Business lobby questions Henderson deals

Last updated 23:44 11/08/2008

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UPDATED: Christchurch's most influential business group has sent a list of 11 questions to the Christchurch City Council demanding to know the reasons behind a decision to buy five buildings off property developer Dave Henderson.
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The council decided at a secret meeting last month to buy the buildings for $17 million in order to protect the city from "inappropriate'' development.

Henderson, who is facing tough times, has been a champion of inner city development and the council was keen to secure the future of the five sites.

Today the Canterbury Employers' Chamber of Commerce stepped into the row over the sale, sending the council a list of 11 questions and copying the media in on them.

In a letter to the council chamber chief executive Peter Townsend makes it clear his organisation has a large number of concerns about the council's foray into property development, which it says has all the hallmarks of a "knee-jerk response'' to Henderson's situation. 

Among the points the chamber has asked the city council to clarify are where the money has come from and how the deal fitted with the council's city plan and long term plans.

The chamber also wanted to know when the council planned to sell the property on, and raised a concern about the decision to give Henderson first right of refusal to buy the properties back.

"Clearly this compromises any other property developers'  potential involvement. Does this effectively position the council as a financier for the Henderson properties?'' 

The chamber said it was concerned about the valuations of the properties amd asked whether the land was packaged into deals worth less than $5m to avoid consulting with the public.

"We are concerned that these transactions have all the hallmarks of a knee-jerk response to a particular set of circumstances and that with respect to its responsibilities to represent the community, the council needs to ensure it takes a balanced and strategic approach.''

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Christchurch property developer David Henderson got back nearly all the money he spent on buying the five properties in his deal with Christchurch City, despite a rapidly declining property market.

Debate on the $17 million purchase of five Henderson properties Sydenham Square on the corner of Colombo and Brougham streets, two Para Rubber sites in Tuam Street, the Electrolux site in Welles Street and the Penny Cycles site in Tuam Street continued to rage in Christchurch yesterday, with even Prime Minister Helen Clark being drawn in.

Labour and National MPs have attacked the decision.

Quotable Value records show Henderson bought most of the properties at the end of 2006, when the property market was at its peak.

At the prices the council agreed to pay last week, when the property market is collapsing, Henderson loses only $75,000 compared with what he paid for the sites.

However, Henderson, who claims he sold one of the sites at half its book value, said he had made significant losses on the deal.

He estimated he had spent $4m on plans and resource consents for Sydenham Square, which gave it a book value of $8m. The council paid $4m.

All sites had sizeable holding costs such as insurance, rates and interest servicing, Henderson said.

"They were part of an aggregation for an entire area and we put huge money into each one of them in terms of planning, and they were originally acquired for our overall aspirations and intention for the South of Lichfield area," he said.

"Just to put this in perspective, this represents about 5 per cent of our property holdings. There's no money in this for us.

"I'm not excited about this transaction. We get emotionally involved in our developments and I'm pretty upset that I can't refinance these and have to look at reselling them."

In other developments yesterday:

City council documents released to The Press show the council also considered buying the former Odeon Theatre in Tuam Street from Henderson for $1.04m.

The council had no independent valuations of the sites before deciding to buy. It agreed to buy at the price decided by its own valuations, to be completed after the meeting.

Four councillors were absent from the meeting called on July 25 to decide on the purchase.

Councillors had only a day to digest a council report on the purchases.

Councillors were not told how much Henderson had paid for the sites.

Council officers advised councillors they did not need to consult because none of the separate titles had a value in excess of $5m.

Deputy Mayor Norm Withers, who could not attend the July 25 meeting owing to a family medical emergency, said he would have voted against the purchase.

Cr Chrissie Williams had to attend a medical appointment with her son and left the meeting before the votes on the first three sites were held, but returned in time for the vote on Sydenham Square. She voted against the purchase.

Cr Gail Sheriff is on leave and Cr Mike Wall was overseas when the meeting was held, but said yesterday he would have supported the purchases.

Council chief executive Tony Marryatt said the urgency to make the decision stemmed from Henderson being involved in creditors' meetings, raising the risk the properties would be taken up by the mortgagee and broken up into smaller lots or sold for big-box retail.

"The sites are valuable to the city because they are big sites and they form a real part of the South of Lichfield plan," Marryatt said.

"Until the creditors' meetings we had been talking to Dave and we always felt we were in the loop. His interests were the same as our interests.

"We were relying on that goodwill and we'd been talking to Dave for some time about integrating his sites with our sites."

The councillors had decided they were ready to make a decision.

"They knew everything about the deal. A week later, the same decision would have been made," Marryatt said.

It was council practice to get only one independent valuation when buying land.

Marryatt said he did not know what Henderson had paid for the properties, but the council was getting all Henderson's intellectual property for nothing and also "his passion for developing the South of Lichfield".

"What we paid for the properties is irrelevant because he will buy them back off us," Marryatt said.

Henderson has the first right of refusal if the council decides to sell the sites.

Williams said councillors had no idea of the basis on which the sites were valued, and she would have expected two or more valuations for each site.

"I certainly felt a bit railroaded," she said. "If we had just waited and let the market take its course, we could have bought at the real price."

Cr Yani Johanson said the deal was a "bailout for an individual and I do not believe in the council doing that.

"There was a lack of consultation on such a significant decision by the council which I find totally unacceptable and potentially unlawful."

The best way of protecting the city from ugly development was to strengthen the City Plan.

 

 

- The Press

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