24 Jan 2017

Developer's ultimatum to council: Agree to carpark deal or we're out

7:38 pm on 24 January 2017

One of Christchurch's most prominent developers gave the council an ultimatum to sign up to a 25-year lease on a carpark building - or it would not build a glossy new CBD shopping precinct.

The council eventually agreed to contribute $28 million towards the $50m carpark - and had to borrow money to pay.

The Crossing carpark building in Christchurch.

The Crossing carpark building, depicted in an artist's impression, opened just before Christmas. Photo: Supplied

Newly-released papers show Carter Group gave the Christchurch City Council four days to agree to becoming its tenant and operate the carpark, which is attached to The Crossing development on the corner of Cashel and Colombo streets.

It threatened to drop its proposed $140m development - which would include shops, bars, cafes and offices - if the council did not sign.

Carter Group, which is owned by rich-lister Philip Carter, said the city's flagship Retail Precinct was at stake.

The 2014 ultimatum, delivered in a letter from Carter Group chief executive Mary Devine, followed 12 months of negotiations.

The letter said: "I cannot stress enough the importance of a decision on The Crossing car park to enable the survival of the Retail Precinct.

"As you are well aware if we do not reach resolution this week, Carter Group, and I'm sure others, will be withdrawing any proposed developments for the Retail Precinct."

The letter from Carter Group reminded the council of its obligation to provide carparking for its retail development thanks to a deal signed in 1998, and warned of legal action if this was not met.

A revised deal got the council out of signing up to the lease, but committed it to paying $28m - was put to the full council by staff three days later, a day before the deadline expired.

Although staff recommended the deal to councillors, a report from the council's corporate finance manager made it clear there were reservations.

"Because of the very short deadline staff have not been able to conduct the normal level of analysis, but in the time available have identified that, while it [$28m] is an improvement, financially it is still not an attractive option for council, although Carter Group maintain that it is fair and reasonable."

As well as requiring the cash-strapped council to borrow extra money to meet the cost of its carpark contribution, staff said the carpark would create traffic congestion on an already busy street.

This was partly because of council plans to rebuild another carpark just a few hundred metres away.

Councillor Raf Manji, who was instrumental in securing the deal, said it was the right thing to do at the time.

"The council was in a completely different position. We still didn't have a really good handle on our finances, we knew there was a big blow-out in the budget.

"It was a very different time and I think we had to take a much broader view around the risks to the central city recovery.

"Probably if we were making this decision now we'd probably go a different way and we'd probably build it ourselves."

Without the deal, the investment now happening in the CBD would have dried up, he said.

"So, you know, there was kind of like this domino effect.

"I think the problem we had was the delay in council making a decision on this really was starting to eat away at confidence in people investing.

"Once this was approved, everything else fell in to place."

Mr Manji said the proof was in the pudding. The Crossing carpark, which opened just before Christmas, was already attracting shoppers to the fledgling retail precinct.

RNZ approached Mr Carter for comment, but he was unavailable while travelling overseas.

  • Council forks out millions for carpark owned by high-flyer
  • $28m payment needed to kickstart CBD development - councillor