Mayor’s secret meeting with multi-millionaire cinema bosses
Thursday, 2 November 2023
The multi-millionaire US owners of Reading Cinema flew to Wellington to meet secretly with new mayor Tory Whanau, just days after she was sworn into office.
Sisters Ellen and Margaret Cotter – who head the family’s entertainment empire – then signed a memorandum of “collaboration and understanding” with the city council in December.
The upshot was a controversial $32m deal for the cash-strapped council to buy the land under the vacant complex on Courtenay Place and lease it back to Reading for 21 years. Reading would then use funds from the sale to renovate the largely derelict building, which abruptly shut in 2019 after sustaining damage during the Kaikōura quake three years earlier.
The Nasdaq-listed entertainment and real estate company operates multiplexes throughout the US, Australia and New Zealand. In the first three months of the year, its global revenue of $45.8 million increased by 14% in a year. Shareholders include high-profile billionaire businessman and Dallas Mavericks NBA basketball franchise owner Mark Cuban, who owns a 10% stake.
The council is refusing to confirm any details of the deal, including what would happen if ground conditions prove to be sub-par. A spokesperson said they hoped to be able to say more later this month “all going well”.
The cinema sits on reclaimed land and liquefaction has caused substantial damage to land and structures in the city. The problem recently caused a $147m blowout on the revamp of the Town Hall and has raised questions about the future cost of strengthening the Michael Fowler Centre and the neighbouring Municipal Office Building.
Experts, including geotechnical specialists, spoken to by The Post said that while Reading would be responsible for the refurbishment, the multinational could walk away if those proved eye-watering, depending on the terms of the deal.
None were optimistic the $32m price tag would cover the eventual bill.
The Post has learned Whanau and officials met with chief executive and president Ellen Cotter and board chairperson Margaret Cotter in October, soon after she was sworn in.
Publicly, the following month, Ellen Cotter said the company planned “a top-to-bottom renovation” of the theatre.
But privately, the company claimed it had suffered the double impact of a loss in revenue due to the closure of the cinema, then the Covid-19 pandemic. Its financial position meant the company was “unable to easily, independently fund the redevelopment in the near future”.
The Cotters committed to working with the council to accelerate the redevelopment of the cinema complex and discussions continued with officials after the meeting about how the council could support the project.
The non-binding MOCU was signed in December and said the parties would “endeavour to reach agreement on commercial terms”.
Reading owns cinemas across the country. In April 2021, it sold a 28.5 hectare parcel of industrial land in South Auckland, making a $58.45m profit. In the same year, the firm sold their Invercargill theatre and land to the city’s downtown developer Invercargill Central Limited, but stayed on as tenants.
Through Reading Courtenay Central Limited it owns 15,000m2 of land around Wellington city centre and also generates revenue through parking on the Courtenay Place site.
After being mothballed, the council also granted the company a rates remission for “property under development or earthquake strengthening.”
Wellington City Council’s financial position is not in such rude health. Councillors have warned of a “crisis” and the need to make cuts to capital spending.
An independent analysis estimates the city is facing a $1b shortfall. But the council says its debt-to-income ratio is 168% – well below a self-imposed cap of 225% and the collective borrowing vehicle Local Government Funding Agency’s 280% limit.
On August 30, the board of directors of Reading Courtenay Central Limited approved the key commercial terms of the land deal. But it did not come before councillors until an hour-long meeting on October 4, from which the public was excluded.
They voted to start due diligence on the deal, although a number were critical when details began to leak out.
Officials told councillors the proposal to buy 7143m2 of land would be “fiscally neutral”. But it comes with an opportunity cost: because the land purchase will be funded by debt, that will decrease the council’s ability to borrow for other projects.
The $32m figure was arrived at after a valuation by Colliers. Reading would have a 21-year perpetually renewable ground lease and the right to buy back within the first 15 years. The council could sell its interest within 10 years – and would have sign-off on the design.
Seismic work must be completed by March 2035. In the commercial terms, Reading has agreed to complete the redevelopment “at the earliest, reasonably practicable, opportunity”.
An initial $6m deposit must be used for agreed pre-construction works.
Once the balance is paid, Reading has two years to obtain consents and establish a construction programme and design satisfactory to the council.
The firm must also agree to “civic outcomes”, such as pedestrian access, a laneway, public toilets and the option for the council to lease ground floor space.
Officials argue the sale supports “economic vitality” by revamping the Courtenay Place precinct – a key plank of Whanau’s mayoral campaign. The re-opening of the cinema and food court would create a “safe and family-friendly” environment in an area plagued by antisocial behaviour and attract new businesses.
But the deal has opened a simmering rift between councillors. When details of the purchase were published by media, Whanau ordered an investigation into leaking.
Four of those accused – Diane Calvert, Ray Chung, Tony Randle and-Nicola Young – said yesterday they would not co-operate with the inquiry, by prominent lawyer Linda Clark.
They called it a “political and biased attack” and accused the mayor of using ratepayer-funded resources to silence their criticism.