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Mayoral candidate John Tamihere goes to Serious Fraud Office over the $3 million sale of Auckland's historic Civic Administration Building

Mayoral candidate John Tamihere goes to Serious Fraud Office over the $3 million sale of Auckland's historic Civic Administration Building
An artist's impression of the proposed Civic Quarter development with the Civic Administration Building in the background.

Mayoral candidate John Tamihere says he's lodged a complaint with the Serious Fraud Office over the sale of the Auckland Council’s historic Civic Administration Building.

The redevelopment of the property is expected to start next month after it was sold by Auckland Council to developer Civic Lane Limited for $3 million. As part of the deal Civic Lane has been given a 5000 square metre property adjoining Mayoral Drive that's expected to be used to develop a hotel.

Auckland councillors were briefed on the property deal which was being handled in on its behalf by Council Controlled Organisation (CCO) Panuku last week after the public and media were excluded from a meeting. But the details regarding how much it had been sold for have remained under wraps until now.

The developer wants to turn it into apartments, along with a wider development which is expected to include new commercial office and retail space, as well as a hotel built on Mayoral Drive itself. 

“I'm requesting that the SFO investigate this deal and am questioning why developer Civic Lane, has been given a sweet honey pot deal,” Tamihere says. “As a ratepayer it doesn’t add up. I want them to look into it and the officials who negotiated it. The city cannot wait until after the elections and this must be investigated now.”

Councillor Mike Lee isn’t impressed with the sale either and says at last week’s council meeting the councillors were told the sale was a done deal.

“We were told it was a fait accompli and that was the reason for our motion. $3 million for an 18 storey building and half a hectare of land in the CBD? These people are getting away with daylight robbery.”

He says he has been getting legal advice and is seeking some of the key documents involved in the deal.

But Auckland Mayor Phil Goff says the sale of the historic Grey’s Ave building means the city’s ratepayers won't have to pay for its refurbishment.

“This settlement means that an A category heritage building can be restored and refurbished without burdening ratepayers more than $80 million in restoration costs. It will also deliver a thriving new area providing hotel and residential accommodation and an exciting new performing arts centre,” Goff says.

Panuku project development director Clive Fuhr says restoring the building and removing the asbestos from the property would have cost $80 million dollars. He says coupled with the ups and downs of the real estate market and construction costs in the city, selling the property to Civic Lane was the best way forward for the council.

“I think from our point of view it feels quite momentous because I think from a property perspective it’s been a really challenging project. We feel, notwithstanding the stuff that’s gone on in council last week, we feel like we’ve climbed a mountain. There’s been an incredibly thorough due diligence process to lock down the construction pricing and make it as bullet proof as possible and that’s what’s taken the time.”

Fuhr says the sale includes a detailed development agreement between Panuku and Civic Lane that means it will have to carry out the restoration and redevelopment work to agreed terms. He says the redevelopment of the building is expected to be completed in 2021.  

When the Council first announced it was looking at selling the building in 2016 Tawera Group was expected to buy it. But now, almost three years later, it has now been sold to Civic Lane, which is owned by Tawera Group’s chief financial officer John Love and his wife Josephine Love.

Love is pleased with the outcome.

“This building will have its challenges to develop, and not every developer would have taken it on. But the location and complete refurbishment will make it a truly desirable place to live and visit. We’re looking forward to being able to provide new homes and a new community in such a wonderful location in central Auckland so close to everything, including theatres such as the Aotea Centre and the Auckland Town Hall, the Auckland Art Gallery, world-class shopping and dining, and of course the new CRL Aotea train station.”

Councillor Mike Lee has threatened to take the sale to the Auditor General and questioned the price it was being sold for. Lee put forward a motion, which was seconded by councillor John Watson, calling for Panuku to suspend any sale or transfer of ownership of the historic property until the Council had been provided with a full report of the commercial details of the proposed transaction, including the price. And they also wanted more information on how the outstanding heritage concerns relating to the Category A listed building had been resolved.

The motion was defeated, but Lee said it didn’t take away from the fact it’s a bad deal and described the sale price as disgracefully low. 

The Civic Administration Building was designed by Hungarian architect Tibor Karl (TK) Donner and was officially opened in 1966. It is recognised as New Zealand’s first skyscraper and building the structure required the use of, what was at the time, cutting edge construction techniques.

The building has been vacant for the past five years following the Auckland Council’s 2012 decision to buy the ASB building in Albert Street for $104 million.

council report from 2015 stated that the property was unsuitable for long term use without significant refurbishment, including removing asbestos from the building. The council voted to seek interest from the private sector to refurbish the Civic Administration Building while maintaining its heritage value, as far as practicable. The council also said it would consider the sale of the building and surrounding land to a selected development party on a freehold or long term leasehold basis.

In September 2016 former Mayor Len Brown announced that Panuku had selected Tawera Group to restore the historic building. At the time the Auckland Council said it was working through the resource and building consents, particularly in terms of the refurbishment works. 

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Someone is getting a good deal (under the table)!

Maybe / maybe not. Who knows? Penny Bright was right - no secret negotiations by council.

A Category A listed building with asbestos - the thing is a liability. Ratepayers should be happy with $3M. I'd say there's a 50/50 chance that the asbestos removal/disposal and renovation ends up costing more than Civic Lane anticipated when they actually get work underway. And its not like they have the flexibility to make significant design changes to save money if need be given that the redevelopment work must be done to the agreed terms.

5000 sqm of land in the city, that has to be worth a lot right? 30 mil? That buys a lot of asbestos removal.

I think the land is worth very little because it is occupied by an outdated scheduled building that you can’t demolish, can’t lease out, and the owner is legally bound to retrofit to a certain standard. Would be worth $30M vacant. I think the cost of all that work will be huge (more than the developer expects) and could easily blow out if the project isn’t very well managed.

the civic building only occupies a tiny portion of that 5000sqm of land they are getting. They've got at least 3 other large buildings planned for the site

$80M to refurbish, but 20 floors, 6 apartments per floor = 120 apartments. From memory a studio apartment on a lower floor was about 750K while a 3 beddie on the higher floors will be more like $3M.

Even if they only averaged $1M each you would comfortably cover the refurb costs.

So you are looking at a nice profit on the civic building, plus free land to develop 3 more large buildings, right in the centre of the city, almost on top of what will be the main train station in the city (Aotea station).

It just doesn't add up.

If it were as lucrative as you’ve described I think they would’ve been able to get more than $3M on the open market. I doubt they’ll make a nice profit on the civic building because of the earthquake strengthening, asbestos and expensive heritage design constraints. And isn’t one of the other buildings going to be a community centre? There may well be some profit in it or the developer wouldn’t be doing it, but I think there is more to it than face value.

I think the point is it wasn't sold on the open market.

It was. These things aren’t sold by auction or trademe listing, but that doesn’t mean it wasn’t sold on the open market. It would be irresponsible to just sell to the highest bidder as it might go to someone that doesn’t have the capacity to deliver on what is a highly challenging job. They’ve engaged with other developers over the years to try get the best deal from those that showed interest. I’m sure most didn’t want of a bar of it though. People are surprised that it was sold for as little as $3M, but I’ve not seen any comments here make the point that it wasn’t sold on the open market.

I think you may need to trace this. John Love is a Tax Agent and the Company referred too, on it's Companies Office listing as "in the business of Investment - Commercial Property". On their website, directed at astute investors, it clearly states the building has a Grade 'A" seismic rating. Seems to be some porky pie happening in the background so all for an investigation as to how this happened. Who is going to actually own this building and the others in the long run.

Your numbers don't account for risk with the undiscovered issues and costs. Conversion from an office to apartments is a change of use under the building act which brings a lot of structural and fire safety issues to deal with, which can be very costly. A sweet deal can turn to crap very quickly once the design work starts, and then problems are uncovered during the refurbishment.

You can guarantee if Auckland Council renovated and removed asbestos there would be cost overruns and end up costing taxpayers more.

So a Mayoral candidate is pulling a pre-election stunt.

There is a lack of discussion about the difficulties of refurbishing a historic building, the extent of structural upgrading works that are required and the huge cost to deal with who know how many other costly problems (besides the asbestos).

Whoever bought it knew they were buying a massive liability, and to turn it around will take a large amount of money (often these projects don't work out well as it's possible to spend more money then the resulting value of the building). Paying $3m was probably too much.

“This settlement means that an A category heritage building can be restored and refurbished without burdening ratepayers more than $80 million in restoration costs.

Creative accounting. Ratepayers have subsidized it via the discount to sale price - in exchange for conditions of course. Impossible for the distant observer to make the call on who got the upper hand.

Don't really care about whether its a good deal or not... its about the process. Why was it not presented to councillors to consider? Why was it not open to public hearings?

Maybe there was some confidentiality element to it.. but the councillors seem as much in the dark as the public is.

Not sure the SFO is the right way to go... I would have thought the Local Government Act, Public Records Act or Official Information Act would have been a more appropriate course of action..... SFO involvement suggests some degree of wrong-doing.

Lets get to the real question. Why was it listed as a scheduled building? Who makes these decisions? If it wasn't for that the building/land would be worth many times what it sold for.

Heres another reason why Auckland city is mired in billion$ of debt with ridiculous decisions like this.
If Phil Goff seriously believes this building is only worth NZ$3million in the CBD he has been hoodwinked
I showed our corporations construction manager here in Boston US this article & he scoffed & said what a great deal - for the developer !