The Wellington City Council plans to buy the land underneath the cinema for $32 million, money which the cinema would use to redevelop the building. Photo / Mark Mitchell
The Wellington City Council plans to buy the land underneath the cinema for $32 million, money which the cinema would use to redevelop the building. Photo / Mark Mitchell
Wellington City Council is ploughing ahead with a controversial deal to buy land underneath the Reading Cinema building after a group of councillors tried to stop it.
The council has been working on a $32 million deal behind closed doors but details were leaked late last year, sparking a debate over whether it was appropriate for a cash-strapped council to be funding Reading’s multimillionaire owners to fix one of the city’s most common gripes.
Wellington Mayor Tory Whanau finally released key aspects of the deal last night.
The council plans to buy the land underneath the cinema for $32 million, money which the cinema would use to redevelop the building.
Reading’s annual rent would cover the council’s costs making it fiscally neutral to ratepayers but Reading could buy back the land for the council’s original purchase price within the first 10 years.
The council is then free to sell the land to someone else at a higher price thereafter.
Today, the council considered Councillor Iona Pannett’s notice of motion to revoke decisions made on the cinema.
Wellington Mayor Tory Whanau said it was a good deal for Wellington. Photo / Mark Mitchell
Pannett said she could not get her head around why Reading could not afford to do the development on its own.
Wellington City Council city development manager Phil Becker said one of Reading’s strategies was that any development must stand on its own two feet so, owners were prudently seeking opportunities for funding through both the council and the bank.
Pannett said the deal was a wealth transfer to some already very wealthy people.
“I do believe this is corporate welfare, generally I believe property developers should be going to the bank.”
Councillor Ray Chung said: “This is the worst commercial deal I have ever seen.”
Everyone agreed something needed to be done about Reading, Councillor Nicola Young said.
Her concern was about “municipal corporate welfare” and said the saga had been a PR disaster for the council.
“How can the council propose small cuts that hurt the fabric of our communities on the one hand and spend $32 million bailing out a multinational on the other.”
The Reading Deal is again up for decision. I and others are trying to stop this irresponsible commitment to sell ratepayer assets in order to fund a multi national property developer. Even if successful, they will benefit by tens of millions largely at the expense of ratepayers.
Dunajtschik said if he were in the shoes of Wellington City Council, he would walk away as fast as he could.
”However, if I was in the shoes of Reading, I would laugh all the way to the bank.”
Nick Wareham, a spokesman for Dunajtschik, told councillors that Dunajtschik would negotiate directly with Reading to buy the land underneath the cinema for its commercial value.
He would offer Reading a ground lease on commercial terms and contribute his funds after the owners of the cinema had first invested their own money.
Proceeds from the ground rental would go to Dunajtschik’s estate which will ultimately be gifted to the Nikau Foundation.
Earlier in the meeting, philanthropist Sir Mark Dunajtschik, right, offered to buy the land underneath the cinema building. Photo / Mark Mitchell
In 50 years’ time, Dunajtschik’s estate would then gift the freehold title for the land back to the citizens of Wellington.
Reading could negotiate to buy back the land before then but at the current market value at that time.
Dunajtschik was concerned that under the existing deal, the council would simply be covering its costs, Wareham said.
“It is unlikely in our opinion that this will match a normal commercial ground rental and therefore the citizens of Wellington will not only be subsidising a commercial entity they will also be foregoing a normal commercial return on land.”
Ratepayers would also forego any uplift in value by Reading having the option of buying back the land for the original sale price within the first 10 years of the council’s deal, Wareham said.
Dunajtschik has made significant contributions to the city.
Georgina Campbell is a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.
