One of Auckland's biggest apartment projects has just been axed, despite desperate buyers agreeing to pay more money.

The $250 million 39-level, 309-unit St James Suites apartments was to be built on Queen St beside the historic St James Theatre but developer Relianz Holdings is today telling buyers it is abandoning the deal.

It is Auckland's biggest apartment project to be cancelled, after Avondale's 91-unit Flo apartment scheme was cancelled a few weeks ago.

The developer cited difficulties in getting funding and "difficult lending market conditions" for the project's cancellation.

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"Unfortunately, this means the St James Suites apartment development is not currently viable and the development is on hold until further notice," the developer said.

"Relianz will, however, honour its commitment to Auckland Council to complete structural and seismic works for the restoration of the St James Theatre.

"Financial institutions have tightened their lending activity to apartment developers in recent months, affecting a number of Auckland apartment projects.

St James Suites co-developer Steve Bielby said buyers will get their deposits back in full, plus interest.

"We know how disappointed buyers will be and would like to sincerely thank them for their support of the project to date. We are communicating directly with them to apologise and arrange their deposit and interest payment."

Relianz started work on the St James site in September last year and has already finished demolition and preparatory work. The site will now be secured, and Relianz will take another look at the viability of the project if lending market conditions improve.

Read more:
Funding issues hit St James project

One buyer expressed disappointment.

"The developer will cancel all contracts regardless of buyers accepting higher price or not. They are not able to secure any loans from the bank, meaning that the project is probably dead now."

The buyer wondered what would happened with the restoration of St James theatre, but Bielby rejected speculation that it was affected.

"There are commitments to the theatre. We're honouring them. We have an agreement with Auckland Council and we still plan to honour it," he said, referring to a possible re-opening of the theatre in about two year.

Bielby said the St James Suites would have cost about $250 million but he could not say how much money had been sought for funding.