Savoy enters fresh ventures
Savoy Equities, still weighed down by unresolved Britomart issues, is working hard at being a bouncy, lively investment company. Its share price remains in penny dreadful territory at 7c, but since the Auckland City Council put an end last year to the major Britomart bus terminal redevelopment in which Savoy was to play a key role, the company has advanced on two separate ventures.
One is an e-commerce venture and the other a large property exercise, developing the large site in front of the Hyatt Regency Hotel on the edge of Auckland’s cbd (the model is pictured below).
The listed company’s chairman, lawyer Judith Collins, told the annual meeting yesterday that Savoy’s claim against the city council for “very substantial damages” should be lodged in the next two months. She would not reveal details or the amount of the claim.
That issue affects Savoy’s balance sheet, which has the rights to acquire land and development entitlements at Britomart, in downtown Auckland, on its books at the directors’ valuation of $70.8 million. Take that away and Savoy’s net assets come to only $10 million. The company’s $92 million of share capital includes $59.6 million of redeemable shares taken up by director Jihong Lu (pictured above) and the lineup of Asian partners he found to support his bid for Britomart, and those shares could be redeemed for just $100 of no return emerges from the Britomart quagmire.
While doubts remain over all these matters, auditors Deloitte Touche Tohmatsu have scored their annual audit report with a “fundamental uncertainty” warning, though they have also recorded an unqualified opinion that proper accounting records have been kept.
The e-commerce venture was announced ahead of the annual meeting, a 70% stake in Safety Net (NZ) taken by a Savoy subsidiary, Savoy Technologies. Safety Net provides mainly wireless internet and virtual private networks to commercial clients in Auckland, Wellington and Christchurch’s cbds.
The Hyatt venture, unlike the long-running and unsuccessful Britomart saga, should prove in a fortnight to be a real exercise in property development. Savoy and Hudson Group of Australia entered a joint venture last year to buy the Hyatt for about $40 million, getting a 273-room hotel on 5800sqm, 5200sqm of development land, the four-storey Princes Court and, at the foot of the site on Eden Cres, the nine-unit Eden Hall building, which has an historic classification.
Savoy has created a display suite in the Princes Court office building, showing a one-bedroom unit with a large lounge and a neighbouring small unit with potential for them to be linked.
Savoy proposes to slot a 20-storey serviced apartment tower between the Hyatt and Princes Court, on Princes St but with views north-west and north-east towards the Waitakeres and Coromandel. Mr Lu said resource consent for the project should be granted in two or three weeks, but was wary about being definite given the drawn-out procedure of Britomart.
Bayleys will pick up the marketing job at that stage, offering 108 units in the Hyatt Residences. The design shows 87 serviced apartments on 11 floors, 12 sub-penthouses on two floors and nine two-level penthouses. Prices (all excluding gst, which depends on whether they are owner-occupied or part of the serviced pool) are expected to range from $162,500 for a 40sqm studio on level 3 to $565,000 for a 110sqm two-bedroom sub-penthouse. The penthouses have been priced from $520,000 to $820,000. Investors will be offered an 8.5 % return for three years. Ex-gst prices range from $3500 to $5000/sqm, which makes the project competitive in the five-star market.
Hyatt has renewed its contract on the hotel for 10 years from 2003, and although some of the hotel rooms will have their views blocked by the new building, the hotel operator stands to gain from the development because all apartments in the serviced pool will be managed by the hotel company. The hotel ballroom and associated facilities will also be enlarged, a pool, tennis court and health spa facilities are part of the design and the site will get about 100 more parking spaces.
Savoy Properties chief executive John Dalzell said financial options were still being considered. They include traditional project funding and ‘”some more innovative structures. We don’t need to make a decision on that for some time.”
Previous hotel owner Otaka International had hoped to remove the category B historic places rating on Eden Hall, which seriously diminishes the value of the site, and Savoy has an application in to remove the protection. But Mr Dalzell said “we’d like to think we can come to some arrangement with the city council. As everyone knows, to refurbish a heritage building is not cheap and not particularly economical.”
The company wants to start work on the apartments site in May for completion next November.
Hyatt Regency general manager Uli Hoppe said the hotel, opened in 1968 as the Inter-Continental, had not been able to offer some of the facilities the chain’s international corporate customers expected and the Hyatt Regency would rectify that.
“We’re definitely aiming at the convention market, having one of the largest facilities in the city,”he said.
He expects room rates in the apartments to compare with those at Quay West, which was top of the range until the Metropolis Somerset Grand opened in December.
Like all Auckland’s hotels, the Hyatt Regency has been at 100% occupancy through the America’s Cup period, up from its average 75%, which is a high level in any case. But once the cup racing is over, Mr Hoppe warned: “There will be a rate war going on in Auckland during the winter months.”