Originally published in the Waikato Times, Friday 8 November 2024.
By Stephen Ward.
The $6.5 million loan to a theatre partnership is “the first cab off the rank” of four planned property investments totalling $33.6 million by the city council’s Municipal Endowment Fund, says economic development committee chairperson Ewan Wilson. PHOTO: Christel Yardley / WAIKATO TIMES
The city council is putting another $6.5 million worth of financial skin in the game to help develop the new Waikato Regional Theatre site.
It’s in the form of a two-year bridging loan at commercial rates from the Municipal Endowment Fund (MEF), which has built up some $33.6 million in cash and $22 million worth of land. The MEF is used to gain returns from strategic property investments.
The latest loan - which will help establish commercial and hospitality operations at the theatre - comes on top of a $25 million council grant to the project and a 10-year annual commitment of $1.1 million for the likes of maintenance.
The theatre building will include around 785 square metres of hospitality offerings on the ground floor, and there’s potential for an art gallery and function space on the first floor.
The new Waikato Regional Theatre is taking shape.
On the risks of putting another $6.5 million on the line, economic development committee chairperson Ewan Wilson told the Waikato Times on Friday that loan security included “personal guarantees from some of the most significant movers and shakers in Hamilton”.
The loan is to the WRT Commercial Limited Partnership to support delivery of the commercial and hospitality areas. Wilson understood the partnership involved five entities which included the likes of Fosters director Leonard Gardner and the Gallagher family. Therefore he was very confident the money would be repaid.
On why the MEF was lending the money rather than the likes of banks, Wilson said there was no current legal property title to the sections of the theatre that would be used for commercial and hospitality operations and “banks are reluctant to provide funding without a title”.
A shot from last year of the embryonic Waikato Regional Theatre build on Victoria St contrasts sharply with the much more advanced development visible now. PHOTO: Christel Yardley / Waikato Times
The advantage of a loan now is it would mean all parts of the theatre could open at the same time. The alternative was the partnership having to wait much longer until legal title was issued to the theatre’s relevant sections before development.
Wilson agreed coordinated opening of various parts was better. The theatre is due to open some time next year.
A bridging loan could be repaid once those commercial and hospitality spaces were developed and gained legal title, he said.
The operators could then approach the likes of banks for funding: “If they still needed that then that’s exactly what would happen.”
He also expected leases of the relevant space to create revenue that “would service any ongoing borrowing”.
In a statement, Wilson said the loan was an ideal use of the MEF.
“Everyone involved in this will reap benefits. The community will be able to enjoy all aspects of the theatre precinct when it opens, the developers have the funding they need, and the city will get the interest earned on the loan.”
Hamilton’s Novotel hotel was also helped by the Municipal Endowment Fund.
PHOTO: Tom Lee / WAIKATO TIMES
The partnership’s commercial director David Heald said in the statement he was grateful to the MEF.
Besides the $6.5 million loan to the partnership, the MEF has also agreed in principle to lend another $10 million to a Bridge Housing Trust affordable homes project in Tristram St.
That leaves another $17.1 million in the pot which is due to be loaned to two other yet-to-be-named projects, Wilson said.
Before this went ahead, the MEF was waiting for other parties involved to provide “the levels of security that we require” for the loans. Other investment options would also be considered.
All currently planned loans would be at full commercial interest rates, except the housing trust one.
The stand-alone MEF’s activities on the commercial property investment front and its income are separate from the council’s core activities and rates.
It’s a commercial property investment fund intended to provide an “enduring return to the citizens of Hamilton”.
MEF holdings flow on from land that was given to Hamilton by the Crown in the 1870s.
Previous MEF support has gone to the likes of the Novotel Hotel and the Pukete industrial estate.