Ten cabins at the Queenstown Lakeview Holiday Park may be put up for auction.
In the report to the Queenstown Lakes District Council finance, audit and corporate accountability committee, which meets tomorrow, Lakes Property Services property manager Joanne Conroy says the council bought several cabins from private owners in 2001 and since then "quite a number" have been on-sold with a licence in place until 2015.
"The policy at that time was that sales were to be for an amount within 10% of the price they were purchased for.
"The listed price of the cabins ranges from $38,500 to $70,000."
Eighteen cabins remained on the market, contracted exclusively to Southern Lakes Real Estate.
Those cabins were "the less attractive" of the cabins.
The more attractive cabins had already been sold.
Ms Conroy said Southern Lakes Real Estate advised there were plenty of inquiries about the cabins, but they had not been able to proceed to sale.
"They believe the reason is a combination of price, compared to private cabins, the relatively short licence term remaining and condition of the cabins. Note that the last two private cabins that sold returned $20,000 and $15,000."
Southern Lakes had suggested stimulating interest by either reducing the price "significantly" or offering the cabins at auction.
The cost would be about $500 each and a 4% commission.
"Given the current state of the real estate market, it would seem unlikely that many would sell at auction, although it would help to establish a benchmark price and reduce the rental pool."
The report gives two summaries of revenue, based on retaining the cabins and renting them, or selling them at auction.
By taking the cabins off the market and continuing to rent them until 2015, the net revenue could potentially be "around $43,000 per cabin over the next seven years".
By reducing the price to start at about $20,000 each and continue to market them for sale, the revenue from each cabin sold would be about $50,000 over the seven-year period.
Ms Conroy said the final option was to put some of the cabins up for auction and retain the balance in the rental pool until 2015.
"Given the high vacancy level for cabins . . . it would be beneficial to reduce the rental pool if possible.
"However, realistically, the market is not strong enough at present to anticipate that all cabins would sell, and therefore paying auction fees for all 18 cabins would not be advisable."
Based on the calculated figures, each cabin had already generated about $41,440 since the council bought them in 2001, so the need to sell them for an amount within 10% of the purchase price was "not relevant".
Ms Conroy has recommended the committee put 10 cabins up for auction now, with a reserve to be set by the property subcommittee, and the remaining eight be taken from the market and let until 2015.
