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Dunedin Mayor Dave Cull confirmed yesterday the council had agreed to sell the 142-year-old heritage building to Dunedin developer Lawrie Forbes, of Zeal Steel, for $900,000.
The unconditional deal, which would be settled on May 1, would leave the council about $500,000 out of pocket after it bought the Athenaeum for $1.13 million in 2007.
The bill included $100,000 in unbudgeted debt left over from the council's original purchase, which could not be covered by sale proceeds or rent from tenants while the council owned it.
Another $400,000 in holding costs, accrued by the council over six years, added to the total bill, Mr Cull said.
However, Mr Cull was upbeat about the deal, saying most of the council's costs had been covered and the development had the potential to ''really enhance the central city''.
Mr Forbes said he expected to spend more than $1 million restoring the building, including earthquake-strengthening by his company and making it fit for purpose.
He hoped its existing tenants - the Craic Irish Tavern, Thistle Cafe and Bar and the Athenaeum Society library - would remain. However, he was excited about the potential for unused space in the building, including a large basement area and room at the back for a courtyard development.
He was already talking to Allan Baddock, from community arts and culture group Transforming Dunedin, about ideas for the site.
It was too soon to commit to a construction time frame but planning would start straight away, Mr Forbes said.
One idea was to develop part of the building into an arts and culture ''arcade'' with access for the public, possibly including a live music venue in the basement and a cafe and bar, he said.
The emphasis was on greater community access to the building and more encouragement for the arts, rather than just adding another bar, he said.
''There's more to the Octagon than just drinking.
''It was built as a community building. I see its future usage along those lines.''
The deal with Mr Forbes was announced soon after it was confirmed in the non-public part of yesterday's council meeting.
It was the second time the council had tried to sell the building, officially called the Athenaeum and Mechanics Institute building. An earlier plan to auction it was aborted in September last year.
The council had bought the building as a possible site for an 800-seat theatre, or so it could be incorporated into a cultural sector associated with the nearby Regent Theatre.
Those plans had since amounted to nothing and the building was put on the market after it was decided there were no advantages to retaining it.
Mr Cull, pressed on whether the purchase had been a mistake, said the result was ''quite fortuitous''.
Any council activity came at a cost and the intention was never to make a profit from buying the building in the first place, he said.
However, although the reason for buying it had not come to fruition, an arts, culture and retail development would still be the result and would suit the council's planning for the area, he said.
For a total cost to the council of $500,000, ''a lot of people would actually say that's a very good outcome'', Mr Cull argued.
The council had received four offers from potential buyers after a deadline sale process run by Colliers International.
Mr Forbes' offer was the highest, followed by offers of $500,000, $555,000 and $800,000, although other details of the rival bids were not disclosed yesterday.
Mr Forbes also planned to place a covenant on the property to protect heritage elements agreed with the New Zealand Historic Places Trust.
The building would become the latest to be rescued by Mr Forbes, who was already restoring the Rogan McIndoe Print buildings and the sagging Reed's Building, among others.
Mr Forbes' work helped earn him the council's supreme award for heritage reuse last email@example.com