Boult drops $100 million Lakeview bombshell

Analysis:

In a remarkable interview this morning, Mayor Jim Boult has revealed details of the Lakeview development agreement that QLDC has been telling Crux is “commercially sensitive” and can’t be revealed.

In an interview with the ODT controlled Mountain Scene, Boult claimed that QLDC ratepayers will get half the Lakeview developer’s profit. This is the first time the Mountain Scene has published coverage of the Lakeview story for many weeks, in spite of numerous stories being published by Crux that suggest ratepayers are at risk of a $40 million loss on the controversial and secretive deal. 

Given that the developers, Melbourne’s Ninety Four Feet Ltd (75%) (with Centuria Capital and Britomart Hospitality at 25%), are predicting a $2 billion value for the finished project (BusinessDesk July 9, 2021) then a 10% profit ($200 million) would be the minimum they would expect – giving QLDC a $100 million windfall.

Boult told the Mountain Scene that this huge windfall would be “surplus” with no plans yet on how to spend it. He used the calculation of a $1 billion profit and $50 million to QLDC - but that ignores the developer's own $2 billion forecast from July this year.

Boult also told the Mountain Scene that the first $14 million stage payment from the developers would not be received until the council’s infrastructure work was complete and the developers had got Resource Consent.  

Crux has revealed that the developers have gone direct to the Government for post Covid fast track consent with no public notification in an apparent break with an agreement made in a private “workshop” meeting. Councillors at the meeting were told that the Lakeview consent would be publicly notified in return for QLDC agreeing to the Lakeview buildings doubling in height from 6 to 12 stories high.

Mayor Boult’s statement today suggests that the council itself might be conflicted on the issue of resource consent given that they won’t get paid if resource consent is not granted. The Mayor has also excused himself from recent council discussions on Lakeview due to his declared conflict of interest through being an Advisory Board member of Downer NZ Ltd, the company carrying out Lakeview infrastructure work for the council.

Mayor Boult's "tell all" interview with the Dunedin/ODT owned Mountain Scene this morning.

Responding to the Mountain Scene revelations, Councillor Niki Gladding has immediately challenged Boult’s facts.

Councillor Gladding - "Boult's statement is factually incorrect."

“I can’t say too much because the developer agreement is commercially sensitive but Mayor Boult's statement is factually incorrect - QLDC will not "get 50% of the upside of whatever the developer makes" - there is a threshold and a lot of complexity in establishing how the developer calculates that threshold.”

Gladding’s statement reflects the commercial reality of many complex commercial agreements, that the definition of “profit” and the stage at which “profit sharing” kicks in are critical points.

Crux has urgently requested clarification from QLDC staff on what the “secret” developer agreement actually says and why the Mayor, who is conflicted by being on the Advisory Board of Downers, is commenting to media at all on the subject of Lakeview.

Downers are carrying out much of the $55 million (and rising) infrastructure work and apparently did not have to bid for the Lakeview work as they are members of the Wakatipu Transport Programme Alliance that gives members of the Alliance guaranteed access to the council’s big “shovel ready” projects.

The Mayor told the Mountain Scene that QLDC is “only $4 million ahead at the moment” on the Lakeview deal. Boult’s calculations are based on getting $77 million that is “locked and loaded” (over 20 years) for selling the 10 hectares of land. Crux understood the sale price was $75 million.

Mayor Boult then claims the costs met by ratepayers so far come to $50 million (Crux believes the number is $55 million) producing a $27 million “profit”.

This calculation ignores the cost of money, opportunity costs and inflation effects over the next 20 years that the Reserve Bank calculator suggests would reduce the sum to $5.7 million based on the property market metrics over the past 20 years.

Boult also told the Mountain Scene that to have sold the land outright for $42 million the council would “still have to spend $20 million on infrastructure costs.” That is information we have not seen before and we will contact QLDC to obtain confirmation of these numbers.

Crux expects to publish a substantial update on this story later today when QLDC staff explain why the Mayor has revealed this “commercially sensitive” information containing information that is already at odds with what Crux already has been told.