Caution silences Kawarau developer

Nigel McKenna, whose plans for Flat Bush have run into problems, had a major setback this week when the receivers were called in on his $1 billion Kawarau Falls Station project. Photo / Supplied

Nigel McKenna, the Auckland developer of Queenstown's troubled $1 billion hotel project, is a man of many visions.

Eighteen months ago, he was untroubled as he drove down Auckland's Southern Motorway in his navy Bentley Continental.

Stopping off to visit his planned $1 billion 40,000-house estate in South Auckland, the Irish migrant who once washed dishes to pay for food spoke of his ideas.

Flat Bush would be the first new town to be built as a proper town centre in New Zealand since World War II, a genuine hub and quite unlike anything attempted before, he said.

But before he got to the paddocks of Flat Bush, he said he was not just confining himself to Auckland but working at two Central Otago projects - Kawarau Falls and the $500 million McArthur Ridge - as well as Atlantic City in the United States.

That was December 2007, when McKenna was leaping from one giant project to the next.

This is a migrant made good. In the mid-1980s he left Ireland for Wellington. The son of an Irish builder, he grew up in a London terraced house but his family moved to the Irish countryside when he was 10.

He developed a love of construction because his father ran a small building firm employing half a dozen tradesmen. His father died when McKenna was 20 so the young man worked at a series of menial jobs such as washing dishes and pumping petrol to help pay the family bills.

By the time last year's NBR Rich List came out, McKenna had an estimated $100 million fortune.

Many people praise him for the risks he has taken and the influence he has had as perhaps New Zealand's most prominent property developer of the past decade.

John Duthie, Auckland City Council city development general manager, credits McKenna's Auckland waterfront vision with transforming that vast area, starting from the Quays and Sebel near Kermadec restaurant at the city end, then moving down to the huge Lighter Quay apartment blocks and Westin Hotel nearer Westhaven.

McKenna has added considerably to the city, Duthie says.

His good taste and excellent eye for detail, combined with bold ventures, are precisely what this city needs.

Others to praise him include ex-ING Property Trust executive Andy Evans for his real estate abilities and Rodney Walshe, honorary consul- general of Ireland, for his business acumen.

Although McKenna initially comes across as quietly spoken and somewhat reticent, this disguises a steel backbone and iron will, Walshe says. He praises his generosity and community contribution.

McKenna has also been praised for bringing a hotel of the quality of Westin to New Zealand and is renowned in property circles for his good taste and interest in design and interior decor.

His offices are festooned with samples of tiles, curtains and carpets and he is deeply involved in deciding on a level of detail which eludes most other developers but which fans say make all the difference to his projects.

"He makes decisions about the very look and feel of his projects, even down to the sheets on the beds," said one admirer.

Connal Townsend, Property Council chief executive, described McKenna as "passionate and visionary". A swag of hotels and thousands of jobs would never have been created without him. McKenna's Holiday Inn had revitalised a previously gloomy area of Wellington.

He had shown great flair in urban design with the Beaumont Quarter and his Kawarau Falls Station hotel project was of national importance, Townsend said.

"Nigel's been a great supporter of the Property Council and particularly our awards and he's been well-recognised by his peers for excellence in hotel development, which is his great area of expertise."

Rob Campbell of Viaduct Harbour Holdings said McKenna had an extremely positive effect on the Viaduct. "We're very happy with his designs and development. Nigel has done a lot of very effective development in this area."

This week, Bank of Scotland appointed receivers Grant Graham and Brendon Gibson of KordaMentha to two of his companies working on his grandest visions yet: the six-hotel lakeside Kawarau Falls Station, which some construction consultants this week uncharitably compared to a bomb site.

A series of mobile and tower cranes dot the big site on the lake shore. Networks of carefully constructed scaffolding cover buildings like spider webs.

Portable offices stand alongside a series of grand but only partly built structures with wood open to the elements and the freezing southern winter. In the background stand snow-capped mountains.

For a true idea of the sheer scale of this site, visit www.kawaraufallsstation.co.nz and click on the gallery link. Work was this week continuing on the project but KordaMentha said it could not say anything more before June 9.

This is not the first problem for McKenna lately. Residents who lease land under his Beaumont Quarter, which he converted from freehold to leasehold, are trying to beat him down over the ground rent. They have succeeded so far in knocking off a fair chunk so that the $900,000 they were paying converts only to $3.1 million annually instead of the $4.4 million McKenna initially demanded. And they have vowed to have that $3.1 million cut back to $2.1 million.

At McKenna's Westin Hotel in Lighter Quay, British financial backers Blue Sky put 24 top-level luxury rooms on the market, although reports emerged this week that Blue Sky is still committed to its $300 million investment at Kawarau - one of the biggest foreign deals approved by the Overseas Investment Office in 2007.

At Wellington's Holiday Inn hotel, 30 investors who bought some of the 300 rooms have complained they are not getting guaranteed rental income. Wellington City rates are also owing, they reckon, although McKenna's hotel management company has blamed non-payment on computer errors and said it is addressing issues.

Fletcher Construction is demanding $1.7 million on the Holiday Inn job but McKenna still disputes whether this money is really owed and has challenged the demands.

After the receivers' arrival, McKenna was refusing to speak about the Queenstown project. This decision was taken out of respect for the receivers, he said via a spokesman.

Caution has now descended.

MCKENNA'S PROJECTS WORK SO FAR

* Galleria Customhouse shops, Auckland with Andrew Krukziener.

* Metropolis 40-level apartment tower, also with Krukziener.

* Sebel and Quays hotel/ apartments, Viaduct waterfront, $100 million.

* UniLodge student towers near Auckland University, $45 million.

* Beaumont Quarter apartments opposite Victoria Park, Auckland, $100 million.

* Lighter Quay's Westin Hotel, lock and apartments, $300 million.

* Quadrant hotel/apartments next to Hyatt at Waterloo Quadrant, Auckland $100 million.

* New Holiday Inn, Wellington, $100 million.

YET TO BE DONE

* Kawarau Falls resort, Queenstown, $1 billion.

* Flat Bush, new Manukau town for 40,000 people, $1 billion.

* McArthur Ridge health resort, Central Otago, $500 million.

* Atlantic City high-rise apartments, US$350 million.