The key features of the deal are:
- WCC will buy the land from Reading for NZ$32m. This is based on the valuation we received that it is worth $31.9m. M
- Reading will lease the land back from WCC on a 21-year perpetually renewable lease.
- The annual rent paid by Reading will cover WCC’s borrowing and other costs so that it is fiscally neutral to ratepayers.
- Reading has the first right to buy back the land anytime within the first 15 years of the lease.
- WCC can sell the land to someone else any time after the first 10 years of the lease.
- The deal provides that WCC will only complete the agreement and pay the balance of funds to Reading once we have been satisfied that the new building design meets the civic outcomes we want and has resource consent.
Yeah I’m not quite sure why it’s being done this way - which makes me suspicious. On the surface it seems to me like this is in effect an interest-free loan of $32M with the condition that Reading fix up the site and make it into something viable once more.
I guess the gotcha is that it would be an upfront cost for the WCC which is already having to make big cuts. You could also argue about the optics of having to pay Reading to actually do something with the site, and not just leave it derelict as they have done for the last several years.
But if this pans out, and helps reverse the decline of Courtney Place, then sounds like an okay plan.
It’s certainly not unheard of, especially in the world of commercial property, to free up capital by selling a building and leasing it back.
It’s also not interest free, if WCC’s claim of being cost neutral is accurate, merely a lower interest loan than they would otherwise get.
I don’t find it suspicious at all.
Not really an interest free loan. It says the lease will cover the WCC borrowing, so it’s like WCC took out a loan on their behalf.
My guess is that Reading can’t borrow themselves, so this is more like WCC guaranteeing the loan so that something will happen.