Extra taxpayer cash underwrites project
Taxpayer money – to the tune of $21 million – is being used to guarantee the private part of a Wellington KiwiBuild development after fears it would not be built.
Despite developer Ian Cassels, of The Wellington Company, barely having begun construction of the 93 apartments planned in Newtown, the entire projected cost of $40m is now underwritten by the Government.
This means Cassels can sell more than half of the apartments at market rate, and any left unsold will be bought by taxpayers for $500,000 each.
Nearly all the private apartments have already sold off plans. However, there is provision for buyers to pull out if construction is significantly delayed.
Housing Minister Megan Woods said the Government initially agreed to underwrite the KiwiBuild aspect of the project, 44 of the apartments, for $19m.
But the extra $21m had now been granted for the private development part, where Cassels plans to sell the apartments on the open market. The Government underwrite is now $40m.
Woods was confident the apartments would be built, they would be sold, and
that the taxpayer money was safe. She said the deal, where a private developer got a 100 per cent underwrite before any dwellings had been built, was ‘‘in a category of one’’.
When Woods took over the housing portfolio, she changed policy to ensure KiwiBuild properties could not be marketed before they had secured financing and had construction agreements in place.
Cassels’ project, which is known as the Monark development, pre-dated that change, she said.
‘‘The Wellington Company approached the Government about an underwrite of the 49 market homes in the Monark development after Covid exacerbated delays to the project and its bank wanted further assurance about the project,’’ Woods said.
The company told the Government that, without the government security to the bank, there could be further delays.
‘‘Further delays would have risked buyers pulling out of the development and the homes not being built,’’ Woods said.
Cassels said the underwrite went through without him ever speaking directly to Woods.
‘‘We sought additional support from the Government to ensure there were no further delays to the delivery of the project and the delivery of homes to purchasers,’’ he said.
‘‘The risk to the taxpayer is negligible and the likelihood of giving effect to underwrite (in total) is highly unlikely.’’
Woods earlier said that if any of the market sale Monark development apartments remained unsold when the project was completed, the Government would buy them for the KiwiBuild price of $500,000 and they would be sold as KiwiBuild homes.
Forty-seven of the 49 units had sold by June 11. While these would have sunset clauses, Woods was confident they would be built before these kicked in.
Meanwhile, all the KiwiBuild apartments were originally sold. While some 10 people had pulled out due to delays, it is understood many more had put their names down for them.
National Wellington list MP Nicola Willis said the major problem was fairness, and there were presumably other developers around New Zealand, facing delays due to Covid-19, who did not get the same support.
There was still significant risk, shown by the two years of delays already, the fact some KiwiBuild buyers had already pulled out, and it was possible private buyers’ sunset clauses could kick in.