Wellington mayor Tory Whanau says it's not a case of "either-or" for the city. Photo: RNZ / Samuel Rillstone
A property deal between Wellington City Council and the international owner of the Reading Cinemas complex is still under way - after an attempt to halt it was voted down on Thursday afternoon.
The controversial deal would see the council pay $32 million for the land the complex is situated on and then lease it back to the cinema company, which would use the cash injection to pay for required building upgrades.
The complex has been closed since January 2019 because of its earthquake risk.
More information about the agreement finally came to light on Wednesday, after months of public speculation following leaked details last year. About 80 percent of the deal has already been agreed.
The Reading Cinemas building on Courtenay Place in Wellington in April 2020, when it had already been closed for about a year after being deemed earthquake prone. Photo: CC 4.0 BY-SA / Tom Ackroyd
At a council meeting on Thursday, a notice of motion by Iona Pannett to revoke the deal was voted down. The Lambton Ward councillor said the deal would give "corporate welfare" to a multinational private company and make already wealthy people offshore even richer.
"We are essentially being asked to sell the family silver to deal with their failure. Cinemas come and go, there is nothing sacred about this particular outfit, and they are getting a much better deal from my perspective than the city is."
The company should ask for a handout from the bank, like any other business, she said.
The deal has been described by the council as "fiscally neutral to ratepayers", because the rent paid by Reading would cover the council's costs.
However, councillors Ray Chung and Tony Randle both voiced concern that the deal specified the company would have first right to buy back the land at the same price within the first decade of the lease.
"What the hell are we doing selling land, promising to sell back land, with no appreciation?" Randle said.
"Reading bought this land in 1999 for $3 million and now it's worth $32 [million] - that's a 16 percent return. The land has gone up tenfold in 25 years. If it doubles again the ratepayers will miss out on $32 million of land appreciation," Randle said.
While council staff said they could not predict the future value of the land, Chung said it was likely to increase.
"Property always goes up. At one stage it may go down for a short time, but it'll go up eventually ... I'll bet you my bottom dollar, and my house and car, that it'll shoot up."
Councillors against the deal also pointed out $26 million was already allocated towards upgrading the Courtenay Place precinct, and the money for the Reading deal - which would come from the sale of other ground leases - could be spent on other projects, particularly the city's failing pipes.
'Just accept it' - mayor
However, other councillors argued the area, including the cinema complex, was in desperate need of revitalisation. Mayor Tory Whanau said it was not a case of either-or spending.
"Yes, water's really important, but also the fear of our city dying is also important ... by not going ahead with this deal, it kills it further," she said.
"It's not an either-or thing. We are investing in water, $1.8 billion in fact, and I reject that narrative, that people think we're not going to invest in water just because we invest in that deal."
Other developers were interested in investing in Courtenay Place, but did not want to do so until the Reading deal had been finalised, she said.
"We went through a democratic process to vote this deal through - just accept it."
Councillor John Apanowicz said the deal had become more controversial than it needed to be, and the agreement was structured to reduce the council's risk.
"There are timeframes within here - if they don't meet the timeframes, then the deal doesn't happen. So literally we are only at the beginning of the step here, we haven't even got to the startline yet and we're just walking away from the race, which is not what we should do."
With the notice of motion voted down, the council will resume its negotiations with Reading to complete due diligence of the deal.
