Christchurch City Council’s $10.8m rent bill is well above market rate thanks to 15-year deal

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The council has been in the Te Hononga Civic Building in Hereford St since 2010.

ALDEN WILLIAMS / Stuff

The council has been in the Te Hononga Civic Building in Hereford St since 2010.

Christchurch City Council is paying above market rent for its city center offices – and talks to reduce it, which could save ratepayers more than $1million a year, are underway.

The annual rent for the seven-story Te Hononga Civic Building in Hereford St is $10.8 million.

The building is jointly owned by the council and the Ngāi Tahu property, meaning that half of the rent essentially goes to the council, which is used to repay debt for the development of the building.

Ngāi Tahu Property manages the lease on behalf of the joint venture.

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The council said it rented 20,300 square meters of space in the building, which equates to around $532 per square meter.

But the average rent for high-end office space in Christchurch’s CBD is $360 per m2, according to property company JLL.

Christchurch City Council is renting 19,300m2 of space in the building at a cost of $10.8m.

ALDEN WILLIAMS / Stuff

Christchurch City Council is renting 19,300m2 of space in the building at a cost of $10.8m.

Their head of research, Gavin Read, said the main rents in the city’s CBD are currently “around $380, maybe $390”.

Prime CBD space refers to newly constructed or newly renovated buildings located in ideal locations.

Setting rent between $380 and $390 per m2 would lower it to between $7.3 and $7.5 million.

In mid-2021, council staff expected to save $1.25 million if they could renegotiate the building’s rent, according to a document obtained by Things.

THINGS

Over 40 buildings were opened to the public as part of Open Christchurch 2022.

Councilor James Gough, who chairs the building’s joint venture board, said preliminary discussions had taken place with Ngāi Tahu about aligning the rent with the market, “to ensure that all parties are satisfied”.

“We’re at a point where the rent is too high and it’s not working for us.”

Gough said the board had a good relationship with Ngāi Tahu and early signs of talks were positive.

He described renegotiation as “completely doable” because “you don’t have a happy landlord if you don’t have a happy tenant”.

“It’s a work in progress and it’s something we’re going to pick up very soon. [this council term].”

Christchurch Councilor James Gough believes the rent reduction is

CHRIS SKELTON / Stuff

Christchurch Councilor James Gough says the rent reduction is “completely achievable”.

The Ngāi Tahu property declined to comment.

Gough, who has a background in real estate, said the rent was above market rate because the original long-term lease contained a hard buy-out clause.

“That means it’s literally like a ratchet that you spin… [the rent] clicks every year, regardless of market rates. »

The council has a separate entity to deal with civic building. This entity, Civic Building Ltd, has three members on the board of directors: Gough, Mayor Phil Mauger and Councilor Sam MacDonald.

The civic building was discussed when Phil Mauger (pictured) met council leader Dawn Baxendale in August  He was joined at the meeting by Councilors James Gough and Sam MacDonald.

Peter Meecham/stuff

The civic building was discussed when Phil Mauger (pictured) met council leader Dawn Baxendale in August He was joined at the meeting by Councilors James Gough and Sam MacDonald.

The trio informed council boss Dawn Baxendale of the rent issue when they met her for a pre-election meeting in August.

MacDonald’s meeting notes listed “Civic Building Ltd” as one of their 10 topics or issues they wanted the board’s executive leadership team to know about.

The council’s head of property and city growth, Bruce Rendall, acknowledged discussions over rent were ongoing.

He said the council considered an opportunity “to reduce council accommodation costs, including rent” when developing the council’s long-term plan in 2021.

“While the council has entered into discussions with its landlord on these matters, these business discussions must take into account our current tenancy agreement and our ongoing needs, including the impact, if any, of future government reforms. “

The council moved into the building, a former post office, in 2010 after it was extensively redeveloped.

In 2010, Things reported the rent was $8.2 million.

The signing of the building renovation agreement for the council was the last action of former mayor Garry Moore’s council in 2007.

On Friday, Moore said he was not involved in the building’s lease agreement.

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