Christchurch Rebuild: Karen Silk: Unity will build confidence

Karen Silk of Westpac.

Karen Silk, General Manager of Westpac Institutional Bank, is well placed to understand the challenges and opportunities of the Christchurch rebuild given her responsibility for managing Westpac's relationships across the infrastructure, property development and investment and corporate business sectors.

Rebuilding Christchurch is New Zealand's biggest-ever construction job. The Government has estimated the cost at $40 billion - two thirds of which will be borne by private insurers and investors. For Christchurch to fulfil its potential and become a dynamic vibrant city there needs to be the right conditions for private investment to occur and thrive.

Entering the next phase of the Christchurch rebuild, it will be essential the Canterbury Earthquake Recovery Authority (Cera) and the Christchurch City Council work closely to effectively execute shared common goals underpinning the rebuild. Consensus on key projects, how to deliver them and effective and transparent communication with the private sector will be essential to attract and maintain private capital and experience through the rebuild process.

The new council has publicly stated several priorities. These include meeting the needs of the people, ensuring the financial strength of the council, catalysing growth in affordable housing and fixing transport issues. The upcoming announcement of the Christchurch Housing Accord is an example of the Council and Cera collaborating and bringing to the private sector an opportunity to participate in the delivery of infrastructure that meets the core needs of Christchurch residents.

However, Cera's special powers will expire in two years and it is not yet clear what approach or role central government will take in Christchurch over the longer term. A number of the anchor projects underpinning the rebuild are yet to come to market and will not be completed within that timeframe. In the absence of certainty, it may require a stronger voice from council to inform the private sector and community of the roadmap ahead.

Some investors and interested parties looking at the rebuild from afar have criticised a lack of progress in implementing the agreed blueprint (in particular the procurement of the anchor projects). Though there may be some justification in their viewpoint, they may not be aware that other similarly critical work has occurred across the city. This includes residential housing repairs, horizontal infrastructure repair and replacement, implementation of region wide land use master planning, acquisition of land to facilitate implementation of the CBD blueprint, and even the work continuing through the Canterbury Water Management Strategy.

Looking forward, a platform is needed that enables the acceleration of procurement and execution of the anchor projects and drives investment into high-needs areas such as new large scale housing projects and retail and commercial developments in the CBD.

Westpac was the first corporate to formally sign up to a return to the CBD (as an anchor tenant within Anthony Gough's "The Terrace" CBD development). We are very aware of the challenges that developers/investors and tenants are facing in making decisions to commit to the CBD, when faced with escalating land prices, construction costs and rentals. Given these challenges, we believe that Government and council will need to continue to focus on tools to assist the redevelopment. In addition however there is also a need for pragmatism and a long term approach to investment by the private sector if the new Christchurch CBD is to achieve the standard outlined in the CBD blueprint.

Westpac is regularly engaged with local and offshore investors and suppliers considering Christchurch rebuild opportunities. There are several challenging themes that consistently emerge for private sector participants when considering opportunities in Christchurch:

• Scale - the opportunity pipeline for infrastructure investors, developers, and builders across Australasia is the highest it has been for the last decade. As a result the ability to attract innovative investment into Christchurch is facing competition and therefore only projects of sufficient scale and quality will be able to attract that capital.

• Procurement certainty - both domestic and international parties that may consider bidding on Christchurch projects will have a focus on return versus risk. Bidding processes, whether for "public private partnerships" or government procured "design and build", are long and expensive processes. To be comfortable in deploying people and finance to fund these bid processes, the absolute requirement is certainty of the procurement process and the capability of the procuring agency to execute.

To date, key projects that have been signalled and brought to market in Christchurch are yet to reach execution - perhaps reflecting overly ambitious timelines. The private sector is signalling that in future it will require greater confidence in timelines, process transparency, consistency in information flow and, most critically, demonstrable ability to execute on procurement, to be willing to invest the time in assessing and bidding for these projects.

• The future - any new investor to Christchurch is aware that asset liquidity in market will be constrained by size. So while project scale will attract developers and contractors from offshore, the size of a project may potentially dissuade end investors who need to ensure that secondary market liquidity is available. Understandably, end investor focus has therefore been on existing Cantabrian investors and new parties that are prepared to adopt a substantially longer term investment horizon.

Canterbury's recovery is complex due to the technical issues, social impact, and the number of governing and procuring agencies involved. There is a need for a greater unified governing overview as well as assurance of professionalism in procurement, execution and communication if the private sector is to maintain confidence in participating in the rebuild.

The blueprint created the basis for strong master planning and community engagement, but it should always be considered a living, working document that can adapt as the rebuild of the city gathers pace and the community continually reassesses its needs and desires. However, any change also needs to reflect consensus in governance and procurement and needs to be clearly signalled to the market. Where information gaps are allowed to exist, markets will inevitably seek to fill those information gaps themselves and create their own certainty where they can. Such outcomes can lead to erroneous perceptions such as "the rebuild has stalled", ultimately leading to poor private sector engagement and diversion of investment funds elsewhere.

Westpac is committed to the Christchurch rebuild. As construction activity picks up the next phase is an exciting one. If the right conditions are created for Government, council, procurement agencies and the private sector to work together then the enormous potential of the Christchurch rebuild will still be realised.