QLDC HQ project: Christchurch councillor says Ngāi Tahu rent deal 'not working for us'

Christchurch City Council is seeking to renegotiate a deal with Ngāi Tahu Property that has it pay higher than market rent for its central city offices.

The council pays $10.8 million a year to lease its headquarters on Hereford Street.

The figure is dictated by a joint venture arrangement entered into more than 15 years ago.

The arrangement has a relevance today for Queenstown Lakes District Council ratepayers, who are being asked their views on a proposed similar partnership with Ngāi Tahu Property to deliver and operate a new council headquarters in the Queenstown CBD.

Up in Christchurch, the seven-storey Te Hononga Civic Building is jointly owned by council company Civic Building Limited and Ngāi Tahu Property.

Essentially half the rent goes back to council coffers and is then used to pay back debt taken on to develop the building, which had a former life as the city's main post office.

However, local reporter Steven Walton, in a story published in October 2022 by Stuff, revealed the Christchurch council was banking on reducing rent payments for the building by approximately $1.25 million and had headed into talks with Ngāi Tahu Property to achieve that.

Councillor James Gough, who chairs the building's joint venture board, told Stuff "We're at a point where the rent is too high and that's not working for us".

He said the council had a good relationship with Ngāi Tahu and initial signs from the discussions were positive, and the renegotiating "distinctly achievable".

Today, when approached by Crux, Councillor Gough had little to say, so it is hard to gauge what progress, if any, has been made more than a year later.

"I can't elaborate further, however it's an ongoing matter and staff are continuing to talk with Ngāi Tahu," he says.

Likewise, Ngāi Tahu Property is close lipped, telling Crux today it would leave responses to Crux questions to the council.

The council's head of city growth and property, Bruce Rendall, did confirm to Crux today the current $10.8-million-a-year rent and that discussions regarding the lease of the offices are continuing.

The council reportedly occupies 20,300 square metres of the building, meaning the annual rent works out at $532 per square metre of office space.

Gavin Read, the head of research at real estate firm JLL has today provided Crux with his company's latest market snapshot.

It shows the average rent for prime CBD office space in Christchurch is a little more than $383 per square metre, but forecasts a further increase of 3.3 percent by year-end due to strong demand and low vacancy in the garden city.

In the Stuff story, Councillor Gough attributes the above market rent to a clause in the original long-term lease - "That means it’s quite literally just like a rachet that you turn ...(the rent) clicks up every year, irrespective of market rates.”

Exactly what any joint venture will look like between the Queenstown Lakes District Council and Ngāi Tahu Property for the delivery of council offices, or how much it will cost ongoing to ratepayers, is largely unknown.

For now, the council is simply asking for feedback on the idea of one.

Councillor Niki Gladding has told Crux she has concerns a risk analysis related to the proposed joint venture is not included as part of the information available to the public during the consultation.

Submissions close on Sunday, December 17.

Keen to join the conversation? More information can be found on the QLDC's Let's Talk Project Manawa page.

Background on Te Hononga Civic Building

• Similar to the situation now for staff at the Queenstown Lakes District Council, prior to moving to the Te Hononga Civic Building in 2010, the Christchurch City Council was spread across five buildings.
• In 2007 when NZ Post left the building for a site closer to the airport, it was sold to Ngāi Tahu, who have first right of refusal on all Crown disposals through their treaty settlement.
• 'Te Hononga' means 'the joining' and recognises the deal between Ngāi Tahu Property and the Christchurch City Council top deliver the project.
• Costs to redevelop the building were shared, and the building received a 5 Green Star rating, meaning it meets very high environmental and sustainability standards.
• The council effectively has a 96-year tenure on the property as its contract includes three rights of renewals of 24 years each.
• Ngāi Tahu Property manages the facility on behalf of the partnership.
• The decision in 2007 to partner with Ngāi Tahu was not without controversy, it was voted on in a public-excluded committee meeting days out from the local government elections.
• Rent was initially set at close to $8.2 million a year, with the following rental increases specified in the contract:

  1. three percent increase per year payable on the third anniversary of commencement, compounded on an annual basis

  2. market rental increase on every sixth anniversary of commencement, set at the greater of five percent or market rental

  3. further three percent per annum payable on the sixth anniversary of the increase in point one

Main image (Open Christchurch): The Christchurch City Council and Ngāi Tahu Property split the cost of repurposing the former NZ Post building in the city centre as a fit-for-purpose council HQ called Te Hononga Civic Building.