Reading deal: $32m gamble or win-win?
One of the architects of a Wellington City Council deal with the United States owners of Reading cinemas says there are just two options to pull out of the deal – both before the lion’s share of $32 million of the city’s cash is handed over.
Councillor John Apanowicz, who met with Reading as the controversial deal was made, yesterday insisted it was cost-neutral to ratepayers.
But he could not say what would happen to the $32m of council money if Reading did not fix the Courtenay Place cinema complex, which has been closed because of structural issues since 2019. He also confirmed councillors would probably not get information on what properties it could sell to fund the deal until after it handed over $6m, by when the first walk-away stage had passed. Councillor Ben McNulty, responding to a
Post column raising concerns about guaran- tees, over the weekend posted on X, formerly Twitter, “We can walk away at 4 stages and get our $ back too”. McNulty via text on Sunday could not elaborate as “I think I crossed the public line by advising the number of points”.
“I don’t know what he is talking about,” Apanowicz said yesterday, when asked about the four back-out points.
There were two times the council could back out: During due diligence – before a $6m deposit was given to Reading – and after the cinema chain had consent and plans approved, when the remaining $26m would be handed over.
The initial $6m would have a bank guarantee while Reading’s parent entity in the United States would guarantee the lease terms. If either the council or Reading chose to ditch the project after plans were approved and consent granted, the council would get $6m back, Apanowicz said.
He could not say whether the entire $32m would be given back to the council if the cinema did not complete the project, but the council would own the land.
The council originally planned to borrow the money to fund the deal and said claims it would sell land to fund it were incorrect. It has now been confirmed that it is looking at selling some of its ground leases, where it owns the land buildings sit on, to fund it.
Documents show the council has 63 of these properties, worth $246m in total. They make the council $9.8m a year. Yesterday, the council supplied a list of ground lease properties, but could not say which ones may be sold.
Apanowicz said council staff had until October to report back on which of these could be sold. He expected the $6m deposit to have been handed over before then, meaning the council may have to take a short-term loan.
The deal with Reading was that its rent would cover interest costs to the council, other fees and charges, plus “any other amount, or adjustment, to satisfy council that the lease is fiscally neutral to it”, including lost ground lease rental money.
But councillor Iona Pannett, who last week forced a council vote that would have derailed the deal if it passed, said the deal was likely to cost ratepayers in real terms.
The deal with Reading meant it could buy the land back from the council in the initial decade for the $32m sale price.
That meant the council would miss out on any land appreciation gains and inflation.
Reading did not respond to questions yesterday about guarantees it had made to rebuild the cinema.