A dollar a year – Willis Bond’s deals with the council

Wellington.Scoop
A dollar a year to lease prime land owned by the Wellington City Council – that’s the deal that’s been given to the company which is building 75 luxury apartments on the site of the the Overseas Passenger Terminal. And it’s not the first time that the city has done such a deal with this company.

In this morning’s DomPost, Peter Love of the Port Nicholson Block Settlement Trust said the dollar-a-year OPT deal with Willis Bond (for 125 years) was a joke. He questioned whether it could give the best financial return for ratepayers.

Ratepayers may have had similar concerns last November, when a similar deal between the city and Willis Bond was revealed. It came to light when property buyers were offered the chance to buy two of the Victoria Street buildings that had been restored as part of Willis Bond’s Chews Lane redevelopment. In this case, the dollar-a-year lease for prime city-owned land was for 250 years – twice as long as for the Overseas Passenger Terminal.

Real estate agent Paul Hastings told the DomPost the concession had been needed to make the Chews Lane development viable for Willis Bond. But the council’s generosity turned out to be not only of benefit to the developer. It was also great for the new owners, who acquired a net income of more than $900,000 a year. They could have used their petty cash to pay the council’s share of $250.

Still, 250 years isn’t as long a time frame as the lease which the city council gave in the 1990s to the developers who built the Queens Wharf Retail Centre (the huge waterfront building where no one wanted to go shopping and which was converted into private offices.) The council signed a lease of 999 years for this public land. There was an outcry when the deal was discovered. There doesn’t seem to have been a similar response to the news of the dollar-a-year lease for the Chews Lane land. Perhaps the discovery of a similar deal for the same developer at the Overseas Passenger Terminal will attract more attention?

The city council was less than frank when it summarised its Overseas Passenger Terminal agreement in 2009. It referred to a “$32 million deal” without mentioning the peppercorn lease. Its announcement implied that the city would be receiving lots of revenue:

Willis Bond & Co would pay for a 125-year lease on the wharf and terminal building. Under the company’s proposal the building would accommodate apartments on the upper levels and a range of other uses at wharf-level ….
Willis Bond & Co would spend some $16 million on repiling and strengthening the 101-year-old wharf on which the OPT sits.
Wellington Waterfront Ltd would receive $16 million in cash and development benefits and improvements.

How much of this is cash? Reports indicate that no money has been received so far, though the old terminal has been demolished and work is starting on building the luxury apartments.

Willis Bond has also been the council’s preferred developer for three other waterfront projects – the Odlins Building (now the NZX Centre), the Free Ambulance Building and Shed 22. These deals have been hidden behind the excuse of “commercial confidentiality.”

It seems, however, that the council doesn’t always agree to peppercorn rentals. Two years ago, the New Zealand Portrait Gallery was negotiating its lease of the century-old Shed 11 on the waterfront. The longest lease it could get was 25 years. And a peppercorn rental? Well, no. It had to pay a one-off sum of $1.45 million. Obviously the council believes that cultural organisations have deeper pockets than property developers.

 

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