Invercargill CBD development hinges on council pumping in extra $16m
Monday, 18 May 2020
The Invercargill CBD development is unlikely to proceed unless the city council stumps up with an additional $16m for the project, the man leading the project has confirmed.
City councillors decided at a Monday meeting to consult the public on whether the council should invest an additional $16m into the development which would bring its total spend to $46m.
Councillors also agreed their preferred option was for the council to invest the additional $16m.
A report to the meeting, written by strategy and policy manager Rhiannon Suter, says no other funders have been found to meet the $16m shortfall.
**READ MORE:
* Ratepayers to be hit up for another $16m for city block development
* Here comes the bulldozer, demolition consent approved
* Investor 'sick of hitting brick wall', pulls out of Invercargill CBD development
* Businesses closing doors as Invercargill CBD developers eye demolition
**
The developer, Invercargill Central Limited, has indicated that without further council investment the project is unlikely to proceed, Suter says.
Invercargill Central Limited director Scott O'Donnell confirmed this, and indicated the design could not change.
''We have got lease contracts signed [Farmers is anchor tenant], based on a certain design.''
Invercargill Mayor Sir Tim Shadbolt said not proceeding with the development was an unacceptable outcome to the community and the city.
During the meeting, council chief executive Clare Hadley confirmed that if the council did not commit to the additional $16m, then the funding previously committed by Community Trust South [$20m] and the Provincial Growth Fund [$19.5m loan] would be lost.
Suter's report also says Covid-19 is creating greater uncertainty in the business environment and it is taking longer than anticipated to agree leases for retail spaces.
Councillor Alex Crackett asked why the development was continuing as initially proposed, with large-scale retail and hospitality, given the country was coming out of Covid-19.
Council finance director Dave Foster replied that no-one knew what the future held but the council did have strategies around the inner city
The council could reasonably predict that in the new world newer buildings would far better than the old buildings currently in the inner city.
''Who really knows where you will go with retail .. and likewise hospitality.''
However, he said if everyone just sat back and waited in times of uncertainty the economy would go into freefall.
With demolition of the site having begun, there would be a vacant block there and something needed to be built, he said.
Public consultation on whether the council should invest a further $16m begins on Tuesday and ends on June 12.
Suter's report says the additional $16m funding, if agreed on by the council, will be loan funded.
''The additional impact on rates will be limited due to favourable costs of borrowing.''
However, there may be an impact on the timing of other council projects so its debt can be managed prudently.
Following consultation in 2019, the council made the decision to be an investment partner in the redevelopment of the CBD.
The council agreed to invest up to $30m [$20m plus $5m contingency and an additional $5m for potential design changes] to support the first three stages of the development.
Other investors were the Provincial Growth Fund [$19.5m - loan], O'Donnell family [up to $25m], Community Trust South [$20m] and Geoff Thomson [up to $25m].
The additional $16m is now required because Thomson pulled out - after investing an initial $4m which he has kept in - because he was 'sick of hitting a brick wall' when working with Hadley.
The council has also applied for Central Government support from the Shovel Ready fund for the city block.
Suter's report recommends the council agree to invest the additional $16m million and if the Government investment from the Shovel Ready Fund is received the council's $16m investment will not be needed.