Southern Capital fights to rezone land for township

By Chris Hutching

Friday 19th October 2001

GRAEME WONG: Individuals should have the choice of buying where they wanted

Southern Capital's legal counsel Jim Guthrie this week opened the company's Environment Court rezoning appeal over its proposed Pegasus Bay township near Christchurch in the latest round of a protracted battle with Environment Canterbury.

The rezoning battle has gone on for more than two years and another two weeks are set down for this hearing.

Southern Capital was earlier successful in seeking a variation in the Waimakariri District Council district plan allowing the township to proceed.

But Environment Canterbury is the ultimate territorial authority that must approve district plans and it has concerns about increased traffic and energy conservation for the town, which would have 1800 sites and house up to 5000 people long-term.

The attraction of the township, about 2.5km toward the coast from Woodend town at the approach of Christchurch's northern motorway, is cheaper sections relative to the city, although the pricing margins have narrowed due to more recently rezoned land on the city outskirts.

Southern Capital managing director Graeme Wong said Environment Canterbury seemed determined to pursue its objections as a key policy in the region. The company's view was that individuals should have the choice of buying in the area they wished and make their own decisions about costs of transport. There was an argument that road-user charges and other levies would cancel out net costs for infrastructure like roading, he said.

A ruling on the Pegasus Bay project should come out in the New Year. Another nearby project, Waimakariri Employment Park sited halfway along the northern motorway, has also struck planning hurdles, but this time from the Waimakariri District Council which has various concerns. The project may be scaled back to a service stop.

Meanwhile, last week Southern Capital announced the issue of 600,000 options to executive directors at an exercise price of 92c. Before the options may be exercised total shareholders returns must exceed 15% per annum from a level of 74c per ordinary share.

The current share price is 77c and with the options due to mature in five years from the issue date of September 19, 2001, the chances of a profit for executives look good.

Non-executive directors are also included in an options scheme with the allotment of 350,000 options on the same conditions.

About 31% of the share capital is owned collectively by founder directors, including South Island developer Howard Paterson. Axa and Armstrong Jones hold about 10% each, a legacy from their holdings in CBD NZ Ltd which Southern Capital took over two years ago.

Southern Capital's policy is to reward shareholders with share price appreciation from the development and sale of various speculative property-related activities and investments in bio-tech companies, rather than dividends.

Details about the options and the company's performance are available in the just-published annual report. The potential value of some projects is difficult to discern but the trading value of shares in some subsidiaries shows a considerable premium over acquisition costs.

Southern Capital reported a profit after tax of $1.36 million ($1.3 million loss last year) on revenues of $5.4 million. A significant contributor was income from settlement of first-stage sections that were pre-sold at Omaha Beach development north of Auckland.

Other proceeds from the sale of an Albert St building and final settlement of Tiromoana Station in North Canterbury early in the reporting period saw all bank debt repaid but the balance sheet was re-geared to complete the group's purchase of 21.7% of Tasman Agriculture early this year. At the current market prices of around $1.75 per share the unrealised profit amounts to $9.5 million.

The Canterbury Supa Centa at Belfast opened stores for The Warehouse and Smiths City in December 2000 and recently clinched a lease agreement with a supermarket operator. A managed apartment development at Frankton Road in Queenstown is nearing completion with pre-sales of units equating to 75% of the total likely sales value.

Other investments include stakes in Blis Technologies, A2 Corporation, and Botry-Zen, which is developing a fungus-based remedy for botrytis rot.

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