GUEST BLOG: Liz Gordon – Whatever happened to the Henderson properties?

Seven years ago, in August 2008, the Christchurch City Council called an urgent meeting on short notice about some sensitive central city properties.  Almost immediately, it was announced that the Council would purchase five sites from David Henderson, for the market value of around $17 million.

In a sense it was a perfect storm.  The Council was concerned that the central city was not attracting residents outside of office hours.  The public areas of the city were largely given over to tourists, and nightlife was scarce.  Recently, Henderson had developed the area known as Sol Square, in a run-down area south of Lichfield Street. The area, accessed through old brick lanes, contained a wide range of bars, eateries and nightclubs.  It was popular and successful.

Henderson had a wider vision for central city development and had acquired five key properties to achieve its goals, in Colombo, Manchester and Welles Streets.  However, Henderson had financial difficulties and approached the Council to purchase these properties and hold them against future development. At the time, Mayor Bob Parker stated that the sites were “extremely desirable” and were key points for further development in the area.

The sale was extremely controversial, filling the letter columns of the local paper.  It was not part of the city’s long-term plan, and was financed by an interest-only loan costing around $1.4 million per year to service.  It also contained a buy-back clause for Henderson allowing re-purchase of the properties at valuation plus costs.

It was almost immediately apparent that Henderson’s development ventures were in trouble.  By 2009, Tuam Ventures, Henderson’s company that owned Sol Square, was in receivership, owing more than $10 million to the Bank of New Zealand and South Canterbury Finance. He missed the deadline to re-purchase the first of the properties in 2010, part of the old Para Rubber site.  By November 2010, Henderson was bankrupt.

In July 2011, three years after the original purchase, the Council finally voted formally to terminate the agreement with Henderson. Some Councillors talked up the saga, with Claudia Reid noting that the properties “would be a pivotal part of the rebuild”. At the time it was noted that various offers had been made for the Sydenham Square site, but none came to fruition.

The only consolation to taxpayers was that, if the worst came to the worst, losses could be limited by selling off the properties.  But then the earthquakes intervened, destroying Sol Square and most of the existing properties on the Henderson sites.

Seven years on, the five properties have not become either the heart of the rebuild, nor great money spinners for the ratepayers of Christchurch.  Two of the sites have recently been sold to the government for the building of central city apartments.  In a secondary deal, the government then on-sold these properties to Fletcher Living for an unknown price.

The Welles Street property was purchased from Henderson for $4.2 million and valued at $4.3 million at the time of sale, and was sold at an (unknown) market price. But there is also an outstanding insurance claim for the demolished buildings, which should bring in a healthy amount. The property at 350 Colombo was purchased for just under $4 million, and shows a current valuation of $2.7 million, and again the sale price is unknown.

The old Para Rubber property on two sites was the most expensive purchase from Henderson at $5.2 million. The building collapsed in the 2010 earthquake and it is not known whether an insurance payout was received.  The current valuation of the land is $4.2 million, but the Council has leased the land on a long-term basis to EPIC, which assists businesses to start up and has built offices on the site.  It is likely that the lease is at less than market rates, reflecting the contribution of the organisation towards business development.

Finally, 113 Manchester Street was purchased for $2.56 million and recently sold to CERA for $800,000.  There is a confidential insurance settlement on the demolished buildings but the Council will not disclose the amount.

On top of the costs, settlements and sales, the Council has also been paying interest on the loan taken out to purchase the properties.  If the amount is still on an interest-only basis, and none has been repaid, then interest of $9.8 million has been paid over the seven years.  Given the extent of that debt, even if the Council achieves a gross surplus on the properties, there is little doubt that overall this transaction did no favours for ratepayers.

This deal was rushed through under urgency and some secrecy in 2008.  It should be noted that it is little more transparent even now.  The cost of the sale of two properties to the government is being withheld on confidentiality grounds, even though the transaction was between two public agencies – a city council and a government department.  The amount of insurance settlements are either still being negotiated or are confidential. It took from 29 March until 22 June (about three times the promised 20 days) to get any response at all from the Council.  
This is not good enough.  Ratepayers need to see a proper, complete, financial accounting of the Henderson saga, and of what it has cost, from first to last.

Dr Liz Gordon is a former Labour & Alliance Party MP