Jack's Point land doubles in value

By Chris Hutching

Friday 21st May 2004

Trans Tasman Properties executive chairman Don Fletcher and his partners in the 1253ha Jack's Point resort development land near Queenstown have already doubled the value of the property as a result of their efforts to have it rezoned late last year.

Fletcher's involvement in the development has irritated Trans Tasman minority shareholders because, in addition to his own stake, he has represented Trans Tasman's 60% shareholder, Hong Kong-listed SEA Holdings, in the deal.

This has led minority Trans Tasman shareholders to query where his main interests lie (he is a director and has a management contract with SEA as well as Trans Tasman).

The original partners in Jack's Point include Fletcher, Queenstown developer John Darby, who has driven the rezoning obtained late last year, and SEA.

Their development joint-venture company Jack's Point Ltd has paid a deposit of $1 million for the Jack's Point land overlooking Lake Wakatipu and it is due to settle the balance of $7.9 million next month.

They will now sell their shares in Jack's Point Ltd into a new company called Jack's Point Newco for $19.3 million, based on new valuations of the property.

The partners are restructuring the deal to provide development working capital and have introduced a new stakeholder, Mike Coburn.

The restructuring deal reveals the leap in value of the Jack's Point land after successfully obtaining the new rezoning last September that allows the resort development.

Fletcher has 25% of Jack's Point Ltd, Darby 25% and SEA 60%.

Jack's Point Newco has been formed to allow new partner Coburn, via a company called Ruboc, to take a 15% stake. Darby and associated entities will have 30%, SEA 25.1% and Fletcher and associated entities (including SEA) 29.9% in Jack's Point Newco. Each of the parties will have options to buy 10 sections for a total consideration of $1.5 million, a considerable discount, as well as other pre-emptive rights to buy sections, which are likely to be revalued upward again once the marketing and development of the resort gets under way.

The deal involves a number of inter-dependent transactions, including Jack's Point Newco obtaining bank borrowing of $21 million (to pay for the shares being sold into the company). The partners will then lend $9.5 million back to Jack's Point Newco for two years at market interest rates for development capital.

The various arrangements will effectively allow SEA to dispose of 33% of its interest in the Jack's Point land for $11 million, with an immediate repayment of $5.9 million and a deferred payment for up to three years of $5.7 million as well as repayment of an initial development loan of $1.9 million.

The final completion value of Jack's Point over several years is potentially between $500 million to $1 billion, representing the amount of building that may potentially be carried out by investors in the new resort development 10 minutes' drive from Queenstown.

Last year Darby negotiated with the Queenstown-Lakes District Council, which initiated a variation to the district plan to allow the development to proceed. In separate negotiations, Darby signed a deed of understanding with the council providing for the developers to gift 20 sections for affordable housing to a community trust.

Darby said the "free" land was offered after the hearings panel in the variation had heard its evidence so that it would not be construed as a bribe or inducement. It was a common sense move to provide for people who would work on the project or be employed at the resort.

The Jack's Point zoning allows for a village with potentially 1400 dwellings, a smaller village of up to 200 dwellings, an 18-hole championship course and luxury lodge, 36 luxury resort homes, a vineyard and winery, public boating facilities, 26ha of public domain, beach reserve access, walkways, and landscape protection corridors.

About 95% of the site would remain open space.

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