City Block FAQ

Frequently Asked Questions

Why is the CBD important and why does it need renewal?

One of the biggest issues facing our community is the commercial sector having confidence to accelerate investment in Southland. If Invercargill is to be a modern city with a future, it needs to maintain healthy levels of population and economic growth. More investment is required for that to happen.

Currently, the CBD lacks the vitality crucial to attracting the people and investment that not only enhances the livability of Invercargill today but provides sureness for the future.   We want a CBD that is attractive and works for residents, Southlanders and visitors.

Why did Council invest in the land in the first place?

Council invested to help with the efficient consolidation of the majority of the property in the City Block and was already an existing land owner in the area.  Council has a history of investing in land, or land banking, to encourage development.   Council does not consider investing in commercial developments to be part of its core role.  This is why your feedback on this type of investment is so important.

Why should Council invest?

Council recognises that its participation is a significant influence on the success of the development.  The financial return on investment for this project is unlikely to attract sufficient interest from private investors alone.

Council does not expect to make a commercial return on its investment in the short to medium term, but neither does it anticipate making a loss.

However, there are broader benefits to Invercargill – and Southland – to be realised through developing a vibrant and dynamic city centre. For Council, investing in such a CBD regeneration project is consistent with supportive action that delivers on a number of Council’s community outcomes, including:

  • An economy that continues to grow and diversify
  • Business areas that are bustling with people, activities and culture
  • Residents of, as well as visitors to, Invercargill give positive feedback and have great experiences

How much is Council proposing to invest – is it $20 million or $30 million?

$20 million is the amount that Council has been requested to invest in the project.  But in recognising the nature of large development projects, Council is proposing to allow a contingency for risk around the budget and any costs associated with potential integration with the rest of the City.  Council has received advice that there may be design changes which would encourage people to explore the wider CBD and ensure the development is outward looking.  The proposed $10 million contingency is effectively a $5 million contingency for budget over-run and a $5 million contingency for any enhancements that Council may seek as a result of advice and/or submissions through this process.  That is why Council is proposing that the investment be ‘up to’ $30 million.

What happens if Council doesn’t invest?

Without Council’s investment, it is unlikely that the project would proceed.  Council’s investment in this development would provide a level of confidence to other investors.

Should the development not go ahead, there is a risk that the decline of the Invercargill CBD would accelerate.  It is unlikely that a development of a similar nature would be undertaken, and alternative uses of the site may not have the same potential for transformational impact that is hoped to be achieved from this development.

Further, Council, through its shareholding in HWCP Ltd, would be left owning 50% of a site and buildings that are untenanted and, in some cases, not tenantable.  Council would be required to undertake the maintenance and ongoing costs of owning this property.  This would have a financial impact on the Council, an impact that would need to be addressed without the benefits of the social and economic boosts that the development would generate, both during and after its construction.

This is likely to be a short term issue, but we can’t predict what would happen in the longer term.

What would it cost to build this development?

Council has been requested to invest in a new entity that will complete stages 1, 2 and 3 of the development.  The estimated cost of these stages is $180 million.

Stages 4, 5 and 6 would be undertaken by other entities.  It is estimated that these developments would cost a further $100 million.

Who are the other partners Council is working with?

A range of parties have been requested to invest in the new entity.  At this stage Council can confirm that two private investors have committed to investing $20 million each in the new entity.

Who would be responsible for the ongoing costs of managing the City Block Development?

A new entity that meets the needs of all shareholders would be formed.  This new entity would own and operate the asset.  As an investor and shareholder in the development, Council would be entitled to representation on the new entity.

Why wasn’t this considered in Council’s Long-term Plan?

The development involves commercially sensitive negotiations.  At the time of developing the Long-term Plan, those negotiations were not at the place where Council had sufficient information to be able to include the City Block Development as a major project.  This is why Council is now undertaking separate consultation with the community on this proposal.

What impact would this development have on the CBD?

The development would introduce approximately 15,000 square metres of newly built retail space.  The current lettable area of the block is 12,000 square metres.  The modelling undertaken suggests that there would be potential demand for a greater retail space than is currently available.

The economic modelling suggests that an investment of this size would lead to an overall increase in the gross domestic product (GDP) of Southland, which in turn, may lead to increased demand.  The establishment of a functioning CBD is also recognised as a key driver of urban growth.  The strategy is that the combination of these factors would positively impact the demand for retail space in neighbouring properties.

Outside any potential role as an investor in this development project, Council would work to ensure that the benefits of the development would be extended to the broader community.

How will Council’s investment be paid for?

The investment in the City Block Development would be loan funded.  Every $10 million of loan funding costs Council $300,000 in servicing costs each year.  For $20 million, this will cost $600,000 per annum.

What will this investment cost me, as an individual ratepayer?

Under Council’s current policies, this investment would result in a 1.2% rates increase for the average rate payer.  For example, if you currently pay $2,000 in rates annually, your rates contribution to the investment for say, the first year, would be $24.00.  At this stage of the proposal, these figures are indicative only.

What else will ratepayers / Council be responsible for?

Council would also be responsible for associated works to integrate the development with the broader environs.  The total cost of this work is unknown but is anticipated to be approximately $20 million.

To demonstrate the sort of work anticipated by this additional investment, it is appropriate to refer to the report from Pocock Design Environment that outlined eleven main projects for the inner-City area that would create reasons for the community to re-engage with the CBD.  The upgrade and inclusion of “pocket-parks” on Esk Street was the most visible of these projects so far.  Just over $6.3 million has been included in the 2018-28 Long-term Plan for work to progress these projects. This means that an additional $14 million is the amount required.

Council has already undertaken substantial work on the investment that will be needed to revitalise the inner-city area.  Some of this has been budgeted through prior and the current Long-term Plan budgets.

Why is this development proposed now?

There has been a strong desire for renewal in the CBD.  The Southland Regional Development Strategy (SoRDS) project identified the importance of this work and it is unique in having such strong support from local business investors who have a passion for their city.

There is no perfect time to invest in a major project such as this.  There are, however, a number of points that suggest it is as good a time as any:

  • The cost of the project is lower during periods of higher growth in gross domestic product;
  • Tourism numbers are projected to continue to increase; and
  • The risk of doing nothing

Council received a request to invest $20 million in a project to revitalise the CBD.  Council would only be one of the parties investing to make this happen and a delay in this project would risk other potential funders walking away from the investment.

What is the Resource Consent Process?

The resource consent process is a different process to this investment consultation.  The resource consent process included design aspects and the environmental impacts of the proposed development.   Council engaged independent commissioners to ensure that there was no Council decision-making involvement in assessing the resource consent application.

If Council invests when would the demolition or rebuild start?

The timing of the demolition and rebuild process would be determined by the resource consent and any conditions that may be applied.  For the 2021 operating target to be met, demolition work would most likely begin as soon as it is permitted.

What is the term of the investment?

Council’s investment in the City Block Development would be long-term.  Council would expect to receive a return on its investment.  It is possible that this return would increase over time and make the investment commercially attractive to a third party.  Council would, as with all its investments, continue to review the benefits and costs of holding its investment over time.

Does Council have an exit strategy?

If Council proceeds with investment in the City Block Development, it expects that the investment would be for the long-term.  Council would, as with all its investments, continue to review the benefits and costs of holding its investment over time.

What is the impact on other Council projects?

To ensure that Council’s work programme and financing remain prudent, some planned projects would need to be delayed.  This would mean that although all of Council’s projects would still be completed, they may not be completed within the timeframes or in the order that was initially proposed.   Rescheduling would form part of the 2021-2031 Long-term Plan.

Why is this proposal focusing on a new build rather than on retaining and re-using heritage?

The resource consent application for the development requests demolition of a number of heritage identified buildings.  HWCP Ltd have advised that the scale of the City Block proposal, along with earthquake considerations, advanced deterioration in some of the buildings, and the requirements of modern retail businesses, mean widespread retention and reuse of the heritage buildings in this block is not commercially viable.

Invercargill has more than 80 heritage buildings in its main shopping streets, which provide a rich and interesting streetscape.  However, as in many cities, what used to be a streetscape of historic frontages is now broken up by a mixture of later twentieth century commercial buildings.

Council has this year adopted the Invercargill City Centre Heritage Strategy 2019, which has the following goals:

  1.  A vibrant, sustainable and active City Centre where heritage is highly valued.
  2. Key heritage resources within the City Centre are, if practicable, actively utilised, creating positive community and economic outcomes.
  3. New development and adaptive re-use projects respect our City’s heritage contact.
  4. Heritage values and character of our City Centre are celebrated and protected.

Council acknowledges that other cities around the world have committed financially to projects that retain and reuse heritage buildings.  The City Block proposal retains some heritage aspects, but is mainly a new build.

Are there any ongoing operational costs if Council is a shareholder?

If Council was to invest, it would not anticipate a commercial return on its investment in the short term.  The development would be expected to satisfy ongoing operational and financing costs with a small return to Council.  Council would also have its own ongoing costs associated with the monitoring and governance of another entity.

What would happen to Council’s investment if something goes wrong?

Council would be a shareholder in the entity undertaking the development.  As a shareholder, Council’s interests would be behind those of any bank or other loan funder.  In the event that the investment did not succeed all parties would be focused on ensuring the greatest return possible from the investment made.

Council would ensure that the investment is managed as far as is practicable in a manner that minimises the risks of this occurring.  Council would seek and obtain independent commercial advice on the terms of the investment prior to signing any agreements.

How would Council avoid being the final point of call for any extra funding needed?

As a shareholder, Council would not be obliged to invest further funds in the development.

As a stakeholder Council may feel obliged to ensure that the project is completed.  Acknowledging this, Council has proposed that a contingency of up to $10 million for risk around the budget and any cost associated with potential integration with the rest of the City, is included in our consultation on the potential investment.