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Home / Bay of Plenty Times / Business

Patience and persistence saves The Lakes

By Graham Skellern - Business Editor
Bay of Plenty Times·
28 Apr, 2012 10:32 PM6 mins to read

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The Bay's biggest and brightest residential subdivision, The Lakes on the southwest outskirts of Tauranga, has been saved.

But it took 14 months of patience and persistence from Carrus Corporation's Paul Adams to rescue the 2000-section project from receivership and uncertainty.

Tauranga-based Carrus, one of the country's leading developers, this week took over the half-billion dollar development, the Western Bay's shining light for urban design.

The Lakes, which started in 2005, was just one-third completed when it ground to a halt in February last year, after the heavily-indebted original developer, Grasshopper Farms, went into receivership owing Bank of Scotland International $95 million.

Mr Adams, whose company has established 16 subdivisions in Tauranga during the past 22 years, first approached the Bank of Scotland directly to buy The Lakes. He had talked with Grasshopper, done due diligence and was armed with a private valuation of about $28 million for the development.

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But at Bank of Scotland's South Pacific head office in Sydney, he couldn't get a meaningful meeting.

"It was unbelievable," said Mr Adams. "I got spurned."

The bank, first mortgagee of a varied portfolio of development projects worth more than $1 billion, was preparing to pull out of New Zealand and 16 other countries.

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A joint venture between Brookfield Real Estate Services and Goldman Sachs bought the loan book at a discount - understood to be in the range of 30-40 per cent.

Bank of Scotland took a big hit on its investments in New Zealand. Included in the loan book were Tauriko Business Estate, Eleven twin towers apartment complex in downtown Mount Maunganui and The Lakes. The bank had also financed Albany Town Centre and developments in Queenstown.

Brookfield/Goldman Sachs onsold the loans individually and approached Mr Adams about The Lakes in November. "I tried to get them to sell the land asset to Carrus, but it was complicated by the fact that Grasshopper Farms had gone into receivership. They only wanted to sell the loan," Mr Adams said. "We came to a deal by Christmas, but I still had to sort out some other issues."

Grasshopper Farms had arrangements with Tauranga City Council where it completed some work in lieu of development contributions. Mr Adams had to renegotiate the council agreement and achieve a credit for Carrus - or else the sale price with Brookfield/Goldman Sachs would have changed. "The council recognised that it was in the interests of the city to get The Lakes project going again," said Mr Adams.

He also wanted Grasshopper Farms to pay the money owing to the Inland Revenue Department and creditors - about $2 million. "I didn't want unsecured creditors coming here [at The Lakes] looking for their money."

After it made the payments, Grasshopper Farms came out of liquidation but is still in receivership. The Grasshopper directors still had personal securities against the loan to The Lakes development.

In between all this, Auckland-based KordaMentha was replaced as receiver by KPMG on March 30 and Mr Adams negotiated with the new receiver to take over the land assets at The Lakes.

After 14 months, the big subdivision was finally owned and controlled by The Lakes 2012, an associate company of Carrus Properties. The deal was settled on Friday last week for a price of about $30 million.

Carrus, which is currently developing in Porirua and Taupo, could concentrate on opening up more sections at The Lakes and completing the earthworks along Kopurererua Valley next to the new expressway.

During the receivership, $1.34 million worth of sections in stage two were sold. Carrus plans a full marketing swing in spring and the lead-up to Christmas. It aims to sell at least 50 sections a year.

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Carrus is halfway through developing the 2000-section Aotea Block subdivision in Porirua East after starting in 2003. Already 700 houses have been built and Carrus expects to complete that residential project in 10 to 15 years.

With a management team of four in Wellington and 10 in Tauranga, Carrus is also establishing 300 sections in the Silverwood subdivision at Whitby, 550 lots at Taupo's Wharewaka East and another 100 sections at Acacia Bay around Lake Taupo.

It also has land in Papamoa East near the Kaituna River that is part of the Te Tumu block which will be re-developed and joined up with the Wairakei urban plan.

A civil engineer, Mr Adams operated Camerons construction company in Wellington for 10 years and was involved in the 1970s re-development of the capital city.

He became a consulting engineer in Lower Hutt in 1980 but, the next year, changed direction after joining a kiwifruit syndicate (for tax incentives) that owned a Te Puke orchard.

He moved to the Western Bay and soon formed Bay Horticultural Services, a grower and post-harvest operator. The company ended up owning 60 orchards producing three million trays a year. It built the coolstore on the corner of Totara St and Hewletts Rd, and had Cool and Pack in Collins Lane, Te Puke.

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Bay Horticultural Services was sold to Fletcher Challenge, but when Fletcher decided to exit the kiwifruit industry Mr Adams bought his old company, and the staff, back.

Eventually, Bay Horticultural Services became part of the Satara Co-operative. An opponent of the single-desk selling system, Mr Adams decided to get out of the kiwifruit industry and back into land development.

He started Carrus in 1990 and bought the Cooneys orchard and a dairy farm alongside his own two kiwifruit orchards and turned the land into the 210-section Bethlehem Heights subdivision. The Bethlehem makeover was under way. Mr Adams had already started the 320-lot Bayfair Estate.

During the past two decades, Carrus has built up a multi-million-dollar property portfolio and its subdivisions read like a Who's Who of Tauranga development: Meadowviews, Springfield, Sunvale, Belvedere, Cheyne Park, Sterling Gate, Pacific Cove, Endeavour Heights, Mayfield, Rowesdale, St Clements, Sereno Vista and Westridge Heights.

Grasshopper Properties was the project manager for the Carrus-owned Somerset Heights subdivision in Hamilton with 429 sections.

Carrus also built 14 luxury apartments on Wellington's Oriental Bay, the Mega Mitre 10 building in Palmerston North, Portside Industrial Park at Mount Maunganui and finished off the Greenwood Park Retirement Village at Welcome Bay, now owned by Metlifecare.

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Carrus Properties owns the Placemakers and Pelco NZ buildings at the Mount, Fletcher head office and Fisher and Paykel Finance building in Auckland, and Mega Mitre 10 at Mt Wellington. Carrus refurbished the State Insurance Building in Wellington and, working on behalf of Wellington Maoridom, completed a joint venture deal for using the old Dominion Museum in Buckle St as a new Massey University campus.

Mr Adams always walked in the right circles, forming a relationship with Maori leader and Treaty of Waitangi negotiator Sir Ngatata Love.

Mr Adams now has a brief for revitalising the old Shelley Bay air base in Wellington. It may just become the new premises for Weta Workshop, which currently operates out of eight buildings in nearby Miramar.

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