Hobbs captains finance team

By ANNE GIBSON

Sport and the property business seem to mix well.

Television sports commentator Phillip Leishman is fronting an advertising campaign to raise $15 million for Orewa developer Rick Martin to buy land where construction of a 37-level tower is planned on the Hibiscus Coast.

Former All Black captain Andy Leslie fronts Pacific Retail Finance's offer of first-ranking debenture stock, using his famous face to promise an attractive 8.5 per cent annual return over 18 months.

Another former All Black captain, Jock Hobbs, who was last week appointed New Zealand Rugby Union chairman after a provincial shakeup, has carved out a career in property finance at Strategic, a Wellington-based mezzanine financier.

Strategic has lent at least $150 million to start some of the largest developments, particularly in Auckland.

Hobbs, Strategic's chief executive officer, fronted Strategic's advertising campaign throughout winter to raise an initial $5 million, with the right to take it to $10 million, in a redeemable preference share issue to get more capital.

Strategic Finance, owned by Strategic Investment Group, is Brian Fitzgerald's company which has merged with Salisbury Finance.

Fitzgerald, who has a financial interest in prominent Auckland restaurant Euro, is former managing director of Equiticorp Australia and was a key witness in two 1990s trials involving corporate fraudster Allan Hawkins, former Equiticorp boss and frontman in its $2 billion collapse.

Last week, Hobbs announced that the $10 million sought had been raised and Strategic Finance made a net profit after tax of $6.5 million for the year to June, up 83 per cent on the previous year's $3.57 million. The $10 million raised will be used as capital for Strategic, Hobbs said.

Asked in the winter to say where Strategic had lent money since it started in 1999, Hobbs provided a list of the projects which Strategic and Salisbury Group, now part of Strategic, had helped to finance.

The information was sought and provided before Hobbs' rugby promotion.

The group lent money for the $200 million Princes Wharf development, the Auckland apartment, hotel, office, retail, shop and restaurant project by David Henderson's Kitchener Group.

Strategic arranged "prime debt and mezzanine debt" on this project, Hobbs said. Hartner Construction and Hartner Group went under while building five of the six wharf blocks, as did another builder, Goodall ABL, building one block.

Fights also ensued about whether Salisbury's Marc Lindale promised out-of-pocket building subcontractors money to return to the job when the firms had gone under.

The group lent money for another Kitchener project, Toscana apartments, a $9 million 18-unit development at Takapuna.

The units were being built by Goodall ABL, but when it collapsed in 2000 owing about $20 million, the job was taken over by Otago-based Amalgamated Builders, which also got into financial trouble when it was working on Auckland buildings.

Strategic's involvement with Henderson also extends to his latest deal, the Q Central apartment project in Auckland's City Rd, a $62 million job where about 300 units will be built. Marketing has started and a showroom has been built.

The group lent Greg Olliver's Landco money for his proposed Long Bay residential subdivision on Auckland's North Shore, a controversial development deal which raised the ire of local authorities. Hobbs said Olliver had planned a $40 million development there.

Last August, the council said it would compulsorily acquire the land to add a green buffer zone between the park and future housing development but the matter went to arbitration so Olliver and the authorities could agree on how much the land was worth.

Landco advertised for "well-heeled beach bums" to buy in the "last coastal subdivision of its kind in urban Auckland" and Olliver said the property was the most valuable block in New Zealand.

Tony Gapes' 180unit Mt Eden apartment project in Auckland also got money from Strategic, as did Jamie Peters' Starline Group for its $65 million purchase of 100ha of land at Gulf Harbour north of Auckland, where a $100 million residential subdivision is being built.

Strategic also provided partial funding for Landco to buy the Mt Wellington quarry in Auckland from Fletcher Property for about $33 million.

Fletcher's proposal for Lake Park, a large residential subdivision to built on the former quarry, was rejected by the Auckland City Council.

Olliver is now putting together a new housing proposal for the land.

Strategic has also been involved with the first stage of a retirement village project built last year on Athletic Park in Wellington.

The entire project will be worth $50 million and involves 280 units, although Strategic was involved in funding only the first 20 units.

The group lent money for Greg Kernohan's controversial $13 million apartment project at 88 The Strand on the old railway yards in Auckland, where two 10-level blocks of apartments are being built.

Opposition to this project went to the Court of Appeal and Kernohan complained of losing millions of dollars in litigation against neighbours who wanted to stop him because his towers would block their views. But Ebert Construction is building there and the units are nearly finished.

Hobbs said Strategic had a focus on lending for big city projects, particularly in Auckland where 70 per cent of its funds are on loan, but also in Queenstown, Nelson and the Bay of Plenty "where above-average growth and activity can be expected. Strategic has four loans in Australia, managed by our office in Sydney."

Strategic has lent 69 per cent to residential projects and 24 per cent to commercial. The rest is for industrial deals.

"While Strategic does participate in the funding of larger-scale projects such as Princes Wharf, its primary role in such projects is as arranger and manager of the funding, for which it receives a fee income," Hobbs said.

"It has clear prudential guidelines set under both its debenture trust deed and by the board which limits its exposure to any one project or borrower."

Strategic Group