Tuesday, 8 September 2009

Harcourt Briefing - September

A NEW question mark hangs over the Waterfront finance district scheme after developers Harcourt apparently missed their final deadline to prove they had the money to build it. It is understood that the Irish developers did not meet their final deadline of last Friday to provide the Waterfront Enterprise Board with a bond to prove that they had the funds to carry out the scheme. If that is the case, WEB could have to negotiate with other developers to build the 14-block finance district on the Esplanade car park. The developers missed a deadline to supply the bond at the start of the year and were dropped as 'preferred developers' for the seven-year scheme. They were then given a second deadline of 4 September to come up with the money, but apparently failed to do so.(1)

It remains to be seen if yet a third deadline will be given, but it seems poor government to keep on extending deadlines continuously. The message that this gives is surely that the deadlines are a fiction, and do not really mean anything, rather like one country saying they will impose sanctions on another, and then always finding the justification for not doing so. I would not like to draw a direct parallel with Neville Chamberlain, although it seems appropriate, given this is the anniversary of the declaration of war in 1939, but this is like a policy of appeasement, of foreoever giving ground, making allowances and excuses, and never drawing a line and saying so far and no further.

In Ireland, Harcourt are facing a problem in having taken contracts with buyers who now cannot afford the mortgage on the full cost:

Plummetting property prices in the North have created a web of despair for buyers who are trapped in negative equity even before they have taken possession of their new home. But that is not the worst case scenario for purchasers in Northern Ireland today. The nightmare that some now face is the possibility of legal action by developers who want to force them to complete on deals agreed at the top of the property price boom....Belfast, which witnessed some of the sharpest rises in value, was overrun with new property developments. It seemed as if there was not a corner of the city which was immune to the charms of a new "luxury" apartment development. They were inevitably launched in a blaze of publicity and naturally "sold out" a few hours later.

Developers are now pressurising some of these people, who have failed to complete purchases, to do so or face legal action... A group of purchasers of apartments in the Arc in Titanic Quarter fear they could face a similar scenario, and they have formed the Titanic Action Group. In this instance the developer, Titanic Quarter Limited, a sister company of Dublin-based Harcourt Developments, has not taken any legal action to date but the completion date is drawing near for apartments agreed in the first release, and some of the buyers involved are growing anxious. The action group wants to meet with the developers to discuss the fall in apartment prices and the impact this has had on them. (2)

The BBC news also reports on writs being issued by some of the developers. Harcourt is playing a waiting game at the moment, because the completion date has not yet come, but it is clear they are not budging on this matter:

Around 100 purchasers have formed the Titanic Action Group, which is being coordinated by Brian Speers of CMG Solicitors. He said the developers, Harcourt, have simply said that if the purchasers honour their obligations they will adhere to theirs.  "I don't think that's an adequate response in the exceptional circumstances we have in the market - an unprecedented collapse in valuations," he added.  "It seems to me more attention should be paid to resolving the dispute through discussion, dialogue - mediation if necessary - than by involving legal action."

In a statement the developers said that they had not started any legal action and were happy to speak to individual purchasers about any queries they may have relating to their property.  The statement added: "Contracts relating to the first residential phase were entered into freely, and in the knowledge that property values can rise and fall. "Titanic Quarter, therefore, anticipates that those contracts will be honoured." (3)

Another news source gives some personal stories, which explain clearly the predicament the buyers are in:

One member of the group, known as the Titanic Action Group, is Ben, a 26-year-old from Coleraine who paid a £20,000 deposit on a one-bed apartment two years ago, but now finds that the apartment is valued at 35 per cent less. Speaking to the News Letter, Ben said he bought the apartment when his work re-located him to Belfast two years ago. "I purchased a one-bed apartment priced at £200,000. At the time there seemed to be no problem. Now the recession has hit and I can't get a mortgage now. Nowhere near it." Ben, who is due to complete his purchase in November, said that he just  wants to talk to the developer. "They're not talking to us at the moment and they're just saying we're tied into the contract," he said.

"I understand that a contract's a contract, but I don't think it's going to benefit them taking 100 people to court. This isn't just any situation - the whole world is in a recession and we need to be realistic."

Brian Speers, the lawyer representing the Titanic Action Group, said that the group did not want to "knock" the developer but merely wanted to open discussions. "The developer has done a good job and finished it well," he said. "The problem is the financial shortfall. I believe that a meeting with the bank and developer and a degree of imagination in these exceptional times could bring about a way of meeting any shortfall." Mr Speers cited a deferred purchase payment or a variation of the co-ownership scheme as possible measures.

No one from Harcourt Developments was available for comment. (4)

Why I think this is important is twofold.
First, it indicates that Harcourt may be facing a financial squeeze, because if people cannot afford the appartments, and it cannot sell them, it cannot recoup its investment.
Secondly, and just as importantly, it shows whether Harcourt will just stick to to the letter of the law, or are prepared to see the wider picture, and give consideration to other people's problems - in other words, apart from legal rights, there are also ethical responsibilities, and a question to be raised is whether how they behave should also be considered in having them as developers in Jersey. Are they a responsible developer?After all, what would their stance be against locals who found themselves in the same predicament?

A second area where Harcourt are facing financial problems is in the Bahamas, where the Royal Oasis development seems to be on hold:

With regard to the construction and reopening of the Royal Oasis Country Club, Casino and Golf Resort, Prime Minister Ingraham simply said, "insofar as the Princess is concerned the persons who bought it have not yet indicated their ability to proceed at the moment." He noted the Government expected Harcourt to develop the Princess property, "but we also understand the financial difficulties that they are facing with the economy of the world.(5)

This seems to have been frozen because of bank lending policies, that Harcourt cannot get the lending needed to move on with the work, which is certainly of interest to Jersey, where they are not only due to put down a substantial bond, but also pay for the development themselves on the basis that they can sell it on. Moreover, the promotion of the development is couched in very similar glowing terms to that of Jersey's proposed waterfront, albeit for tourism rather than finance.

Tourism's Director General for Grand Bahama is suggesting any construction at the Royal Oasis hotel won't likely come before a change in current bank lending policies - a move analysts peg for late 2010. "The point at which this and other major developments can resume is the point to which we get back to pre-2008 equity cash input levels," David  Johnson, Tourism's Director General of Grand Bahama, told Guardian Business.

"The degree to which we can see a rebound in construction and other new developments like the creation of new businesses is tied to equity. Hopefully that would happen by the end of 2010." Johnson's comments come as government awaits an outline from the Irish company Harcourt Developments on how it intends to redevelop the property, which closed four years ago. Earlier this year Prime Minister Hubert Ingraham confirmed that he had not  heard anything from the purchasers that suggests anything will happen in the near-term. With a total investment pegged at $400 million, the redevelopment of the Royal Oasis has been touted as the key jump start for the GB economy. "Harcourt is very important to us in that it will generate a lot of jobs for people who are out of work at this present time and who are looking forward to the reopening of Royal Oasis," a Tourism spokesperson told The Guardian in an earlier interview. "Not only will it create employment, but also it
will create opportunities for us to increase our tourism product."

Just last fall, Ingraham was briefed on whether there was still full funding in place for the project and on the timelines for moving ahead. Guardian Business understands the developers had committed to starting work last October, but the construction start never materialized.In a statement sent last Fall, Harcourt tried to reassure residents of its commitments, asserting that Royal Oasis represented a major expansion of its interest in Grand Bahama, and the sale reflected the company's commitment to the island. (6)

(2) http://www.irishtimes.com/newspaper/finance/2009/0908/1224254067293.html
(3) http://news.bbc.co.uk/1/hi/northern_ireland/8237366.stm
(5) http://freeport.nassauguardian.net/national_local/301526562666879.php
(6) http://freeport.nassauguardian.net/national_local/298719683056091.php

1 comment:

Anonymous said...

I was thinking of deploying the Harcourt defence when I don't submit my Income Tax by the deadline.