liquidity means there’s a “hell of a lot” less cash in the New Zealand system, particularly for property, even though the economy is performing well. “The Australian-headquartered banks are allocating their cash to different risk profiles.”

It was a “perfect storm,” he said and, as a result, the number of active developers will shrink.  “Unless they have an alignment with a financial institution, they will not survive.”

The crumbling St James theatre complex site was bought by the Li family from Paul Doole for more than $30 million in 2014 and the family decided to use the existing apartment development consent but reduce the number of units from 330 to 307 and restore the theatre. The apartments were to start at 48sq m including balcony, and were priced between $500,000 and $1 million.

The project was a collaboration between Weixin Li and her daughter-in-law Na Li. Weixin Li is behind Relianz Holdings while La Ni is the owner of St James Suites. The Li family has done some residential development in New Zealand but nothing of this scale and size, although members of the extended family in Shanghai are developers. 

St James Theatre has lain abandoned since 2007 and the grade one listed historic building will be restored and opened progressively as a separate project.

The theatre, designed by Dunedin-born architect Henry Eli White and opened in 1928, was closed in 2007 because of damage from a fire in a neighbouring building. It hosted performances by the late Lord Olivier and his then-wife film star Vivien Leigh and a royal variety performance for Queen Elizabeth while later  it became a popular contemporary music venue.