Receivers called in to $1bn hotel project

Stage one of the huge development, the Westin hotel, could be worth $250 million, the receivers say. Photo / Supplied

Receivers have been appointed to two companies developing the first stage of Queenstown's $1 billion Kawarau Falls Station six-hotel development.

The future of the country's most ambitious real estate project is now up in the air.

Auckland developer Nigel McKenna, managing director of Melview Group, has been building the luxury tourism estate on the Frankton arm of Lake Wakatipu.

But yesterday, Brendon Gibson and Grant Graham of KordaMentha said they had been appointed receivers of Melview (Kawarau Falls Station) Investments and Melview (Kawarau Falls Station) Development by international funder Bank of Scotland.

Mr Gibson indicated investigations before a report is due in two months could spell bad news. He and Mr Graham said the situation was extremely difficult to assess.

"This is a complex development being built in multiple stages. Our immediate task will be to understand the construction costs and associated revenue streams for the project.

"The current intention is that construction work will continue to be funded in the interim while all the options are assessed. We envisage that this assessment will most likely take a couple of weeks."

Stage one of the project started in 2007 and could be worth about $250 million, he said. A second mortgage over the project was held by Hanover Finance.

"Stage two and three are owned by companies owned by Mr McKenna, so obviously we will be trying to understand what's going to happen with those stages. But they are subject to separate arrangements and totally separate financiers."

The companies working on the various stages were special-purpose vehicles established for the three separate ventures, he said.

Stage one was to be a 178-room, eight-level Westin hotel and apartment development made up of five blocks.

Mr McKenna - ranked 69th on last year's NBR Rich List with $120 million - developed and runs Auckland's Westin in the Lighter Quay waterfront area.

Kawarau Falls was also to have a 223-room InterContinental Hotel and a Quay West.

Mr Gibson said he and Mr Graham were working closely with Mr McKenna.

"We met with Mr McKenna and he's cooperating in the receivership in assessing the position."

Between 400 and 500 people were working on stage one of the project and the Westin was the only site that was active, Mr Gibson said.

Yesterday, he refused to comment on speculation about the NZ Superannuation Fund entering discussions to underwrite Kawarau Falls.

A report in a Sunday newspaper said Mr McKenna had been talking to the Super Fund about backing the project. He and the fund refused to discuss the matter.

Mr McKenna said international investor Blue Sky had invested $300 million in Kawarau Falls - one of the largest foreign deals this decade.

But Blue Sky is now selling all its 24 units on top of Auckland's Westin.

Mr McKenna said no other companies in the Melview Group were involved and Melview's Hotels division, which manages the Westin and the Quadrant in Auckland and the Holiday Inn in Wellington, were unaffected.

KordaMentha had been asked to carry out a review of stage one and this could take weeks.

Mr McKenna said the receivers were asking contractors to continue building the development on the basis that funding would be available. Stage one was on budget, fully consented and paid up to date.

KAWARAU FALLS
* $1 billion Queenstown project.
* Six hotels were to be built.
* Only the Westin is rising.
* Developed by Nigel McKenna.