Developer behind Timaru retail complex runs out of money
Wednesday, 20 November 2024
Just over a week out from a council-imposed deadline to move a massive pile of dirt, the developer of Timaru’s The Showgrounds retail complex has run out of money and another is stepping in.
Kerry Knight, a director of KC Securities Ltd Partnership and Equinox Group, confirmed Equinox had taken over and told The Timaru Herald of its plans to continue progressing the development.
Knight, who described himself as a passive investor in the development, said Tony Gapes had struggled to find the money to refinance the embattled project.
“He needed to refinance around $60 million and couldn’t find it. No-one in New Zealand could find it.”
Knight said Gapes received nothing from the changeover, and Equinox would be taking over any debt.
“We took over, otherwise there would have been a mortgagee sale and the equity would be wiped out.”
He said the probable settlement date with a bank was November 29.
The complex includes a Bunnings store, a Woolworths supermarket and other retail shops.
According to Quotable Value, the property at 233 Evans St had a capital value of $42.35m as at September 1, 2023, and a land value of $17.55m.
Documents released to The Timaru Herald by the Timaru District Council, under the Local Government Official Information and Meetings Act, showed KC Securities LP has held a mortgage over the first stage of the development since February 2021.
A portfolio breakdown on the company’s website showed it had lending into Timaru in the 12 months to March 2021 of roughly $11m to $12m.
By March 2022, that had increased to about $21m to $22m.
The company also lent into Auckland, Wellington and Queenstown. However, by March 2022, Timaru accounted for almost half of its $47m in lending.
Gapes has been approached for comment.
Gapes initiated the development when he signed an agreement to buy 9.9 hectares of the 12ha site at 233 Evans St from the council’s holdings company, Timaru District Holdings Ltd (TDHL), for $6.4m in 2019.
The original settlement date for two further lots of land at the site was to be October 12, 2023. Gapes was unable to meet that, and TDHL granted an extension to June 30 this year.
At the time, TDHL general manager Frazer Munro said: “We just want to see him finish it off.”
In June, Munro confirmed the company had asked to further extend the deadline, and in August he said a further 15-month extension had been agreed to.
In April, when granting a change to the subdivision consent for the development, the council ordered Gapes to hand over a $100,000 bond and gave him deadline of December 1 to remove a large stockpile of dirt from the site.
Knight said Gapes was a good operator who had encountered many challenges.
“There was a combination of bad weather when he lost time on the project, as well as the change of cap rules and high interest rates,” Knight said explaining how Gapes struck financial problems.
Last year, three of Gapes’ companies were liquidated and he abandoned plans to develop a business park next to The Showgrounds.
“I’ve known him [Gapes] a long time and he’s still working on stage 2,” Knight said.
“He’s a realist. When cap rates change from 4% and 5% to 7%, that’s million of dollars in value.
“The value has gone down significantly and it’s difficult refinancing.
“Gapes is a good operator, but big bulk retail all over has been rattled – none of them are happy.”
Speaking about plans for the site, Knight said further retail stores would be built as part of a $44m stage 2 development. The work would get under way in May 2025.
A $23m “monster store” was planned with six larger-sized shops and a further nine smaller shops, for which four non-committal agreements had been signed, he said.
“It should trap more spend in Timaru and bring more shoppers into Timaru.
“Overall, it is a good thing. It still doesn’t solve the problem of the main street, but that’s nothing new.”
He believed Timaru’s main street, Stafford St, needed a new vision. “I think the answer is residential; it’s limited as being a one stop for shopping.”
In August, KC Securities, in a joint venture with Equinox Group, called for expressions of interest in the second stage of the Showgrounds development and listed a number of tenants including Kmart as its anchor tenant.
However, when asked about that, KC Securities director Cameron Dargaville said the tenancies were not confirmed. The information was then removed from the company’s website.
As for the mountain of clay and dirt, overgrown with scrub and weeds, that was stockpiled during excavation and levelling of the site, Knight said he intended to move it.
With Gapes’ company exiting the project, Knight said the date for the removal had been pushed out.
“I tried to get it moved by Christmas,” he said, adding that the contractor, Rooney Earthmoving, would be “coming back to us with pricing”.
He hoped the second stage of the development could be completed by May 2026.