Another bargain for Willis Bond

kumutoto another view

by Lindsay Shelton
The usual secrecy surrounds the latest deal made by Willis Bond to lease prime waterfront land from the Wellington City Council. But a small amount of information can be found.

Willis Bond won’t be paying an annual annual rental for its 125-year lease of land for a new five-storey building on North Kumutoto. Instead, it will be making one payment, and one payment only.

Here’s what Willis Bond’s owner Mark McGuinness told the DomPost:

Willis Bond would pay its 125-year lease to Wellington City Council to use the land up front. At the end of 125 years the building and land would become owned by the council.

And what’s the value of this one-off payment? According to the Court’s decision, it may not be enough even to cover the cost of creating the neighbouring park:

The council will have no role in the ownership or operation of the building, but will have a windfall benefit from the lump sum to be paid for the lease of the land, which will at least subsidise the cost of the landscaping and exterior development on the waterfront area.

Andy Foster is more optimistic than the judge. In a council media release he promises that

“The building at Site 10 will … pay for … the upgrade of open space including Site 8.”

But though it’s dealing with public land, there’s never been any willingness by the council to give any real details of its waterfront deals.

However in 2012 some information was leaked and we discovered that Willis Bond was paying the council a dollar a year for its 125-year lease of the Overseas Passenger Terminal wharf. Peter Love of the Port Nicholson Settlement Trust said this deal was a joke. The council was defensive, saying that Willis Bond would be spending $16m to strengthen the wharf as well as the cost of creating luxury apartments.

There was similar defensiveness a year earlier when the council’s deal with Willis Bond for the redevelopment of Chews Lane was revealed. Another dollar-a-year lease for prime city-owned land, but this one for 250 years. A real estate agent told the DomPost that such generosity was needed to make the Chews Lane development viable. Not only viable for Willis Bond, but immensely profitable for the owners of the redeveloped buildings when they were resold. Two of the buildings were delivering an annual net income of $900,000 a year. From which the dollar a year lease could be paid from petty cash, without anyone noticing.

The city council has been curiously selective with its generosity. The New Zealand Portrait Gallery didn’t get nearly as good a deal when it negotiated with the council to lease the century-old Shed 11 on the waterfront. It was given 25 years, with one right of renewal. A national cultural institution might have expected the city to offer a peppercorn rental similar to Willis Bond’s dollar a year. But no. It had to pay the council a one-off sum of $1.45million. The council seems to have deluded itself into thinking that cultural organisations have deeper pockets than property developers.

 

7 comments:

  1. KB, 13. October 2015, 12:22

    I don’t get it. We don’t know the figure Willis Bond is paying upfront – but I doubt it will be anywhere near the commercial value of 125 years of lease rental from a prime waterfront site. I doubt it would even be anywhere near the same as the revenue generated from the campervan park.

    Why does the council have the right to make these one sided deals? Isn’t it fiscal malfeasance? I’m sure Willis Bond would have happily paid a commercially acceptable annual rental for this building space – what is the rational for the council to make it so easy? Is the council that desperate for lump sum payments at the cost of future forgone revenue? Why?

    This is the same council which is supposedly developing a business case for a longer runway. They obviously fail spectacularly when it comes to a business case for giving away waterfront property rights.

     
  2. City Lad, 13. October 2015, 21:35

    Sorry KB. Willis Bond would not “happily pay” an annual rental for this prime waterfront land. They are too smart to volunteer anything more than a minuscule one off payment. It’s a gold mine for them. And city folk will be able to admire the PWC logo glaring down on them. Especially when lit up at night.

     
  3. Trish, 14. October 2015, 11:19

    That’s a great artist’s impression of a beautiful office building and the lovely clouds. I can’t work out if it is supposed to be sunset or dawn with the sun coming up over Newlands. But I just love the glowing light in the restaurant beneath the overhang where I thought it would be cold and shady. Anything’s possible in the imagination.

     
  4. Island Bay Rules, 14. October 2015, 21:40

    Talking about cheap leases, you don’t have to be a Willis or a Bond. Our community lost the full use of the Surf Club in Island Bay to a lease of 10 years to the Marine Education Trust. The exterior is maintained by the council including damage caused by vandalism or storms. Proceeds from functions and/or club room hire, managed by Victor Anderlini and Judy Hutt, are shared between them and the council after cleaning costs have been deducted. Annual rent: $250

     
  5. Phil C, 14. October 2015, 23:22

    Well, it’s either commercial incompetence by the council or backhanders. I wonder what the other terms of the lease are. Sorry Wellington ratepayers, your council is letting you get screwed. But at least Wellington has one of the top ten nicest mayors in the world, or something.

     
  6. Nora, 15. October 2015, 9:54

    Are PWC paying Willis Bond to have naming rights for the building?

     
  7. City Lad, 17. October 2015, 13:53

    Willis Bond will be paid substantially by PWC for naming rights. Another trip laughing all the way to the bank.

    Mark McGuinness’s statement to the DomPost implying that after 125 years the council will own the land and building is misleading. An extension can be granted to whoever owns the building at that time. The car park basement could be used as a swimming pool. It would be filled with sea water well before then.

     

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