| By Graeme Legg (FoCP Historian an original owner)
In the beginning.
The Club Paihia site was bought circa 1980 from the McInnes family by a developer (under the Chalet Inns New Zealand company) to build a motel complex. The original concept was for individual investors to purchase individual motel units and lease them back to the motel operator, and be able to use them for two weeks a year themselves. The original sales brochure quoted an annual profit of $5398 on 55% occupancy (25.6% return), 14 days free holiday, land secured, and a separate building fund.
|Initial sales during 1981 were $25,000 for a one bedroom motel unit ($10,000 down deposited in a separate building account with balance in two stages as building progressed).
Unfortunately, in 1982 the developing company went bankrupt due to the developer’s other ventures – unrelated to the Paihia site. As a result, the building fund was legally purloined by the bank to offset debts in other related companies outside of Chalet Inns. Even though there was sufficient money available to continue to complete the resort. This practice exercised by the banks at that time, was legal but a few years later, following widespread public outcries it was eventually banned by parliament.
The property then went into receivership with various caveats being slapped on it, and, the receiver had great difficulty in selling the development. The landowner was also unable to on-sell it due to these legal complications, despite some high offers, so the project came to a grinding halt.
It remained in limbo until several of the motel purchasers formed a committee (R.E. Wallis, L.J.B. Paterson and L.P.B. Weir being the main representatives) and agreed to buy the site off the receiver for a nominal sum. This was done by forming a company (retaining the Chalet Inns NZ title), with those original motel unit purchasers (about half of which participated) adding additional sums themselves by way of debenture and giving the landowner (50%) participation in the new venture.
A Phoenix out of the fire.
In September 1983, Chalet Inns was incorporated with 20 of the original depositors (who contributed the balance owing as an additional secured debenture – this amounted to an additional $154,500 along with a BNZ loan of $130,000). These depositors agreed to add to their debentures at $1,000 per annum for a further five years and trade creditors were satisfied through a share float to be redeemable (eventually) out of profits. The intention was to complete the originally planned development on a phased basis, with additional funds to expand, as units were sold.
Paihia township 1981
|Full speed ahead!
Chalet 2 was then finished and marketed during 1984. Three of the units sold in this block (as motel units, based on the original structure). During the initial construction period the unit was leased back to Chalet Inns as a display unit over the next four years, at a guaranteed rental of 10% p.a. In the early 1980s there was a severe economic recession that affected much of the world. It is widely considered to have been the most severe recession since World War II and NZ was no exception. In the mid 80’s, sales of complete motel units were proving to be very slow, and as construction was only proceeding as funds were gathered from unit sales, only 1 Chalet had been finished as the Chalet 4 base was started. Once again, the future of the project came under a dark cloud.
| A light at the end of tunnel
As the gloom continue, a new idea was bursting forth from the USA called “timeshare”, where instead of owning a unit for the whole year a person could purchase one only the number of weeks that they wished to use. The advantage for holiday makers was to reduce both capital costs and annual charges.
Hence the Club Paihia property was converted into one of the new timeshare resorts with individual interval weeks sold, following which sales took off (initial pricing was c. $6,500 for a 1 bedroom floating week , of which about half the value unfortunately went back to the marketing agents and for legal costs.
In July 1985 the resort was converted to timeshare (Chalet 4, which consisted of three 2 bedroom units and two one bedroom units), and within four months $300,000 in sales was achieved! (Chalet 2 construction cost quoted at $180,000 and Chalet 4 at $194,000). During 1986 Chalets 3 & 5 were also started.
|By April 1986 over $2 million in sales had been achieved.
By December 1986 the swimming pool was filled, and construction started on a tennis court (on leased land
By April 1987 Chalets 2, 3, 4, 5 were completed and occupied, Chalet 6 was closed in, Chalets 1 & 7 pole foundations were in place, and the swimming pool complex and surrounding landscaping were completed.
Club Paihia building site 1981
|By December 1987 Chalet Inns was starting to make a commercial profit. It was never the intention of the original motel unit owner purchasers who owned Chalet Inns to become profitable commercial developers, only to recover their earlier losses and additional sums put in by debenture, and to secure a holiday entitlement in the Bay of Islands. As a result the original shares were sold to another professional development company on a deferred payment basis (Vacation Developments Ltd, managed by a Mr Meates) and the debentures passed over with a high priority security.
In 1988, the originally sold Chalet 2 units were bought back out at c. $89,000 and converted to timeshare standard. The top floor units were converted to one bedroom units with building extensions but there was insufficient space to extend the downstairs units, so these were converted to studio units which is how they appear today.
|Later on, the concept of timeshare was also expanded to include the exchange of your resort week usage with other timeshare owners elsewhere through several timeshare exchange companies, which had also just started up (RCI being the first).
On a roll
Vacation Developments then dramatically increased the development pace from the earlier more prudent policy of mainly spending as the sales came in, to borrowing an additional $4 million from the bank to complete the core block and swimming pools. Following the addition of this magnificent section of the resort, Vacation Developments marketing pace also went into overdrive, with some questionable sales tactics along with financing offered to those who could not afford them starting to result in negative news publicity. The prices of the units were also increased further, with one bedroom floating units at the peak being over $9,000 and 2 bedroom fixed weeks sold as high as $24,995 per week).
Here we go again!
During 1989, somewhat predicatively this selling pace and excessive price level could not be sustained and the continuing world recession saw 1987 share market crash which eventually caught up with Vacation Developments. When their sales collapsed this company also went into receivership!
1990 saw the receiver install a scheme of arrangement to reorganise Club Paihia but was unable to sell off the balance of the resort to other users due to New Zealand’s real estate legislation, with every unit sold at Club Paihia having a legal title. This meant that all purchasers of Club Paihia timeshare units retained their rights unlike similar resorts in other countries where if such a developer collapses the timeshare owners, without legal title, frequently lost all.
| A Daniel, come to judgement!
Following the receivership Monad group (who were primarily a timeshare management company) took over the remaining assets and partially paid off the bank in return for a ten year management contract with the Club Paihia Body Corporate. Of interest is that the bank which offset the original motel purchasers building deposits in the 1980s was the same bank that financed and lost $4 million invested in the core block & swimming pool, later showing that there is some justice in the world eventually. Club Paihia owners later received the full value of this core asset as common property without paying anything additional back to the bank.
|Monad did an excellent job in tidying up outstanding issues, including clarifying ownership, incorporating the balance of the land into common property legally, completing the development of the outstanding chalet.
(Chalet 9 completed by 1995), and over the next few years selling off the outstanding timeshare stock at cost price. For a long while two bedroom floating weeks were available at $4000 per week until all remaining weeks were sold.
A decade later with all major construction, legal & financial issues solved Club Paihia was well on its way to becoming the highest quality timeshare resort in New Zealand. Routine major ten year internal overhauls were commenced and at the twenty five year mark major external remedial work & upgrades were commenced (Chalet 9 was complete in December 2020). The resort is in excellent physical and financial state.
The Bay of Islands has become an International Tourist Destination!
Paihia township, after a long standing still status period over the last 25 years, is also coming to life with new constructions on the way, and as the travel time from Auckland reduces every year with motorway upgrades the whole area is poised for take-off. Club Paihia is also uniquely placed being within a 2 minute’s walk to the centre of the town in an area with restricted land availability.
Following the major maintenance levies over the last decade, which is now coming to an end, with 12 year long term management plan securely in place, the owners of Club Paihia have the highest quality resort in the far North, where a two bedroom unit ownership costs are well under half of comparable lower quality commercial accommodation, and capital substantially below resort replacement cost. Pricing of resale units is presently also at a low level due to the ageing ownership from 25 years ago resulting in a current glut of sales. With the formation of the friends of Club Paihia however we expect this oversupply to be resolved over the next few years so that the future value of Club Paihia units will be reignite. Club Paihia resort looks forward to a new generation of owners to discover the benefits of holiday ownership of an RCI Gold Crown rated resort in one of the most beautiful and desirable parts of New Zealand. As such, the long term future for owners at Club Paihia is very bright indeed.