How developer bailout for their

Kāinga Ora paid up against Treasury advice, for fear of “reputational damages” the debacle could cause the KiwiBuild programme. Jonathan reports.

The Government has paid a major developer $37.8 million in a land deal, after it threatened to openly flout its legal obligations and sell scores of KiwiBuild homes out from underneath anxious buyers.

Documents released to Stuff under the Official Information Act show that developers The Neighbourhood Ormiston told Kāinga Ora (KO) they were on the brink of receivership and would need assistance.

Cabinet ministers allowed the housing agency to pay up against the advice of the Treasury, after being warned of “reputational damages” the debacle could cause to the KiwiBuild programme.

Stuff previously reported on buyers of stage one of the development who could see their homes were finished but had been denied settlement because the developer’s engineer wouldn’t sign off on practical completion. Meanwhile, their sunset clauses were looming.

“Without some form of intervention, the likelihood is that the developer would either cancel the sale and purchase agreements at the sunset date, and resell the homes on the open market to achieve additional sales revenue, or put the development into receivership,” government staff told ministers.

Ormiston gave the Government a deadline of October 6. This would have breached its contracts with KiwiBuild, but KO was under the impression it would do it anyway.

“The developer has indicated they will ignore their contractual obligations to the Crown... We believe the developer will breach the [agreement] knowingly, as they no longer see any value in the benefits.”

The market value of 56 outstanding homes under threat was estimated to be $770,000 to $830,000 each, compared with the contracted KiwiBuild purchase price of $650,000.

KO explored various options, including releasing Ormiston from price caps on future stages, but the developer wasn’t having it. “The developer has indicated this would not be enough to restore financial viability to the development – land acquisition must be part of any agreement.”

Ormiston wanted the Government to pay $46m to purchase stage three of the development to give it a needed cash injection. KO negotiated that down, saying