Five Mile project will be scaled back

Tony Gapes. Photo / Brett Phibbs

Scaling back Queenstown's abandoned Five Mile project will be the key to its future success, says Auckland developer Tony Gapes.

The Redwood Group chief revealed how he did not initially intend to own the entire 30.8ha site and he only agreed to pick up most of the block from Allied Farmers after buying a much smaller first stage.

What Gapes will not reveal is his money source or development funding stream.

But building much less than Christchurch developer Dave Henderson was the best plan, Gapes said.

"Our development is a much smaller and less ambitious plan than Dave had envisaged for the property which is more suitable for the current market. With the massive growth in tourism and potential in Queenstown, we feel that the timing is right for another large-scale retail complex," Gapes said.

Henderson got a $72.4 million loan from Hanover to develop the $2 billion mixed-use project at Frankton Flats.

That was Hanover's second-biggest advance after it loaned another Auckland developer, Nigel McKenna, $88.7 million to build the troubled $1 billion Kawarau Falls Station hotel project outside Queenstown

Gapes said he paid Allied Farmers about $47 million for the land: "Around $20 million for stage one and $27 million for stage two.

"It is a great location with very high profile as the gateway to Queenstown and, in the case of stage one, zoning allowed a retail centre. This is probably the last opportunity in Queenstown for a very long time to pick up land at a reasonable price that has the zoning for a large mixed-use development," Gapes said.

"Stage one is 7.8ha and has zoning for a retail centre and mixed-use development. Initially, we were only interested in this piece but when the opportunity arose to pick up stage two, we decided that it made sense to control the whole development and undertake an integrated mixed use development. Stage two is 23ha and is currently subject to a plan change that will allow retail, offices, residential and industrial uses."

The $125 million spend was only for stage one, he said.

In July, Allied Farmers confirmed an unconditional sale of 23.3ha at Five Mile. It controlled the land as part of the purchase of Hanover Finance late last year. Rob Alloway, then Allied's managing director, said the buyer did not wish to be identified.

In June, when first announcing the sale, Alloway said the price was above the value of the property as recorded in the half year accounts of $23.2 million.

In separate development plans, Gapes vowed to go ahead with controversial plans for a 700-unit, waterfront high-rise apartment project on the Orakei peninsula between the Orakei Basin and Hobson Bay.

"The plan change hearing has been held and we are awaiting a decision shortly."