How does it work?
How do you take an old building or a bare piece of land?
And how do you work out how it costs?
And then how do you work out if there's a market for it,
and if it's an economic outcome,
that's going to be worthwhile?
I got really interested in that.
And I got really interested in the sort of people
that were doing property development.
They're a really special group of people.
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In this episode, we meet some property developers.
What sort of people are they?
What drives them?
What's involved in property development,
and what are the risks?
And is this the best way to build our communities?
I think there are two sorts of developers in there,
and you've sort of got the romantic developer,
with a great vision,
who really want to do something like that.
And then on the other hand,
you tend to have the hardened developer who says,
councils are all bastards, neighbours are a problem,
I just want to build this thing,
which I can do and make a buck.
That's what I do.
Let me get on with it you know.
So, that's a very interesting dynamic,
especially if you're on a council,
to try and manage that process
in a way that your community will accept.
Unquestionably, you want to make money
out of whatever you do,
but that shouldn't be ever your prime purpose
in whatever you do in life.
Your prime purpose should be to do a great job.
Dave Henderson is a twice bankrupted property developer
who was previously involved in developments in Queenstown,
Christchurch, Dunedin, and Invercargill.
When it comes to being a developer,
you know one should first ask oneself
what it means to do a great job.
And I think what it means to do a great job
is to create spaces that people can derive
for many years to come, great satisfaction,
or joy from either living in or shopping in,
or having their workspaces.
John Darby is a prolific property developer,
who's played a major role in the development
of Clearwater Golf Resort in Christchurch, Jack's Point
in Queenstown, and Millbrook near Arrowtown, Omaha Beach,
and the Denarau Resort in Fiji.
I think what attracted me to land development
of the scale, which we typically are working at,
is really the ability to deploy skills
as a landscape architect.
I was trained in that field and I still use it
and consider myself firstly, a landscape architect
rather than just a developer.
And that is where we can understand the many factors
of the land, and how we best manage it
and allow people to settle.
New Zealand's still a young country,
we're still settling people and expanding our community.
So, the real interest and challenge was the design
and that design being integrated with nature, really.
So, that's what excites me.
That might be what excites developers,
but what keeps them awake at night?
Well obviously these large projects
have high financial risk.
So, you are very tuned to market and circumstances.
Some of which are well beyond your control,
like world events or the recent sort of reset in
economic terms, worldwide, all impact.
So, as a result, we are very conservative
when we develop.
We use our own capital and we don't take, we hope, risks
with other people's money.
It is a challenging environment to work on.
And so what is important to understand is,
first of all you have to have someone with a vision to see,
take a blank piece of land or an old building on it
and create something that's really visionary.
Then you've got to go through the process
and actually acquire the land and develop the concepts.
Then you have to go through and get all the consenting
and the master planning through council.
Then you've got to go and secure financing.
Then you've got to sell the product,
then you've got to build it,
finally when you get to build it.
And so what's important to understand is that,
for some of these projects where you might be doing
500 to a thousand houses, these are 10, 15 year projects.
And so you've also got to take the risk
of everything that can happen.
The market might go up or the market might go down,
you take all that risk.
You take risks because you can have delays
either with consenting or with construction or with weather.
The allocation of capital is the key issue
with respect to risk in property.
After a successful career, as a private developer,
Chris Aiken, moved to the public sector
as the chief executive of a Housing New Zealand subsidiary,
created to oversee the transformation
of the former Hobsonville Airbase into a new town
with homes for 11,000 Aucklanders.
Because it is a risky process,
it attracts higher reward, capital and funding.
So, what are those risks if you unpack them?
Low equity in the projects.
So, there's not a lot of money before the bank.
So, they insist on a whole lot of measures such as,
rapid presales, fixed price contracts
to de-risk the process.
That in turn drives profit risks.
So if you fix a contract, fixed price contract now,
you are going to pay a premium,
if there's changes because the builder has to carry
that contract through three years.
So you're paying a premium,
but because of the way you're funded,
you've got an alternative,
because the funder will want to see
those fixed price contracts.
Equally, if they want to see 40 to 60 to 70% presales,
and when I was developing,
we were at 80% presales for apartment.
No other industry has to do that.
If I was a car manufacturer, I'd get funding to create
my two, three years of supply of cars.
I don't have to pre-sell them all
before I get the money in the bank.
I can then move with the market.
You've gotta be totally passionate to do it,
because actually it doesn't make money at the moment.
I'm still in a negative cash flow.
Last month, two of my rates bills
I paid on my visa.
That's how tight it can be for people like me.
And everyone thinks, he must be rolling in it.
I wish I was.
Antony Gough is a Christchurch Rich Lister
and a property developer best known for his colourful suits
and the Terrace precinct,
part of the Christchurch city rebuild
after the 2011 earthquake.
It will get there.
And I've got the confidence
and I see that to me there's that vision,
it's got to stand out.
I'm the Terrace development and it's all interlinked,
lots of buildings.
When you look at my logo, it's got gaps and all the letters,
and the gaps talk about the gaps between the buildings
because everyone normally, a gap in the building,
it's where you throw the rubbish.
No, they're the most important parts.
That's extra street frontage,
and people don't realise it.
Once upon a time, they were the people, this is sexist,
we used to call the city fathers.
They were the people who built the buildings,
that housed the businesses, that created the jobs,
you know they built the wealth for the city.
That's what they were, it's a respected thing.
Something happened somewhere along the way.
I think it came about as a result
of the kind of modernist movement
that swept across America, building motorways
and creating these great big suburban sprawls.
And in that moment of belief,
that that would make us happier
than living in a more urban environment,
a lot of people went for it.
You've got to look at the history of developers.
So, most of Georgian London
was built by developers.
And we look at London say, aren't these beautiful squares.
They were greenfields.
I used to live in Soho, which was named after the hunting
cries of the local Lord, as he used to gallop
across the fields, chasing hounds yelling out,
Soho, anyhow.
So, those greenfields have been turned
into one of the more densely packed areas,
parts of London, Soho Square, various things like that.
They're all built, north of there, Bedford Square
is a classic developer built piece of urban infrastructure.
So, I think that what happened there is,
the developers were actually the Duke of Bedford,
the Duke of Gloucester, people like that who had money
in the game and they wanted to capitalise on their asset
and they built these beautiful brick fronted buildings.
Probably at the time, people probably thought
this is a tragedy.
Where are those greenfields?
I can't live in a town like this,
but that's become something more than that over time.
I think the problem with our New Zealand developers is,
they've got very little vision when it comes to housing.
The developers of the big schemes in the cities
are very keen to do some quite amazing schemes,
but the developers for most suburban housing,
they're pretty banal.
The schemes are just banality upon banality.
And so, we need developers with a lot more vision.
Britomart was a developmental in Auckland
done by a developer, and that's become one of the key places
in Auckland as a sort of vibrant area,
completely developer driven.
And I think most people would say that's a fantastic result.
But so, we need our developers to have more vision.
But of course, in the modern world, these so-called
city fathers and mothers have to contend with regulations
and obtain permits, and deal with objections
from other land owners and citizens.
So how does Dave Henderson
think that affects their approach?
What you're left with,
is you left with a community developers
who are fundamentally bullies.
Because the only way to achieve your outcome
with the RMA is to be a bully.
You've got to go and bully everyone
to get your development through.
The second thing is, that the best way
to get your development through other than being a bully,
is to do something entirely vanilla.
So, the less creative you are,
the more chance you've got
at getting your development through.
So, we ended up with a vanilla landscape.
You know the average person lacks conceptual skills,
which is very sad.
And so you can conceive something and you can lay it out,
but you put those plans and drawings and even deed,
it's great 3-D renderings in front of people
and they still can't get it.
Unless you can properly conceive these things,
you're not really well-placed to pass judgment on them.
So we have a whole bunch of people who can't conceive
things, passing judgment on them.
And so developers quickly learn that the best way
to get somewhere is to do something very simple,
straightforward, and as I said, terribly vanilla.
Yeah, people take risk, they take a risk.
Property development is one of those things
that looks really easy until you try and do it.
It's like international gymnastics,
always looks fabulously easy,
and then you try and do a forward roll, it's not good.
Of course they take big risks.
Lots of people take big risks.
I don't give a toss about anybody's risk.
In fact, it has absolutely no importance
to me at all, their risk.
We need them to develop.
So, there was a tension there
because they are only going to develop and take risks
if they have the decent, the big rewards,
but this sort of gambling game,
is this a good way to run our communities?
Is this the way into the future to make sure we deliver
the best outcomes for communities and for maintaining,
not maintaining, for rescuing and restoring our environment?
I don't think it's the right way at all.
I think where people get a bit lost with this is that,
it is a business like anybody else.
There are high risks and there are a number of organisations
and companies that go bankrupt.
So, they do need to focus on making a profit,
given the risks and the timeframe
and everything that goes with it.
But I don't know of any developers
that also don't want to drive past what they do and be
proud because guess what?
When we build this stuff,
it's sitting here for the next 50 years.
In two of our other episodes, we discuss in more detail,
the effectiveness of the Resource Management Act,
and what the average citizen can achieve
in disputes with developers and councils.
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This program was made possible by the RNZ
NZ On Air Innovation Fund
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