Opportunity knocks for rapid rebuilder
How did developer Richard Diver get so far ahead with Victoria St while the authorities dithered over the CBD? John McCrone learns the lessons of fast decision-making.
The inside story is never exactly what you expect. By rights, with the massive risks he is racking up, developer Richard Diver should be a bag of nerves. But there he sits with a constant grin on his face.
Also by rights, he ought to be furious and scornful about the way the Christchurch central city rebuild is being run. Yet he seems as much amused and entertained by the bumbling he is striking as he seeks to stack up his latest big deal, a $150 million gamble on the Oxford Terrace health precinct.
And now his comfortable ease seems positively surreal. With that same eye twinkle, he is telling me the authorities have been buggering about with the traffic lights outside his office, the Carlton Butchery, on the corner of Victoria St and Bealey Ave.
The green light is only letting about three cars slip round the corner at a time. We look out the window and sure enough, traffic is backed up the length of Victoria St.
Does he really believe this a deliberate ploy to cripple his rapid-fire approach to office block developments?
It is true that more than anyone else, Diver has been disrupting the tidy plans of the bureaucrats by throwing up buildings faster than they can blink. They had this lumbering Blueprint plan for the city core. But Diver has raced ahead, populating Victoria St with 10 office developments in quick succession - half of them now open, half on the go - creating his own alternative CBD on the city's northern corner.
So oh yes, Diver says quite happily. It must suit someone to dampen enthusiasm for the runaway growth of Victoria St.
"We know they've slowed the traffic lights up to stop people coming down here. We know they're looking at some changes on the intersection with Salisbury St which is going to make it quite difficult from that end."
Diver seems too relaxed about it. Although you could believe the authorities would not be pulling out fingers to do him any favours at the moment.
Anyway, back to the inside story, which is surprising enough. Who is Diver and how did he manage to become the first one roaring out of pack?
Walking down Victoria St, it is marked just how advanced it looks. Then to discover that Diver had tried to be a first mover in the Blueprint's City Mall, and now is being stymied in the health precinct as well, it does raise some questions.
Diver's version of why he was so fast out of the blocks has been told before.
He was holidaying in Fiji with the family when the September 4 quake struck. Diver turned on the television and there on the news was the building he had just started renovating - the old heritage-fronted Daily Bagel, now the rebuilt Carlton Butchery.
The front had fallen off. "I thought hang on, that's my building."
Diver says being out of town was an advantage. He was not caught up in the shock of it all.
"I was able to get on the phone while everyone else was collecting their senses. I rang my engineer, my insurance company, the demolition company I normally use.
"I got back that Saturday night and had them all there on site on the Sunday. Got the insurance pretty much sorted out the same day and the architects started drawing the new building on the Monday."
Diver was up and running before the dust settled. From there, he simply jumped into every development project that presented itself. And after the second February 22 earthquake, the whole central city became the opportunity.
The logic of focusing on Victoria St was obvious. The city core was in lockdown. Diver could see that stuck inside the red zone cordon, it would be a mess for years. A tangle of insurance claims, tricky demolitions and bureaucracy.
Meanwhile prime tenants - the lawyers, accountants and other professionals - were working out of warehouses or any accommodation they could find.
So Diver started systematically calling on Victoria St property owners - mostly rich-listers - and offering to buy any land going spare. Aftershocks meant there were plenty of sellers.
"We bought about half a dozen sites down here straight after the second quake. From day one, we were well out in front of the pack."
Diver says fellow developer Richard Peebles has possibly now overtaken him. However, until very recently at least, he was the guy who had built the most office space, written the most leases, in the four years since the central city was wrecked.
Diver was a fairly small-time commercial property developer before the earthquakes. Plenty of others knew a central city wiped clean presented a golden financial opportunity. How did he scale up so quickly?
Diver's thumbnail biography is that he was the lazy kid in school. His dad was a builder who moved around. Diver says he lived in Sydenham, Tai Tapu, a lot of places.
Yet his parents managed to send him to St Andrews - where he mainly played tennis and left at 15 to become a builder himself.
That got him into residential development by about 19. He had a knack for making deals and running businesses. Eventually he got in with a local valuer, Miles Yeoman, and as DY Investments, the pair started to crank up some commercial projects.
Turning the old Press paper warehouse in Lincoln Rd into a collection of shops and offices was the first meaty one. Then came $80m Hazeldean Business Park - seven office blocks in Addington in partnership with Calder Stewart Industries, one of Christchurch's big developers.
Plainly Diver was rocking along. Then the global financial crisis hit in 2008 and it was a scramble to deleverage. DY Investments had to sell down Hazeldean to Calder Stewart. His work with Yeoman went on ice.
It is a fascinating glimpse into how buccaneering business works. It was no fuss, says Diver. You know economies run in cycles of five to seven years. The fat and the thin. So when the downturn hits, you just have to wind it in, sit on your hands, until the good times come around again.
Diver agrees many developers come a cropper because their egos will not allow them to retrench. "They've got to keep busy. They're almost making a job for themselves." Part of being successful is knowing when to do nothing.
Diver remembers the day he and Yeoman sat around a table divvying up their small list of assets, a few properties like the Carlton Butchery. "You take this and I'll have that." A handshake, walk away friends, wait on the sidelines for the opportunities to return.
Diver was going to spend his time refurbishing his small Victoria St shop frontage -
building himself a nice two-storey apartment above.
Then, of course, the earthquakes. Time to flick the switch and get motoring.
It started with getting the Carlton Butchery sorted. But Diver had a wealth of contacts and local knowledge. Soon he had his first new site - a block of dirt as he likes to call them - at 83 Victoria St. And a tenant in lawyer Buddle Findlay.
A friend introduced him to an experienced Auckland builder, Mike Sullivan of Clearwater Construction and D&H Steel. They formed a partnership, Countrywide Property.
Diver says Sullivan was the answer to coming at the rebuild with scale. As a builder of malls and apartment blocks, he had the construction machine just waiting around for something to do.
"Mike had a reasonable amount of capital. He had a large construction and steel company. And he needed the work. But he knew an Aucklander coming to Christchurch to do it on his own would find it a pretty shut-out shop."
Diver says deal-making is about the small things like knowing who wants to sell, who wants to buy, who are the doers and who are the talkers and time-wasters in a town. So he could be the one on the ground, lining up the projects for Sullivan to knock off.
"My role is to dream the dream, take the development through to a point where it can be started. Mike takes it over, gets it done."
So Diver teamed up with a construction partner who could grab all the work to be found. Then, as Countrywide Property, they began churning out the developments down Victoria St.
No doubt Diver soon became a problem for the official rebuild - the Blueprint masterplan drafted by the Christchurch Central Development Unit (CCDU), the specially set-up arm of the Canterbury Earthquake Recovery Authority (Cera).
Small-scale redevelopment in Victoria St was fine. But the grumble became that Victoria St was being allowed to run riot, siphoning money away from where the government plan wanted it to go.
There were mutterings that Diver's buildings were cheap and temporary. He might have his A-grade tenants for a few years, but they would shift down to the classier city core eventually.
Diver laughs. There are some good-looking buildings out there. And the tenants have been investing millions on the interiors. "The amount of money they're spending on the fit-outs, they're not moving in a hurry."
It was another blow to the CCDU when high-flying software firm Telogis took the top four floors of 104 Victoria St, Countrywide's refurbished ANZ building.
The Blueprint has a designated innovation precinct over on the CPIT side of the city. But it is happening too slowly. Meanwhile Victoria St is fast returning to life, abuzz with bars and restaurants.
Diver is keeping this going with his own pop-up venue on one of his vacant sites. A stage space for summer events.
Then look what comes next, he says, spreading out some architect's designs.
Countrywide has bought the old Environment Canterbury headquarters site in Kilmore St. The money changes hands this week. This one is going to be a $100m apartment block. Some 144 units in two towers above a three-level car park for 400 cars.
Diver says now he has brought all these extra workers into Victoria St - there should be 4000 office staff in the area eventually - some are going to want to live nearby and many more will want to rent a car park.
It is going to be a proper community. The cool corner of the city to be in. And it is halfway there already. While the central city? The only office workers going into the official rebuild area are government employees and the major banks, says Diver.
Take the Justice Precinct - another example of how the slow-moving CCDU has let the commercial energy escape.
The law firms could not wait. So if they are not in Victoria St, they are down Cambridge Tce where again - outside the cordon restrictions, outside the Blueprint confusion - people could get on with the rebuild.
Diver is still smiling cheerily. It is not a malicious thing, just the way the rebuild is panning out.
He understands there needed to be some government hand in the central city recovery. The libraries, stadiums and convention centres are big bits of public furniture. The earthquakes were an opportunity for urban planners to give the city core some careful thought.
And in the scheme of things, Countrywide's contributions are not even that large. There are commercial entities like Calder Stewart, Ngai Tahu and the Carter Group - the local multigenerational dynasties - that are moving more slowly yet will end up doing bigger chunks of the city.
But even so, it is surprising how many deals Diver has managed to tee up. And some of the ones that got away.
Diver says he could have been in the heart of the city rather than Victoria St. Early on, he nipped in to buy up land in the Oxford Tce/City Mall area - the Bog and Mad Cow pubs, plus a small apartment block.
Cashel St was clearly still going to be the premier retail location. And Westpac Bank was keen to build somewhere there. "It was our second job after the Carlton Butchery. We wanted to get the city going, the old part of the city."
Then the Blueprint and its restrictions were released. The CCDU said the area would have to be developed as an integrated city block. Property owners would be required to work on a communal plan.
Diver's instinct was this bureaucratic approach would tie them up forever so - snap decision - Countrywide sold out. "I rang Mike and said, look, this is never going to happen. Let's get rid of it, go back and buy more land in Victoria St, keep on moving there."
Leighs Construction took over the City Mall properties. The CCDU eventually bought out Leighs to consolidate the titles as the various development proposals fell apart.
Now, says Diver, the land sits idle, home to the relocated Re:Start Mall. Whereas his own development would have been built and open.
So that was a big miss. Countrywide could easily have sunk $100m into that one project - how the sums roll off the tongue. Instead it is heading towards $200m in office space in Victoria St, with $100m in apartments coming soon.
And those are just the deals he was stacking up leading into this year. Since about March, Diver has had been thinking why not take the CCDU at its word and do a large part of its health precinct down along the river by the hospital. Nip in, buy the land, find tenants for $150m worth of campus-style buildings fronting the Avon River in Oxford Tce. Just do it in one big chunk, a whole row of linked spaces.
Diver assumes an expression of innocent bemusement. Again he finds a commercial developer and a government department work at vastly different speeds.
Diver just did what he does. Start knocking on doors to find who owns what, then offer a fair price. A site on the corner of Antigua and Tuam St was typical. The CCDU had been talking about purchasing it.
"I walked over to the owner and said, 'I hear you're thinking about selling.' He said, 'Yep, they're trying to buy it off me but not offering very much.' I said, 'Well, I'll give you exactly what I paid down the road per metre' and he said yep. So I dropped off the contract the next day and bought it."
The plan is to build a 70-room medi-hotel on the spot. Accommodation for relatives and also patients well enough to be shifted out of a hospital bed.
Just as quickly, Diver bought up the old Deloitte building in Oxford Tce where he has launched into a $30m renovation. It has become another specialty of Countrywide - stripping back a damaged building and wrapping it in a new skin. A fast turnaround.
But plans to develop the whole strip of adjoining riverfront have floundered because the CCDU can't move at his speed.
The CCDU are owners of half the block - another tale of picking up parcels of land after letting tenants escape. The Oxford Clinic private hospital should logically have been an anchor tenant for the health precinct. It could not wait and instead is now a solitary occupant across town in Peterborough St.
Anyway, says Diver, he has tried to buy that land to deliver the precinct the CCDU says it wants, but the CCDU doesn't seem to know how to sell it.
Officials have told him it is signed off for sale, but it may be first quarter next year, maybe early second quarter, before offers can be formally considered. So the big plan is going sideways.
Diver acknowledges government departments have tender processes and rigmarole to adhere to, but he is used to doing next-day deals. You can see why the official side of the rebuild is going to continue to stutter along. And he smiles as he says this. It is all just part of the game.
Diver says he is not in it for the ego. He shudders at the idea of having his own name on a building or even as the company's brand.
It is the fun of stacking up the deals while there is such a huge opportunity. And if it all goes quiet for him next year, he will be just as happy sitting on his hands again.
Doesn't the vast bank debt, the tremendous risk, keep him awake at nights? Countrywide's clock is ticking north of $300m after all.
Diver admits he does have to watch his cash flow like a hawk. Nailing down a tenant for the Oxford Tce refurb is taking longer than he would like. So snap decision, he has put his Carlton Butchery on the market.
"I decided last week to sell this building. The photos have been done. It'll be on the market Wednesday."
Goodbye to the large apartment he had built himself. The space was being rented as temporary accommodation to lawyer Lane Neave anyway. So no drama. Keep the show rolling.
Diver was first out of the blocks and he will keep going until it is sensible to stop. Then sit back and relax until the cycle comes around once more.
It is not quite how you might expect it to be - less agonising over decisions, more sniffing out of deals. But even in the heightened circumstances of an earthquake rebuild, he says, that is business as a developer for you.
- The Press