Delta #EpicFail —The End Game according to CD

Updated post
Mon, 1 Aug 2016 at 9:54 a.m.

Received from Christchurch Driver [CD]
Sun, 31 Jul 2016 at 9:50 p.m.

Readers and Councillors, there is a way out of the Noble Quagmire— but first, not before there is a wholesale clean out of the Delta senior management and directors, or those that have either created this toxic mess or allowed it to continue, which is all of them.

As time is tight, we will not dwell yet again on this topic…. but we will return.

After spending many months considering this toxic mess and the abysmal management and governance that is evident, your Correspondent has come to a conclusion that shocks even him, but desperate times call for if not desperate, then extreme lateral thinking :

After a clean out at Delta, we must hold our collective noses and Council must do the unthinkable and spend MORE ratepayer funds and BUY OUT GOLDBAND’S 32.50% SHARE OF THE FIRST MORTGAGE and take control of the ENTIRE SUBDIVISION.

Council need only to buy the $2.7M Gold Band First Mortgage to have complete control of the project. There of course remains the issue of the Neighbours and the ongoing court actions, but the Neighbours are very willing to work with Council (not Delta) and they have estimated that a solution to provide for their interests could cost around $2M.

The Neighbours have offered to meet with Councillors immediately, at any time to discuss and resolve the issue. The alternative is ongoing legal action with the Council in a very weak positon. Certainly, Crs Calvert and Vandervis, and other Councillors also share this position.

Here is the Outline Plan

1. DCC – (Preferably NOT Delta or DCHL) spends $2.7M to buy the remaining first mortgage. To be free of the toxic taint of the DCHL, ideally a separate Council Owned Company may need to be created. Tax issues may mean it has to stay within Delta but every effort should be made to avoid this. Once the $2.7M mortgage is bought there are no external interest costs, just some rates and insurances, which are minimal in the overall scale of things. Council then has time to make informed decisions. THE IMPORTANT THING IS TO AGREE TO BUY THE MORTGAGE AND STOP THE CURRENT MORTGAGEE SALE (which is possible with the agreement of the Neighbours under s102 of the Property Law Act).

2. BEFORE the remaining mortgage is bought, do a deal with the Neighbours to satisfy their interests which will cost around $2M, plus some amount for Neighbours’ costs – this might be around $500-600,000. The legal costs might grate but that is the cost of acting like a corporate criminal. This step provides certainty to Council there will be no more legal delays that have added years to the project.

3. The DCC appoint a directly employed project manager that is answerable directly to the DCC CEO, and set in place very clear KPIs and make a very large proportion of his/her remuneration subject to those KPIs. NOT a “Consultant” and DEFINITELY NOT Mr Mike Coburn or any other person associated with past or present Directors.

4. That project manager will have full visibility of absolutely all costs relating to the subdivision past and present, and will present full and detailed monthly reporting to Councillors and DCC Management and appear at all Council meetings. The project manager will have complete control over the Delta CEO on this matter.

5. Resolve with Christchurch City Council and Yaldhurst Community what is required to make a workable and safe subdivision.

6. Complete the work required to sell the first stages of the residential subdivisions – there are around 80 sections ready to go and if a deal was offered to a housing company like Mike Greer Homes that had demonstrated expertise and capacity to build cost effective homes, the deal would be done in a week. The remaining work would NOT be done by Delta but by a small efficient company. Above all, it is important that the work awarded by the DCC project manager is an open and transparent process and there are no links to Delta or DCHL Directors, past or present.

7. Councillors must understand the land will never be worth less than it is now – they must avoid Denham Shale-like stupidity that occurred at Luggate where land was sold for a fraction of the cost, only for the sections to be marketed several years later at prices that would have yielded Delta all of its funds spent there, interest and a profit besides. Council must learn from the mistakes past, not repeat them, otherwise there will be more Auditor-general and Ombudsman reports, and it won’t be good for Council.

8. Councillors must resist temptation to bow to the Delta / DCHL Directors recommendations to sell now – the overriding concern of these incompetents is to sweep this toxic mess under the carpet and hope that Ratepayers will buy the TINA line – there is no alternative, we just had to move on with another $10-20M loss….

9. The directors will be pushing hard for a quick sale and say in effect : “If you don’t accept this mortgagee offer there won’t be another as good” which is utter rubbish. There were several mortgagee offers, despite the property being marketed over the holiday break and with a lot of complexity in the sale document that wrote off large chunks of value. But the essential point is that the first sections that are almost ready and all or part of the commercial land is sold off separately, then Delta plus get MORE than what is currently available :

10. What is the ultimate value of the land ? Very quickly, there is over 35,000 m2 of commercial land, for a major commercial centre including retail anchors and specialty shopping that is already master planned with the main entrance road virtually complete. This excludes the main entrance road and shared parking circulation roads. Even in a fire sale this land is worth around $90-100 /m2. This alone is a value of $31M minimum, Councillors. Admittedly it will take time to sell down, but the upside is huge again – even industrial land in Christchurch is $250-300 /m2, and commercial zoning is worth more again. Completed, in an orderly sell down over time, 35,000 m2 at $300 /m2 is …. too big to contemplate !! The 80 completed sections would be worth around $9M nett after selling costs, and then there are 190 consented but undeveloped sections that your Correspondent says are worth around $9M also. These end value figures are why Noble are fighting so hard to regain control of the asset. Yes, there is some re-work and further costs, but they are small in relation to the total asset. The key is not to pass that value to some bottom feeding vulture at mortgagee sale that is likely to be NIL in disguise. NOTE : Your Correspondent has not calculated in detail the area of the commercial land.

11. The Delta Directors and Mr Crombie, Mr Dixon and Mr Cameron cannot be trusted. They have not ever given Councillors the full facts about a range of matters, have at best misled Mr McKenzie. Their willingness to simply close the door and accept a huge loss on this deal is plainly evident by the fact they wrote off in excess of $10M in their 2015 accounts. They just want to forget this mess ever existed, because it is Other People’s Money.

12. Councillors should consider 2 final facts : The only way that the $24M investment that ratepayers have made in this project to be protected and repaid is if Council finishes the project, even if just in part. With what has gone on, there must be full accountability and transparency which can only be achieved by full Council control. The other thing to remember is that Council has already set a precedent to bail out loss making Council enterprises : It’s called the stadium. Council agreed to reduce the rent by $1.85M per year. If Council takes an amount equal to around 18 months of Stadium rent subsidy to DVML, it can have control over the subdivision and very likely make back at least the $10-15M in interest costs that would pay for the Luggate and Jacks Point debacles !! Result !!

Go on Councillors, make a sensible and decision tomorrow and make us proud.

█ For more, enter the terms *delta*, *noble* or *epic fraud* in the search box at right.

Posted by Elizabeth Kerr

Election Year. This post is offered in the public interest.

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13 Comments

Filed under Business, Construction, DCC, DCHL, Delta, Democracy, Design, District Plan, Economics, Finance, Geography, Housing, Infrastructure, Media, Name, New Zealand, OAG, Ombudsman, People, Politics, Project management, Property, Public interest, Resource management, Site, Town planning, Travesty, Urban design

13 responses to “Delta #EpicFail —The End Game according to CD

  1. Anonymous

    {Name corrected at point 3. Comment moderated. -Eds}

    The Noble subdivision punt sounds a lot like Jacks Point, where Delta put in infrastructure prior to subdivisions being sold. And Mike Coburn, once Delta director, was involved in that deal.

    And is it also possible that this debacle is the real reason that Delta upped sticks and pulled out of Christchurch, where every other civil contractor was making money hand over fist?

  2. Gurglars

    Not a bad analysis. It depends upon the cost of repairing the major constructiion mistakes that Delta have made and the Christchurch City Council’s attitude to the DCC involvement. But the naked self interest of council employees in both cities should see those issuesvresolved behind closed doors. The POSITION of the land is excellent, close to the airport, away from areas of potential liquefaction, the overhead wires an issue.

    The right answer after this mess is resolved is for the DCC to sideline Delta as CD has stated and partner with a reputable developer. However in practice will the DCC have the courage to cut the Delta umbilical cord. I doubt it. A solution may be to completely cut off Delta. Liquidate it and set up a new company with any assets left and sell that off. It is clear that the DCC should not be involved in any company that is involved in land development. It just does not have that expertise.

  3. russandbev

    What a fiasco.

    So despite Delta having a proven track record of stuffing up at Jacks Point, at Luggate and at Yaldhurst with the result of total losses being – if the numbers are right – well over $30m, the Councillors who are ultimately responsible for these losses, are not allowed to ask the CEO of Delta any questions regarding this shambles? And why? Seems like an arrangement has been arrived at between Cull – who controls the DCC agenda completely – and Crombie, Chair of DCHL to protect Grady Cameron. We all remember do we not, the comment from Cull who told Crombie and McKenzie at a Council meeting that they don’t need to answer questions from Cr Vandervis?

    The right thing to happen would be for the Board and CEO of Delta to front up, along with the Board of DCHL and the whole meeting to be held in public session.

    I for one don’t expect the meeting to be conducted in a way to elicit truthful, full and frank disclosures. And I certainly don’t expect the “facts” to be released for public scrutiny. Too much to lose for some people I’d suggest for that to happen.

  4. Bev Butler

    CD, you have stated above the Neighbours have estimated a solution to provide for their interests could cost around $2M.
    Can you please clarify exactly what you mean by the Neighbours’ interests?
    Thanks.

    {Previous posts from CD speak to the neighbours’ interests; one of the neighbours also had a post published. These are searchable. Suggest you read the latest email from landowner and caveator Colin Stokes (plaintiff) published here : https://dunedinstadium.wordpress.com/2016/08/01/re-delta-message-to-dunedin-city-councillors/#comment-75480 -Eds}

  5. Elizabeth

    Editorial error.

    Correction: The post at point 3. should read Mike Coburn.

  6. Elizabeth

    The Council meeting (the discussion for Delta will happen in non public at 1pm) is being controlled by Mr Crombie for DCHL – and revolves around a valuation supplied to Gold Band Finance. This valuation is therefore not independent – the Council MUST seek its own independent valuation and do FURTHER DILIGENCE.

    No decision needs to be made today.
    If Councillors are UNSURE – they should defer any decision.

    We note that one councillor has a conflict of interest being a developer and contractor.

  7. Elizabeth

    Received from Colin Stokes
    Mon, 1 Aug 2016 at 3:29 a.m.

    From: Colin Stokes
    Sent: Monday, 1 August 2016 3:25 a.m.
    To: ‘dbensonp@dcc.govt.nz’; ‘john.bezett@dcc.govt.nz’; ‘hcalvert@dcc.govt.nz’; ‘doug.hall@dcc.govt.nz’; ‘aaron.hawkins@dcc.govt.nz’; ‘mlord@dcc.govt.nz’; ‘jmactavi@dcc.govt.nz’; ‘anoone@dcc.govt.nz’; ‘npeat@dcc.govt.nz’; ‘cstaynes@dcc.govt.nz’; ‘rthomson@dcc.govt.nz’; ‘lee@vandervision.co.nz’; ‘andrew.whiley@dcc.govt.nz’; ‘kwilson@dcc.govt.nz’; ‘mayor@dcc.govt.nz’; ‘Sue.Bidrose@dcc.govt.nz’
    Cc: ‘Greg Smith’
    Subject: Residents Prior Interests in Noble Subdivision ChCh

    Good morning all,

    We understand you have meetings today regarding the Noble Subdivision in Christchurch which we have historic interests in.

    Could you please consider our proposal attached and the security amounts we’ve discovered Noble have given Delta over the land. We believe the proposal provides a multiple million dollar better outcome for Dunedin ratepayers than what Delta is proposing, while also providing for the prior interests of us and our neighbours.

    Kind Regards
    Colin and Greg

    [Attachment]

    CS_GS 2016 07 31 to DCC s102 Noble Subdivision

  8. Elizabeth

    Crs Lee Vandervis and Hilary Calvert requested Delta chief executive Grady Cameron be made available to ask questions at the meeting, but this was declined by DCHL chairman Graham Crombie.

    ### ODT Online Mon, 1 Aug 2016
    Councillors unable to quiz Delta chief
    By Vaughan Elder
    Dunedin city councillors will not be able to ask questions of Delta’s chief executive before a decision over $13.3million in bad debt from Delta’s involvement in a controversial Christchurch subdivision. Councillors are set to make a decision about the recovery of the debt, which relates to infrastructure work the council-owned company carried out for the Yaldhurst Village subdivision more than three years ago, at a closed-door meeting today. The issue is going to the council because of a policy which requires Dunedin City Holdings Ltd (DCHL), which oversees council-owned companies including Delta, to get council approval for decisions which have financial implications of more than $10million.
    Read more

    • Hype O'Thermia

      Anyone who listened to the interview yesterday http://www.accessradio.org/ProgrammePage.aspx?PID=8fe75f68-6c6e-4e3c-b4ab-929576c92c2d
      will be unsurprised at Mayor Cull’s refusal to let any of our other elected representatives – councillors – attempt to extract information not willingly offered up by Delta’s chief executive.

      One would not like the “wrong” answers to come out. And when questions are asked but dodged or there is a refusal to answer, that looks bad too.

      Cull is standing at this upcoming election both for mayor and councillor.

      Nominations for Feather Duster have not closed yet.

      It’s August already, not long till October.

      • russandbev

        An excellent and thoughtful interview with Cr Calvert. She was cautious in some of her responses, but she managed to make the point that there is an “A” team who are never wrong who are about a third of the Council, and a Mayor who lacks leadership and is, reading between the lines, a bully. Also interesting re her comments about some Councillors who run round the University having all sorts of chats with people who then are determining Council policy. Ditto with her views on the ODT’s failure to examine basic issues.

  9. Calvin Oaten

    This could be the crunch time for this council. If only it were in open meeting (Cull’s influence again) then we could all seethe councillors in their nakedness. This would be a pointer for the election if nothing else.
    Then the fact that this issue has such huge financial implications is why it should be thrashed out in the public chamber. Tyranny is the only description.

    • Hype O'Thermia

      “If only it were in open meeting (Cull’s influence again) then we could all see the councillors in their nakedness. This would be a pointer for the election” – so, Calvin, you’re not really wondering why it’s being held in a secret broom cupboard, soundproofed, mutual support group only?
      And “this issue has such huge financial implications is why it should be thrashed out in the public chamber” – and even stronger reasons why for self-[interest]-preservation it must be sequestered.

  10. Gurglars

    It is an absolute DISGRACE to natural justice and democracy that elected councillors responsible for the governance of the city are unable to question senior staff on hugely important( acknowledged at over $10 million) matters concerning ratepayers monies paid to the DCC.

    Councillors should demand that they interview Grady Cameron.

    Issue a legal application to the courts for such a right. Should the courts rule against such an enquiry then we can go to the streets to argue for the bringing back of democracy and governance.

    It is clear from this example alone that Hilary was right in her radio interview that elected governance has been hijacked. This must stop and be reversed.

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