20 October 2009

Additional information on the National Conservatorium of Music proposal

The Christchurch City Council is releasing additional information on the National Conservatorium of Music proposal following discussions with the Ombudsman.

If following the Special Consultative Process, the Council resolves to proceed with the proposal, the recommended structure would involve the Council borrowing the funds required to build the centre, leasing the land from the Arts Centre and providing working capital to Civic Building Limited (CBL), which would be responsible for the development. 

CBL would then have a long-term lease agreement with the University, which ensures lease payments are sufficient to:

Recover the whole construction cost of the building over 50 years
Meet all maintenance and refurbishment costs
Pay the interest on the required loans
Repay the debt
Maintain solvency
Ensure the structure is cash-flow (and rates) neutral to Council

The proposal would involve the Council borrowing a total of $24.355m million to advance to CBL.  This amount covers:

·        The cost of the construction of the building and associated 38 car-parks

·        A 20-year prepayment of the land lease to the Arts Centre Trust Board

·        Working capital for the Council-controlled trading organisation

·        40 additional car-parks for Council use

The University has agreed to alter its lease payments to reflect the final actual construction costs.  In addition, the University has agreed to reset its lease payments every five years to reflect Council’s actual borrowing costs.  This means that the University takes the upside and downside risks of both construction and borrowing costs on the project, excluding the additional $800,000 for the additional car-parks.  The lease payments are also indexed for inflation and an allowance for ongoing replacements and maintenance of the building – in particular heating, ventilation, lifts and fire services.

The ground lease with the Arts Centre Trust Board would be for an initial term of 100 years followed by two rights of renewal for 50 years each.  At the expiry of the lease and the last renewal period (i.e. 200 years) ownership of the building and other improvements on the site will pass to the Arts Centre Trust Board.

CBL would enter into a lease with the University for a 50-year term with three rights of renewal for a further 148 years.  If the University does not renew the lease, Council would be able to lease the building to another tenant.  After the initial 50 years all debt owing on the project would be repaid.

 ends

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