Council to restructure Invercargill Central finance
Council to restructure Invercargill Central finance
The Invercargill City Council’s preferred option includes a $10m share purchase and increase its loan by $8.55m.
The Invercargill City Council is looking to restructure its finance in the Invercargill Central development. Although the council stresses it will not see an increase to rates.
An almost entire Invercargill city block was demolished and the Invercargill Central mall type-complex rebuilt. It includes retail, food and beverage, and parking.
The Invercargill City Council decided in 2019 to be an investment partner in the redevelopment of the CBD.
In 2022 the council then agreed to bring the total council investment up to $70.74m to support the first three stages of the six-stage development.
This was made up of a $48.2m investment and a $22.75m short-term loan.
In late 2022 these arrangements were adjusted slightly to increase the short-term loan portion to $31.45m.
Council’s holding company ICHL has purchased $43.2M shares in Invercargill Central Ltd.
It was funded by the council’s initial investment of $25m in 2019, and a further $15.5m agreed in 2020.
The balance was provided by ICHL in its own right as part of transactions outside the scope of the council investment.
The final funds needed to complete the project were to come from a commercial bank loan. However, interest rates are no longer favourable, and this, combined with the change in the value of the asset and changed priorities of the council’s development partner, the O’Donnell family, means financial restructuring is now necessary.
The council is now asking for public feedback on two options.
Acting Group Manager Finance and Assurance Patricia Christie said both options will increase Invercargill Central’s financial security but have different risks and benefits for the council.
“Neither option will increase rates,” Christie said.
The council’s preferred option includes a $10m share purchase. ICHL and O’Donnell CBD Limited will purchase up to $20m of additional share equity ($10m each) with the purchase price for the shares to be determined.
The preferred option will also see the council increase its loan by $8.55m, from $31.45m to $40m. The loan term will be extended to 15 years with interest-only repayments.
Invercargill Central Ltd will use the $20m received from the issue of shares and a further drawdown from the council debt facility to fully repay the HWRF debt facility.
Should only ICHL and O'Donnell CBD Limited participate in the share purchase, this will result in ICHL having purchased $53.2m equity and the council holding a debt facility of up to $40m.
HWRF would have no further interest in Invercargill Central Ltd.
The council’s consultation document says based on current forecasts Invercargill Central Ltd will be able to repay the loans to Community Trust South and Provincial Development Unit when they fall due.
ICL will also be able to service all its debt from projected operating cashflows.
However, the document says it may limit the ability of the council’s holding company to fund other potential projects on behalf of the Council as ICHL will fund the purchase of the shares from its own cashflows/reserves.
The second option put forward would see the council take a $20m share purchase and not increase its loan.
For more information, including the information from earlier consultations on City Block and city centre streets is available at https://letstalk.icc.govt.nz/city-block-west.
People can view copies on request at the Te Hīnaki Civic Building, the Bluff Service Centre and the Invercargill Public Library and the Murihiku Marae, or by contacting the policy team on policy@icc.govt.nz or by phoning 03 211 1777.
Council will also be hosting a Facebook Live on 27 September, where the community will have the opportunity to hear about the options and ask questions, and will also be out and about atInvercargill Central on 23 September.