KEY POINTS:
Apartment owners in Auckland's large-scale Beaumont Quarter housing complex will meet next Tuesday to discuss how to oppose big ground rent increases.
Landowner Beaumont Partners has valued the ground under 258 apartments off Beaumont St opposite Victoria Park at $4.4 million a year in rent.
But the apartment owners have challenged this, getting their own valuation to say the land is worth just $2.2 million and next week they will plan their next move, voting on a proposal to put their case.
The existing annual ground rent is only $900,218.45 but the seven-yearly rent review has just arrived and proposed a big leap in charges.
John Carter, the Auckland lawyer representing the owners, said they believed the $2.2 million assessment from valuer Brett Smithies of Extensor Advisory was correct.
Carter issued a statement on the owners' behalf which said since Christmas Eve, Beaumont Partners had owned the nine freehold apartment lots at the complex and could have served its rent review notices at any time after November 28 by arrangement with the previous owner Melview.
Instead, the owner decided to wait until March 27, the day before the rent review date, to serve the notices, and at the same time demanded that the nine body corporates start paying the higher rent from March 28, Carter said.
However, an alternative was also proposed.
"Beaumont Partners put forward a lesser settlement offer which works out to a total rent of $3.9 million annually for consideration by the apartment owners and demanded an immediate reply on the settlement offer," Carter said.
On April 7, Mark Francis of Beaumont Partners addressed a meeting of owners and said he was under such pressure from his lenders - and in particular ASB - that he could not extend the offer, Carter said.
When it became clear that the offer was not going to be accepted because the apartment owners did not have legal or valuation advice at that stage, Francis said he would talk to ASB and see if he could extend the offer for acceptance and subsequently agreed to extend the offer until April 21.
"However, for various good reasons the body corporates were unable to call further meetings of all apartment holders before the deadline and the offer has now lapsed," he said.
He summarised the owners' position as being that the new $4.4 million rent being demanded was not assessed in accordance with terms of the lease.
Conditions have changed too.
"The rent sought by Beaumont on March 28 is the same as their valuer assessed it in September last year and fails to take into account the economic downturn which has worsened since September and in particular the world-wide collapses since January," Carter said, citing the string of finance companies which have now gone into receivership or defaulted on repayments to investors.
"Some of the few remaining finance companies available to provide development funding are either in difficulty or are struggling.
"As at the review date, the demand for residential development land [the lease prescribes that the new rent is to be fixed on the assumption that the land is vacant and undeveloped] had dramatically fallen away," Carter said.
The owners also challenge the Jones Lang LaSalle valuation of the land, commissioned by Beaumont Partners.
"Beaumont's valuers' valuation is based on incorrect valuation methodology, has used comparable sales which are either irrelevant or have not been properly adjusted and contains other flaws," Carter said.
It was also widely understood that the new ground rent was going to be an issue, a point JLL pointed out in its valuation.
"The apartment owners generally feel that they are being bullied by Beaumont Partners by the lateness of the review notice and the setting of arbitrary deadlines by Beaumont Partners at the insistence of ASB for acceptance of their offer."
But, he said: "The apartment owners understand the predicament Beaumont Partners is in given its timing of purchase last year viewed against the worldwide and local economic collapse since January. The apartment owners are also in a similar position as a result of the market downturn and will be willing to negotiate any reasonable settlement."
* Beaumont Quarter apartment owners meet on Tuesday April 29, 7.30pm at Victoria Park Bowling Club, Beaumont St.
$349,000 UNIT GOES FOR A BARGAIN-BASEMENT $58,600
The sale of a Beaumont Quarter unit for just $58,600 is one of the worst drops in value in the residential downturn.
The unit was auctioned last week for 17 per cent of what it cost to buy three years ago when a Mt Albert couple paid $349,000 through investment business Blue Chip.
Nationally, house sales fell to unprecedented levels last month with the median price slipping to $349,000. Auckland, New Zealand's largest housing market, is in the grip of a slowdown, suffering a two-thirds drop in the volume of sales in the past year.
Last month, just 1621 houses sold in the Auckland area, down on the 3884 sold in March last year.
Agent Matt Jones, of Ray White, advertised the apartment at 210/22 Fisher-Point Drive with no bottom limit.
"Reserve already signed at $0.00. This is not a misprint. Blue Chip vendor bites the bullet and opens the doors to any offer," said the ad.
The unit is mortgaged to Westpac and valued at $305,000. It even has its own carpark, yet a year ago some Auckland carparks were selling for more than $100,000 each.
A Howick woman bought the unit after bidding on the phone.
Realestate.co.nz listed a three-bedroom Beaumont Quarter unit for $475,000 and a one-bedder for $355,000.
Real Estate Institute president Murray Cleland said residential sales had dropped to unprecedented levels last month and prices all around the country were generally weaker.
