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Another bargain for Willis Bond

kumutoto another view [1]

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 [2]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 [3]:

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 [4] 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 [5] 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 [6] 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.