Fletcher gives east frame assurances
Fletcher Building says Christchurch’s east frame anchor housing project won’t be affected by the company’s profit downgrade and the departure of chief executive Mark Adamson.
The assurances came on Friday after Christchurch Mayor Lianne Dalziel said she wanted to talk to Crown-owned Canterbury rebuild company Otakaro about Fletcher’s struggles and questioned whether east frame residential work could be opened up to the market again.
On Thursday, Fletcher announced its operating profit for the year to June would be $525 million – about $100m below its previous guidance of $610m to $650m.
Earlier this year, the company announced its profit was likely to be between $610m and $650m for the 2017 year – down from previous guidance of between $720m and $760m.
‘‘It’s something that obviously I’d like to talk to Otakaro about, because if that is one of the reasons for the [east frame] delay then I don’t know whether you’d want to hold a company that’s obviously facing some challenges to a contractual arrangement or whether there’s an opportunity to open it up to the market again,’’ Dalziel said.
‘‘I know there was a lot of interest in those sites [and] in those blocks and if we could sort of co-develop at the same time . . . then we’d get a lot better progress than even what was originally implied.’’
But a Fletcher Living spokeswoman said the east frame, which was being completed by Fletcher Living, would not be impacted by the earnings downgrade.
‘‘Fletcher Living remains committed to the east frame project,’’ she said.
‘‘Yesterday’s earnings update from Fletcher Building has no bearing on this project or the residential division of our business.’’
An Otakaro spokesman said Fletcher was committed to completing all 900 homes in the east frame.
Dalziel later responded, saying it was ‘‘great to have the reassurance’’ Fletcher was committed to the project and that the Fletcher Building earnings downgrade would not affect it.
However, she expressed frustration with claims the east frame, which once had an indicative finish date of the end of 2014, was ahead of schedule.
‘‘I get a bit frustrated when I hear Otakaro say that they’re ahead of schedule, when they’re not.
‘‘They’re ahead of their own schedule, so you can’t blame Otakaro for that because . . . the original schedule was put out by [Otakaro’s predecessor] Cera.
‘‘So I’m not actually being critical of Otakaro when I say that, but I do kind of feel like let’s not hear we’re ahead of schedule because we’re not, we’re behind schedule – seriously behind schedule – and we need people living in the central city to achieve the ambitious targets that we require,’’ Dalziel said.
An Otakaro spokesman said Fletcher Living was selected before Otakaro’s establishment in April 2016.
‘‘Initial timelines produced by Cera may have signalled the east frame would be further advanced by now, but when the development agreement with Fletcher Living was signed in December 2015 the completion date for superlot 4 was October 2018.
‘‘It is now expected to be completed ahead of that date,’’ he said.
Greater Christchurch Regeneration Minister Nicky Wagner said construction timetables could change ‘‘especially when dealing with projects of this size and nature’’.
Fletcher’s problems stemmed from cost blowouts on two construction projects that have pushed its business and interiors division further into the red. Aside from the Auckland convention centre, the other problem project was understood to be the Justice Ministry’s $300m Justice and Emergency Precinct in Christchurch, which was expected to open later this year after a delay of several months.
The $30m east frame public space, a 660 metre by 40m space stretching from Lichfield St north to Armagh St, was to open early next year. However, it was unlikely any east frame houses would be finished by that time.
The first 20 homes on the corner Hereford St and Latimer Sq, known as superlot 4, were scheduled for completion in May 2018.
The next parcels of land – one piece on the corner of Madras and Lichfield streets and another between Worcester and Hereford streets – were expected to be transferred to Fletcher Living later this year so construction could continue.
‘‘Fletcher Living remains committed to the east frame project.’’
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