Hilton on the wharf

By ANNE GIBSON

Developer David Henderson this week went to the market to raise $12.7 million to help finance his luxurious $4.25 million apartment project and New Zealand's first Hilton Hotel, valued at $54 million, at the end of Princes Wharf.

The junk bond issue follows developer Andrew Krukziener's $21 million issue for the Metropolis apartments late last year.

Investors, promised an 11.1 per cent return, have been invited to stump up $5000 minimum for the secured bond issue which opened last Monday and closes on Wednesday - a tight nine-day window to drag in the necessary funds.

The money will be used as a second mortgage to finance part of the costs of developing the 167-room hotel, conference and exhibition centre, as well as a penthouse apartment in which Henderson and his family will live.

The return is 7 per cent with a bonus to be paid in 2003 of 4.1 per cent a year. This promises an 11.1 per cent return for those who stay the full term. The trustee for the issue is Perpetual Trust.

Most of the financing for the Hilton has come from ASB Bank, providing the first mortgage of $29.8 million.

For Henderson, the electrician-turned-developer who made his money developing Auckland apartments, the $220 million Princes Wharf is by far his grandest gesture to date.

But the bond issue has been overridden by other matters for Henderson and his Kitchener Group lately. The past week has been dogged by meetings with a liquidator and construction companies to get his project back on track after the collapse of builder Goodall ABL, which was putting up one of the six buildings on the wharf.

Goodall ABL was building Shed 24, a block of 64 apartments, with ground-floor restaurants and offices, all on the western end of the wharf and directly opposite the new Hilton, which will be finished in October.

It was Goodall ABL's only involvement in the project, with the contract to build five of the six buildings let to Hartner Construction.

Henderson has now appointed Associated Builders Ltd to start work on Monday after a two-week lapse on the site - a move which surprised some in the industry, given the common directorships between the two companies.

ABL is the Southland firm, started in 1961, which took over well-known Auckland builder Goodall Construction two years ago. So why appoint a company associated with the collapsed firm?

Continuity of work by existing subcontractors was one of the reasons cited by Henderson and financier Marc Lindale, of investment banker Salisbury Group.

"We have negotiated with the liquidator to novate the project, that is, move it across to another entity which takes it over as it is. So the contract price remains the same and all the terms and conditions remain the same," Lindale says.

"We don't have to renegotiate the subcontracts, which would have taken us three months if we'd had to re-tender all the work. We don't have the time for that. People want to move in to the apartments."

Henderson puts a developer's spin on the outcome, claiming quality of work by ABL - whose previous projects include the Tiwai Pt aluminium smelter and hotels in Queenstown - as the reason behind its appointment.

Lindale concedes Henderson will wear some costs from the collapse, mainly financing costs related to the delay, "but he's entitled to claim damages from the liquidator."

The voluntary liquidation of Goodall ABL will result in a two-week setback on Shed 24, taking completion from mid-September to the end of September.

Princes Wharf will give Auckland a further 299 apartments, 688 carparks, 4637 sq m of shops and 6614 sq m of offices.

It has already brought a raft of restaurants spanning the western side of the wharf.

Henderson is often asked why anyone would want to live in an apartment on a wharf with a huge cruise ship tied alongside. His answer is that the cruise ship season is relatively short, opening in December and closing in March. This season ships will be here for only 32 days.

"We've always marketed the wharf as working," he emphasises, adding that the ships will usually be alongside the Hilton and not spanning as far towards the CBD as Shed 20.

"Besides which, cruise ships are getting squatter and higher," he adds, resulting in the bulk being alongside the hotel rather than the apartment blocks.

Another question raised about the unusual development is whether the 1923 wharf can stand the load. "We've only used 50 per cent of the wharf's loading," Henderson says.

He adds that the wharf was built to store huge tonnages of cargo, and carried two steam locomotives on tracks which still run up either side.

These tracks will soon be pulled up to enable paving of public areas around the water's edge.

Answering doubts about the wharf's piles, Henderson says concrete piles are "driven 12 metres down into the Waitemata stone at the bottom of the harbour." Wood piles apparent at the edge of the wharf are simply there to protect the wharf when cruise ships are tied up.

The project manager on the Hilton construction site, Paul Feltham, of Hartner Construction, has 80 people working on the hotel seven days a week, but predicts 300 will swarm onto the site in the next few weeks as completion nears and more people are needed for the finishing trades.

Henderson praises Feltham, saying it took his team only 11 weeks before Christmas to build the new Ports of Auckland Overseas Terminal on Princes Wharf.

The terminal will be used 110 days each year to host cruise passengers. It includes customs, baggage handling and a 20-passenger elevator. The arrivals hall can be used for functions and conferences, able to cater for 1000 diners.

Henderson gazes wistfully across to the Tank Farm, noting that the leases expire there in 10 to 12 years, and that its position in relation to the city is inappropriate now that the Viaduct Basin has been developed.

Redeveloping this area could be his next grand gesture to Auckland.