Britomart claim to reach court about Easter
Savoy Group’s claim against Auckland City Council over the Britomart project failure will be for more than $100 million and should be lodged in the High Court in about six weeks.
At the same time as councillors have been working towards a lesser, but potentially as expensive, transport interchange for the Britomart site in downtown Auckland and Savoy’s lawyers have been putting together the damages claim, Savoy director Jihong Lu (right) has been involved in a far bigger, and proceeding, transport infrastructure scheme in the Philippines, embroiled in a High Court case over sale of shares in Smartel and is about to launch his group’s formal bid to take over a listed Hong Kong electronics manufacturer.
Meanwhile Savoy Equities, the group’s New Zealand-listed company, hopes to have resource consent in a few weeks for its major extensions to the Hyatt Regency Hotel property. Some Savoy Equities staff have also been employed on the Philippines venture.
The extent of Mr Lu’s active business ventures is ironic, given the state of the Britomart bus terminal, where Savoy companies were to take on a development role, earning potentially large sums from the 11 towers to be built above the five underground transport centre and parking levels.
Pacific Capital Assets was listed to give small investors a stake in that project and in further proposed infrastructure project involvement in New Zealand, Australia and Asia. But that listed company folded with the continual holdups on the Britomart scheme.
The city council canned the project late last year, claiming Savoy had not met its part of the master development agreement, but Savoy claims this was a contrived ruse to meet the political ends of councillors, and a mayor, elected to oppose the scheme.
“The amount will be substantially over $100 million,” Mr Lu said of the damages claim over the torpedoed Britomart project. “We’re definitely not giving up.”
Part of the group’s litigation process involves establishing a distinct vehicle within the Britomart Investments subsidiary, while the parent company, Savoy, and rest of the group carry on with new projects.
“I still have a strategy for New Zealand. Just because I’ve been away, I haven’t given up that strategy. I want to make sure the entity for battle is sufficiently quarantined not to backfire on my other business in New Zealand.”
Savoy Equities chief executive Kerry Haycock said the claim against the council would be for breach of contract, damages for costs, loss of potential earnings and conspiracy among councillors “to achieve a certain outcome. That outcome injured us.”
Said Mr Lu: “They also frustrated the ability of the parties to complete. There were market rumours that Jihong Lu wouldn’t come up with the funds. As we started getting the documents in place, they realised, ‘Gosh, he will come up with the money,’ and they pulled the plug. I wasn’t even here at the time the announcement was made.”
Compared to the long and ultimately fruitless haggling over Britomart, Mr Lu hopes the group’s expansion back of the Hyatt Regency Hotel, along Princes St and flowing down to Eden Cres, will be underway soon.
Savoy hopes to get resource consent in a fortnight for the project, to build the 108-unit Hyatt Residences and extent the hotel’s existing conference facilities.
That would enable Bayleys to open its marketing campaign before the end of this month. Despite the site’s obvious distance from Auckland’s new playgrounds, Princes Wharf and the Viaduct Basin, Mr Lu is enthusiastic about the apartment scheme’s potential because of the ability of hotel operator Hyatt to draw on the corporate clientele it has really not had a place for.
“Hyatt Australia has a very strong marketing programme, but corporate clients can’t stay in the Hyatt here, it’s not upmarket enough. At the moment 20% of our bookings are from the Hyatt organisation, but the apartments will give us much better critical mass to attract more.”
Landplan Pacific is project and development manager on the Hyatt Residences, and Mr Lu said the two parties could be involved together again, with Savoy involved in financial arrangements.
But these projects are small compared to some Mr Lu has become involved in overseas.
Savoy Group, the family business through which Mr Lu controls New Zealand listed company Savoy Equities and also through which he has taken interests in overseas ventures (where Savoy Equities may pick up contracts for its staff but has no other significant interest), has become one of five owners of Fil-Estate Group, “probably the second largest property conglomerate after Ayala Group” in the Philippines, with assets exceeding $US1 billion.
Savoy got its minor stake after Fil-Estate was forced into restructuring, along with the rest of Asia after the 1997 crisis. Mr Lu says the group has emerged strongly: “They’re still one of the largest urban developers in the Philippines, one of the largest leisure and entertainment facility developers. They own six golf courses and are one of the largest landbanking, subdivision, ‘horizontal’ [as distinct from tower] developers, mainly residential.”
But it is involved in one major tower, a project very reminiscent of Auckland’s Britomart. This one is a 47-storey apartment block at Pioneer Grand Station, one of the 10 new stations on Manila’s 17km mass transit extension. Fil-Estate has a 16% stake in the mass transit expansion project.
The line was opened in December. By association through the Fil-Estate stake, Mr Lu places himself in good company, although the project was well under way before he bought in. The mass transit extension is a $US700 million scheme using $US470 million of debt from Mitsubishi, with Sumitomo as contractor.
“Savoy Equities has a full-time team, led by our investment banking team, working in Manila on a retainer and success fee basis,” Mr Lu said.
There is plenty of work to be done. That one station, with 400 underground carparks and a 55,000mÂ² residential tower in Manila’s cbd, is bigger than Auckland’s Britomart was to be.
BW Resources casino
A second Philippines project for Savoy is its investment in gambling and entertainment business BW Resources, headed by Macau’s Stanley Ho, with local partners. Mr Lu was initially chairman when he became involved last August, just after the period in which sharemarket investigators are looking at share price manipulation, but is now deputy chairman.
“We’re reassessing that investment at the moment because it’s too high-profile for us. We’re not involved in management at all at BW Resources, but at Fil-Estate we’re actively involved in management. We have another company, Armstrong Holdings, a listed technology investor, and I’m chairman.”
It is hard to establish Mr Lu’s role in these ventures, if only because of distance.
Hong Kong takeover
In one, though, he has a clear leadership role, and that is Team Concepts, a struggling Hong Kong consumer electronics research, development and manufacturing company which two years ago was penalised by the Business Software Alliance for pirating.
“We’re restructuring the manufacturing business but extending the technology. It has a very strong market position as the world’s second largest electronic learning aids company.
“From 15 March I’ll be the new chairman. I’ll taken a70% shareholding in the company. I’m putting $HK100 million ($NZ25 million) into it through Savoy TC Ltd, registered in the British Virgin Islands.”
Team Concepts was formed in 1978, listed in Hong Kong in 1991, specialises in interreactive toys for ages four to seven and, Mr Lu said, is one of the best researcher in voice-recognition phones. In that field, British Telecom is one of its best customers.
For the failed Britomart project, the team put together to do it came largely from outside Auckland. Development backers were mostly Asian, construction was Germany through Australia and design was Australia. The locals ground them down.
But, as he flits about Asia, Mr Lu recognises that “it’s all relationships. The former partners in Team Concepts said they wanted to transform the company, they knew about my ability, and I want to push something forward.They’ve sold down from 75% to 23%, and since I went in the share price has gone up from 18c to 45-50c. It’s an old sleepy company that needed a bit of momentum,” he said.
“I have many businesses but most are passive investments. At any time I’ll be driving maybe one or two. That’s why I’m upset about New Zealand. I took ownership of Britomart and it cost 3Â½ years of my time. It got me involved in an environment beyond my control, a football, I got kicked around.
“As long as the project was alive, I was driving it. I’m not interested now, no matter how good the terms are. I lose on projects all the time. I also win, oh yes. That’s my business. I’m an investor, entrepreneur, I take risks, divest. I’ve been very aggressive. Everything I go in, I have a strategy , and if my strategy doesn’t work I get out.”
Mr Lu said he would like to continue living in New Zealand and enjoys working here. “But I can’t afford to stay here for too long — the business is over there. I’m trying to provide management services from here to the businesses in Asia.
“Once we get out of Britomart, we start looking for opportunities and growing the business. But the loss of Britomart isn’t just what’s happened. It’s credibility, perception.”
In the High Court in Auckland over the past three weeks, Mr Lu has been fighting another credibility battle before Justice Fisher, this one with the Malaysian investors who took over SmarTel NZ from him in 1997, a dispute involving options, numerous agreements, and allegations by Lu that the buyers conspired to defeat agreements so they could take control at a far better price. That hearing should end this week with a reserved decision.