Retirement village loan change frees funds

Ian Hurst
Ian Hurst
Up to $2.3million could be freed up for further construction at Oamaru's Observatory Hill retirement village or to support a proposed redevelopment of Oamaru Hospital.

The Waitaki District Council decided this week to ease loan repayments for the Observatory Retirement Village Trust, removing the requirement for the trust to pay down its initial $8million council loan to $5million by August 20, 2020.

If the trust was asked to repay $1million of its loan to the Waitaki District Health Services trust seven years earlier than expected, it would only be obliged to repay the council $708,000 in 2020-21, council finance and corporate development group manager Paul Hope said.

Observatory Village Lifecare Ltd director and retirement village trustee Ian Hurst told councillors it was in the trust's interests to repay its loans to council as soon as practicable, because once its loans were repaid, all profits from the trust would go to the health services trust to support healthcare in the district, as planned.

However, when the first funding package was made - a $5,630,000 loan from Waitaki District Health Services trust supplemented by an $8million council loan - it was to develop 41 care beds, 12 serviced apartments, 20 villas, community facilities and associated infrastructure by 2022.

Due to demand, there were already 81 care beds, 22 serviced apartments, and 18 villas. Another 10 serviced apartments and up to 60 more villas were possible by 2029.

"There is no additional money that is required. It is a ... recycling of the funds that have been awarded to us,'' Mr Hurst said.

And while he defended the trust's conservative forecasts, he said, where the trust's business plan had been inaccurate was ``as to how much demand was sitting there''.

To begin construction on the additional villas, about $2million would be required for infrastructure.

Construction began on the site in 2016 and Observatory Village Lifecare Ltd was now the district's second-largest ratepaying business, Mr Hurst said.

The council's website shows a land valuation of $620,000 and a capital valuation of $18.8million.

In 2018-19 the company that runs the retirement village paid $52,425.82 in rates.

A letter from Mr Hurst, tabled at Tuesday's council meeting, stated a $1million repayment to the health services trust was possible for the retirement village trust if it renegotiated its loans with the council.

The company would spend $25million on the construction of the next 10-unit serviced apartment block, and $4.1million on infrastructure, in addition to the construction costs of the villas, supporting the local trades industry.

After the initial loan, the council extended two more loans to the retirement village trust, including a $3.5million loan for its first 20-care bed expansion.

On Tuesday, the council removed the requirement for the trust to repay $3million by 2020, set out a proposed repayment plan for all $11.5million in council loans by 2029, set interest rates on the loans at the council's cost of funds plus 0.5%, and agreed further that a $250,000 extension granted to plan the retirement village's stage 2 development was in part ($93,000) a donation and in part ($157,000) an interest-free loan, repayable by 2029.

Waitaki Mayor Gary Kircher, who is the council representative on the retirement village trust, declared an interest and did not vote at the meeting.


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