Luxury Real Estate Development in New Zealand Collapses

The credit crunch seems to be spreading further afield, with news that a luxury real estate development in Auckland, New Zealand, has just collapsed financially, leaving many angry buyers and creditors.

Whisper Cove

The “Whisper Cove,” development was to be a  16 hectare, 160-luxury-residence, waterfront development at Snells Beach, but has been abandoned  after money issues, leaving a string of subcontractors, builders and others owed more than $2 million; $36 million to Westpac and $17 million to other financiers.

This is the second big housing development in Auckland to go under recently and follows the collapse of Kensington Park, a $450 million, 750-home development. Plans for more than 600 houses at both Orewa and Snells Beach are now being dropped as receivers attempt to complete dozens of part built homes and apartments. Bank of New Zealand loaned $41 million for Kensington Park and Westpac has a first mortgage over Whisper Cove.

Australian investor Babcock & Brown helped Westpac fund Whisper Cove along with Dominion Finance. Whisper Cove’s first phase of homes were marketed from $850,000 to $2.6 million. Grant Graham of KordaMentha, the receivers, says the company is getting good advice about options available for the development and a decision is likely in about a month. Unsecured creditors are owed over $2 million, but Brendon Gibson, joint receiver, said it was “unlikely they would get a cent.”

The Kensington Park and Whisper Cove collapses will almost certainly have a strong impact on the construction industry and drag down many smaller businesses along with them - the owners of Kensigton Park have already been forced to stop work on another huge development on Lake Taupo. Full story on possible impact at the New Zealand Herald.