Sale list written up as Hamilton City Council eyes debt reduction

Thursday, 9 November 2023

City councillors have received a list of properties that could potentially be sold to reduce debt and create operating expenditure savings, including Garden Place HQ.

Twenty-two properties valued at almost $125 million are on a new list of possible asset sales as financially-challenged Hamilton City Council strives to get its books into healthier shape.

The list includes big ticket items such as the council’s Garden Place HQ and underground car park, the central bus depot and the central library.

Opoia Pā car park, commercial buildings on Victoria St and the St Peters hall are other notable items on the list.

But actually putting properties on the block is another matter, leaders heard at Wednesday’s 2024-34 long term plan briefing session.

Collectively the 22 have an estimated current market value of $124 million following 2021 rating valuations of just over $110 million.

Strategic property manager Nicolas Wells described the list as “a high-level first suck of the sav” and some properties were “very small beer in the scheme of things”.

Also, the hui heard it could be “tricky” to budget for sales in the long term plan unless they are a certainty.

But using sales to pay off debt - as required by council policy - would give the council more “headroom” when it comes to funding operations through borrowing.

Strategic property manager Nicolas Wells indicated, while talking to the list, that not all properties would be suitable for sale.

The hui heard there’s also potential for interest savings of about $50,000 for every $1 million reduction in debt and this would help keep operating costs down. A $125 million debt reduction could theoretically save about $6.25 million a year in interest.

However, there were warnings many properties on the list would be impractical or difficult to sell, meaning there may well be no big windfall ahead from a fresh round of asset sales.

That bears out recent warnings that - following $63 million in property and share sales between 2013 and 2017 - the council’s “cupboard” was pretty bare when it came to getting fresh potential revenue from such sources.

Finance director Tracey Musty told the briefing that a reasonably significant amount of sales would be needed to have much affect on balancing the books.

Wells said the 22 fit into two broad categories: properties where a sale had been considered or agreed to and a second “complex” group which staff may recommend holding on to for various reasons.

“We don’t have a lot to sell and what [remains] is left for a particular reasons,” said Wells.

Typically, properties in these categories were being considered for development or were just too hard to sell.

Wells noted caveats could be put on sales to help ensure properties were used in accordance with council wishes.

Mayor Paula Southgate was concerned about budgeting for potential sales given the uncertainty over them.

But conditions of sale could “devalue” assets and there was always a trade off between imposing them and maximising revenue.

“These need to be balanced.”

Mayor Paula Southgate asked how potential sales could be budgeted for in the long term plan given the uncertainty over them.

Growth manager Blair Bowcott said advice was that sales proceeds shouldn’t be budgeted for unless locked in.

“It is really tricky to … budget for it,” said Musty.

Growth general manager Blair Bowcott said some potential asset sales had previously been budgeted for but then failed to materialise.

Advice was that “unless the sale is absolutely certain you wouldn’t budget for it”, he said.

Council chief executive Lance Vervoort said leasing parts of the HQ wouldn’t necessarily bring in “squillions of dollars”.

Wells said a detailed analysis was now needed before staff came back with specific sales recommendations. It’s likely this will see the list of options whittled down.

Southgate raised the question of leasing parts of the council’s HQ - including the “terribly underutilised ninth floor” where she sits - noting the past talk about selling the building longer term.

Wells said analysis indicated an HQ sale wouldn’t provide any advantage financially and noted leasing sections of the main building could be challenging. However, there was a greater possibility of leasing out the Caro St side of the complex.

Decisions on leasing needed to be locked down by the middle of next year if they were to be taken account of in this latest long term plan, he said.

Chief executive Lance Vervoort said there weren’t “squillions of dollars” to be gained from leasing main building floors.

Southgate agreed leasing revenue may not make much of a difference overall but added: “If you take a look after the pennies and the pounds will look after themselves approach every little bit of efficiency actually does help us.”

Referring to remaining council-owned residential properties, deputy mayor Angela O’Leary asked “what would it take to airbnb those” to raise revenue. Wells said this idea could be looked into.

The full list of the 22 (with use in brackets unless obvious):

Opoia Pā carpark

Artpost carpark

Heaphy/Brooklyn (commercial business)

Area Q (vacant land)

Council HQ

Underground Garden Place carpark

Victoria on the River block (commercial lease)

Peacocke surplus land

Raynes Road (farm and dwelling)

Refuse Transfer Station

Hamilton Organic Recycling Centre

Horotiu Landfill site

2 Ruakura Road (grassed area)

Rotokauri transport hub

Duke Street (works depot)

Central Library

Kent Street carpark

237 Pukete Road (grassed area)

80 Bryce Street (central bus depot)

11 Elicott Rd (grassed area)

Land adjacent 67 Clyde Street (car park)

St Peters Hall