Wellington's pilot apartment conversion project delayed

Councillor Brian Dawson, developer Alex Cassels and mayor Justin Lester. Photo / Supplied.

Wellington's pilot apartment conversion project is months behind schedule and remains without a signed commercial lease deal.

In September 2018 Wellington City Council announced it had entered a 15-year agreement with The Wellington Company which would see an office block at 195 Willis St turned into 35 apartments.

The private public partnership has been described as a New Zealand-first model to help bring more affordable and quality rental accommodation to the capital.

The plan is for WCC to lease apartments from TWC and rent them out at less than market rate. The model is cost neutral to council and will have no impact on rates.

The original proposal from TWC suggested the apartments could be ready as early as last month, but by the time the partnership was announced the first of the apartments were set to be made available in September 2019.

WCC Housing Development Manager John McDonald said he was expecting handover to now take place in March 2020.

"Legally binding heads of terms were agreed with the developer last December and council and the developer are now in the final stages of concluding the full lease agreement", he said.

Mayor Justin Lester declined to comment on the situation.

The point of contention in the proposed commercial lease agreement was not disclosed by either parties due to commercial sensitivity.

TWC did however confirm it had nothing to do with the cost to renters or ratepayers.

Housing portfolio leader councillor Brian Dawson said the delay was disappointing.

"I would have liked to have had us getting tenants in there are as soon as possible and getting a move on. The rental situation in Wellington is dire and urgent."

Dawson confirmed the council was in conversations with owners of five other buildings for more apartment conversions, although the projects are intended to be staggered.

"That first lease is the key one because that's the one that will set the template for all the future ones.

"I've made it really clear to council officers that my hope is we can get that expedited as quickly as possible and whatever details there are to iron out we make that a priority".

He doubted the delay to the first lease would hold up work on the other buildings in the pipeline.

Three of those buildings are also owned by the TWC.

Developer Alex Cassels hoped once the first deal was bedded, the other three would follow in templated fashion.

The project at 195 Willis St was TWC's response to the urgency of Wellington's housing crisis, Cassels said.

The real impact of the delay was on the renter, he said.

"The unique model is intended to be able to respond really quickly to rental demand because it is a conversion rather than a new build, which theoretically means that it takes about 25 per cent of the time that's required to get from first works to move-in.

"With rents going up sharply, it's not us or the council that will really feel the brunt of it, but the end renter, which is the worst possible outcome."

Cassels said they were pushing ahead with the build regardless of what the delivery model became because they were serious about affordable housing.

However, a specialist delivery partner made all the difference and Lester and WCC were their first point of call, Cassels said.