Property Owners Criticise CERA/CCDU

Finally after nearly 26 months. There is an Increasing number of articles reflecting the situation in the central city.  Chris Hutching in the NBR has published an article reflecting some of the remarks made by CORE (“The City Owners Rebuild Entity: a group of over 200 business and building owners who made a submission to Cera/CCDU regarding the feelings of the local business owners.  It does not make pretty reading.)  Here is the  link to the Chris Hutching article:  http://www.nbr.co.nz/article/property-owners-launch-stinging-attack-cera-ch-138530

Here is the link to the Core website:   http://www.corebusiness.co.nz/c.key_Issues.html

Also the Chch Press article by Georgina Stylianou.  http://www.stuff.co.nz/the-press/business/the-rebuild/8535100/Owners-slam-rebuild-delays-costs This one surprised me as the Press has a poor record of reporting the issues in the CBD.  Interestingly it disappeared from the web site quickly and there was no follow-up on it as far as I can see.

I am afraid that I am starting to see conspiracy theory’s everywhere.   On that subject, here is a good link to an article on Sarah Mills website: http://thechristchurchfiasco.wordpress.com/2013/04/08/what-have-we-learned-from-disaster-thus-far-guest-post-by-sleazkey/

Amongst other things, It discusses the red zoning of residential land.

“CERA, on behalf of Government, created Red Zones on which ‘it will never be built again’.  Residents told that they will have to leave.  No consideration is taken of the insurance implications. Government offers them payments for their land which is obviously well short of true valuation.  This spells ruin for many who are arguably  bullied by the Earthquake Minister to accept low offers for their assets”

I HAD to sign the sales and purchase agreement for mum’s red zone house a few days ago.  I signed under duress, having had numerous phone calls and letters from CERA, threats of no water, power and services.  This was not willing seller willing buyer.  This was theft by government. As you can see, relatively undamaged, perfectly livable. 4 bedrooms.  You would think given the housing shortage in CHCH that someone in power would use their brains and delay demolition of these livable red zone houses.  We had to accept a low offer for this asset on a 1400sqm central city site.

IMGP3994

Below is the full CORE submission.

Two Years On  From 22nd February 2011

 C.O.R.E  Update March 2013.

Comments suggestions and recommendations from inner city property owners two years on from our initial submission and the February 22nd 2011 earthquakes.

This submission is a compilation of comments and information received from a data base of nearly 200 inner city property owners. In many cases extracts have been taken unedited from e-mail comments received. These have been referenced by quotation marks/inverted commas.

In some cases we have moderated the comments and where several owners have said the same thing have referenced it singularly. In other cases we have simply pasted and copied what they have said verbatim.

These comments are intended to assist the C.C.C, CERA, and CCDU in its ongoing development of the inner city and implementation of the new city blueprint. There is generally widespread support for the outcomes of the plan and what it is trying to achieve for the city.

CORE members represent a significant body of experience, expertise and capital wealth who can contribute positively to the re construction of Christchurch.

CORE has always believed primary investment funds for the rebuild will come from the private sector, CCC and government. The former is largely represented by local owners who are well placed to influence development for the following reasons;

1. They are personally inclined to do so because this it is their city.

2. They own the land and in many cases is debt free.

3. They are beneficially entitled to the proceeds of insurance funds.

1.Cordon Restrictions- Public Access – services

Owners are saying the city has been locked up too long preventing them making meaningful investment decisions. Where possible, “the barriers need to be removed to get commerce moving again.”

“Telling us when services will resume would be useful for owners in their planning.  Including – status of the water supply, waste water system, foot paths, street lighting, power supplies/ substation, access for emergency services, after hour’s public access etc.”  Improved communication on these matters would be helpful.

“The ongoing lock down is creating security issues for buildings. People, traffic etc improve security in an area.”

Demolitions need to continue urgently and be completed as a priority and in some cases should continue in a controlled manner that does not require the entire city locked down.

Recent announcements of Cordon reduction/removal are to be applauded as very positive steps and are welcomed by owners.

 2.A great plan but  when will it start and when will the key  aspects be ready?

Without time lines and time frames surrounding completion of the anchor projects and opening the city up, it is challenging to make investment decisions and engage other stakeholders in the development process.

“The lack of time frames is exacerbating capital flight.”

3.Delays are undermining the plan and  making it more challenging to implement.

“The delays in opening up the city are creating an environment of disengagement, as reflected in the CBRE figures and is reducing office and building owners commitment to the central city.”

The uncertainty is driving investment to peripheral areas such as Victoria st, Lincoln Road, Moorhouse Avenue, Riccarton, Showplace and further afield. These areas are enjoying less control and better access in contrast to the inner city, OBP hanging over areas of the city, the possibility of compulsory acquisition and absence of services are all handbrakes on development.

4.The city is decentralizing

Business will not wait and dislike uncertainty, it is therefore moving to parts of the city it can operate in. We are now witnessing significant construction activity in these areas with dozens of new buildings under construction compared to ‘rebuild zone’.

“New niche/boutique areas will develop organically around the city as time passes, eg second-hand clothing, craft shops will cluster. These types of shops add individuality to an area. (Is there a place for these in the new plan?)”

“These peripheral areas are gaining momentum and will forever become significant business zones to challenge the primacy of the CBD going forward.”

One of the stated aims of the blueprint was to escalate land values and rents in the CBD and focus development within a compact CBD. This aim has been partially achieved in that rentals throughout all of Christchurch have increased significantly so that there is a diminished differential between the city and outlying areas.

The objective of focusing development within a compact CBD is being challenged by peripheral development which has a head start. Some have said this objective is no longer possible because we now have a dispersed CBD extending from Moorhouse Avenue/Addington/Riccarton through to Victoria st which are now all popular office locations.

It should be noted that every building under construction on the periphery is underpinned by a long-term lease meaning those tenants will not be available to return to the CBD in the long-term.

One owner commented that “a major consultancy house has elected last Friday to take 6000 sq m in Addington as opposed to the CBD.” As development and momentum gains in these areas the desire to return to the city will diminish.

Attached is the C.B.Richard Ellis survey on tenant intentions over the last two years which show a diminishing desire by tenants to return to the CBD. In speaking to CBRE they advise that the uncertainty of time lines and lack of infrastructure are driving reasons. Those tenancies who remain committed to re-entering the CBD often respond with the phrase ‘we will go back but we don’t want to be first and we want there to be something there before we go.’ Or ‘we won’t go back into a demolition environment  …’

Christchurch is functioning at its pre quake levels without a CBD. Businesses have shown resilience, the central city is no longer as critical to the functioning of the local economy.

Historically a city has three years from the time of a disaster to re start. We are into our third year. CORE believes it may be time for some aspects of the plan and the way it’s being implemented to be reviewed and fine tuned to achieve the stated outcomes in the light of an ever evolving environment.

“The announcement of the blueprint has not attracted new office tenants to the central city.” see comments under item 2.1 of the CBRE /Lincoln College report and relocation aspirations continue to decline, now down to 28% of respondents.

5.Increases in Costs

“The increases in land prices, operating costs and construction costs are making development challenging and pushing up rentals for businesses, there’s no cheap space and this town is now an expensive place to do business in.”

 6.Multiple Outline Blueprint plans .

“Multiple OBP are creating uncertainty in these areas as there does not appear to be any mechanism in the CER legislation to engage smaller isolated developments within that 7500 sq m OBP to enable consolidated developments to proceed.  For the overall blueprint to be effective it requires strong intervention by Government which is perceived as a positive for the larger plans but creates reluctance to invest because of fear of having property taken for the benefit of those OBPs.”

7. Consultation and communication

“It is acknowledged that CERA/CCDU have decided on a ‘top down’ command and control’ approach to the decision-making processes around the central city but there are strong feelings that this approach should be modified to create a platform of greater engagement and consultation with affected groups and landowners impacted by the plan so the city can moved forward more under the San Francisco model where council and business representatives made decisions jointly.  “

CORE believes owners and investors can positively input to the plan as it processes and would welcome the opportunity for broad access to decision makers.

“The top down approach has resulted in a lack of consultation with many small building owners who are well aware they do not fit with the CERA/CCDU grand scheme. This is unfortunate as again it limits individuality and retards renewal by causing further disengagement and capital flight.”

At the recent CDC/NZTE Innovation precinct Forum attended by IT professionals and stakeholders the common points raised in respect of the innovation precinct were. “Speed, it needs to happen now. Ensure development is market lead- it needs to be organic- IT tenants don’t care what the buildings look like and can operate from anywhere- adopt the EPIC model.”

One overriding comment was that the ownership model doesn’t need to be changed and that owners, developers and tenants are capable of getting development in this precinct underway without excessive control which could further delay matters. I suggest a copy of the notes be secured from NZTE/CDC.

8. Compulsory Acquisitions.

This is the most contentious area and received the strongest feedback. We intend to be candid in delivering the views of owners affected by this process and some of the views have come from the ranks of the valuation professionals   acting for owners.

“There doesn’t appear to be a good faith provision in the legislation which requires that the crown acts in good faith with owners by being transparent in showing owners their full valuation.” Some valuers have commented that there appears to be” ‘pre scoping’ of land areas so that values are pre set.  ..There seems to be significant variations in valuations between the Crowns valuers, Telfer Young /Colliers and those of private owners notwithstanding access to the same information.”

“There does not appear to be an agreed methodology for determining value and reaching agreement and owners feel disempowered in dealing with the crown over this process. “One owner described the situation like ‘being in handcuffs waiting to be sentenced’.  Owners have significant grievances and do not feel the process is fair reasonable or equitable The widespread perception is that Colliers and Telfer young are acting as agents to  secure land at the lowest price under the guise of a ‘negotiated process’.

In one instance an owner got three valuations on his land from the largest valuation practices in the world showing land values significantly higher than the crowns, these were ignored.

Valuation evidence appears to be used selectively and the Crowns valuers have a dim view of land east of Manchester st notwithstanding we are in a rising market.

Owners have to continue to pay rates and mortgages for properties they have no access to and cannot use and are uncertain as to what they are likely to receive and when they will be paid. “There is no sharing of sales information to create a transparent process.”

“Representations by the valuation institute seem largely to have been ignored.” – (comment from a prominent valuer)

CORE feels a transparent methodology needs to be openly agreed so parties can agree on value in an equitable and fair manner. The current process and players are perceived as being disingenuous which is cultivating a level of distrust and suspicion.

Owners feel aggrieved by the process and do not feel there is any degree of negotiation given that there can only ever be one outcome with the threat of compulsory acquisition. This is not a willing seller willing buyer scenario; owners feel “we are being coerced into selling with the threat of our property being taken and then having to go through the courts to get redress”. The crowns agents are very aware of this and are adopting fixed positions. The words being used to describe the agents include, “arrogant, disingenuous,” in one case an owner was lied to, absence of good faith in the  discussions, not willing to disclose or share information in an open manner, condescending. This process is not serving the agents, CERA/CCDU/the crown or the Government well. Names of individuals involved in the process have been mentioned.

One owner described the situation as the government” using a sledge-hammer to crack a nut.”

At a recent Wynn Williams seminar there was talk of class actions and judicial reviews. The matter has the potential to fester on unless dealt with equitably.

CORE believes some the designated of land in the eastern, northern and southern frames should be re visited to allow owners the opportunity to retain and develop their sites to reflect the aspirations of the blueprint and avoid compulsory acquisition. In this way the crown is relieved of the capital costs and further negative impacts on its books and current account. Areas could be zoned or designated with specific outcomes for owners to complete within agreed time frames. Owners who wanted to sell land to the crown in these areas could do so. Other owners may agree to ‘park’ sites for an agreed period in exchange for rates remissions and or compensation during that period.

The purpose of acquiring land under the blueprint was to remove it from circulation and thus focus development in the compact CBD. This no longer seems relevant given that development has moved out of the city to peripheral areas. The acquisition of sites will not stem the ongoing dilution of the central city.

Designation does not need to be mean acquisition and where owners can demonstrate compatibility with the blueprint they should be allowed to develop their sites.

The process of acquisition, amalgamation, re packaging and offering back to the market will in many cases favour larger institutional developers at the expanse of smaller ones. The city runs the risk of losing some of its individual character and collective fabric in favour of a more corporate look.

“The crown is denying that some buildings are repairable. One building owner has had to fight to get the crown to accept that his building was over 34% of NBS, and be fairly reimbursed. (Under bus depot site)”

9.Recovery Plan – hospitality- tourism.

“The announcement of the Avon river frontage park is to be applauded as an essential first step to creating a positive visitor environment in the central city.”

There is concern that “there does not seem to be a credible plan surrounding hotel accommodation-convention centre- general tourism.” The convention centre for 4000 delegates will require considerable investment in new hotel accommodation to service the delegates and their partners (potentially 8000). We have lost over 1000 rooms and will require these back plus more. “Hotels cannot survive solely on conventions several times a year but require the totality of commerce and the entire fabric of a city to be functioning. In order for hoteliers to survive and generate reasonable occupancy levels   during the interim periods, developments will need to be staged to address these demand curves.”

10.Eastern Frame.

CORE owners believe the concept of a temporary green frame on the eastern border of the city is a positive idea which could co-exist with many of the remaining buildings within this designated zone.

Many of the existing buildings are repairable and will make a sound and lasting contribution to the re build of the city by providing accommodation, hospitality and recreational activities all of which will be needed in the transitional city. There is already very large open areas suitable for greening and landscaping and  feedback from owners,  and industry professionals suggest that a green band or  ‘river of grass and trees’ could be integrated into this area at lower tax payer cost and yet still serve the outcomes of the blueprint. In this way the opportunity would exist to retain many of the remaining buildings which could make a contribution to the city and be compatible with the other green spaces.

The opportunity to positively re-use existing properties but surround them with green spaces would create a very positive, exciting and complimentary environment for the city by providing large open landscapes interspersed with functioning and vital properties. The savings to the crown with this approach will be considerable. Such an approach would create  areas of reduced construction activity and spaces/places where  the public could recreate away from  full on construction within the compact CBD and yet still close to the city centre thus providing support for the CBD.

Owners feel there is a case to be made to retain many of the remaining buildings in this area which should be repaired and bought into service to assist with the revitalization of the city.  Many of the remaining buildings represent an important contribution to the property stock and will be needed to provide office and residential accommodation until new buildings are completed within the city. These properties will bring life and vitality to the central city which effectively will need to re start after a two-year period. They will allow a fast and inexpensive ‘kick start’ for the city by re engaging owners and their capital.

We would encourage the CCDU to consider this option.

Other issues.

A.   Transport

“Open the city up to traffic and get the trams running as a way of moving people around and creating a positive environment for the many existing buildings/businesses to start re operating again.”

Trams operated through the Cathedral Junction development over a two-year period running through that project every 15 minutes whilst construction occurred underneath the tram lines, over the top and on either side. If that can happen then they should be able to run and act as a secure means of visitors viewing the city and moving  and connecting the public around parts of the city that  are trying to function, eg re start, New Regent st etc.

B. Insurance settlements

It is noteworthy that progress is being made to settle insurance claims across the city but many remain outstanding and many owners will not receive their full entitlement unless/until they rebuild. Delays effectively erode the purchasing power of fixed insurance sums which insurance companies receive the benefit of until paid out. These funds would be better in NZ bank accounts.

Comments have been made that New Zealand should introduce legislation requiring insurers to settle within  set time lines  as  is the case in Australia and the US and other countries. This would avoid long drawn out periods of settlements which reduce to availability of capital for re building.  It is noteworthy that Jay M Feiman recently visited Christchurch espousing the same view.

 C. Ngai Tahu

1)     Some owners feel there is a conflict of interest having Ngai Tahu on various boards when they are effectively a development corporation and in competition with those they preside over. The city has elevated Ngai Tahu to a position of power and prominence. Owners feel it should be a level playing field.

“Why do we have to endure the Resource consent process where Ngai Tahu have a position on the committee considering the consent? Their presence makes no sense as they are a potential competitor themselves as a property developer. We have recently been through this process spending 2 hours for the committee’s approval. For that privilege we received an approx $13000 invoice. What a waste of funds. Why do we pay for Ngai Tahu to have a seat?? They asked not one question and one finds difficulty comprehending why they have this preferred position. (as an aside has anyone looked at their financial accounts. They have 60% revenue from property development, earn 70 million net off a 95 million gross turnover and pay 42000 or ½ % of tax. Don’t you think they have enough and where is the level playing field.)”

“Why is Ngai Tahu introduced as a potential partner to overseas companies for local developments when other local property owners could have equal if not greater value? Our “silent “partner was introduced to Ngai Tahu by Cera when they visited CHCH and confidentially found it difficult to comprehend why such a preferred status was accorded this group especially when we were keen to work with them” sic

Extract from an owner: This owner has asked to be cited on this issue

 D. Depreciation and Claw back.

“Claw back relief offered for those who lost buildings and wish to rebuild only provides this relief if the same original ownership company or structure is used.  If insurance monies are pooled to create a rebuild from a number of related companies depreciation claw back still applies with a wind fall profit to the IRD from demolished buildings and a significant reduction in available insurance proceeds to do a rebuild.  The tax rules affecting Depreciation Claw back need broadening to allow this depreciation to be transferred to other Canterbury rebuilds with different ownership structures.”

 E. One way traffic system.

Many owners feel re introducing these into the city will be a backward step as little evidence exists to show there are commercial benefits for businesses. They have been referred to as vehicle sewers and from past experience in Christchurch with Litchfield st, Barbados etc they have done little to enhance the environment.  A one way street system through the high street precinct will divide this and make it very difficult to function as a precinct in any retail or community sense. There is a feeling that stadium traffic could be addressed by temporary one way system for the few times the stadium  will be used and that  this system of delivering large traffic flows through a new compact inner city is counterproductive to a people , park and cycle friendly environment.

“Many hundreds of cities worldwide have and are successfully converting their one way street systems to two-way (Hanka and Gilderbloom) there is a very compelling submission written by Jill Bradley which they should read.”

F. High st  Buildings

CERA need to quickly advise owners of buildings in this area as to their intentions to avoid ongoing delays, frustration and loss of opportunity. Despite the uncertainty one owner has decided to move ahead with repairs to his property not knowing if it will be taken or if he will be able to retain it. In this case it demonstrates the commitment owners have to their properties and their willingness to be part of the re built.

Owners are passionate about this part of town and  …”want a stronger inclusion of the importance that heritage buildings will play.” This group of owners is very committed to participate in the rebuild and welcomes ways it can be engaged in this area.

G. Capital Flight

Some owners have already made the decision to leave Christchurch with their capital. One owner out of frustration has advised that after many years in the city he is moving to Queenstown. The impact of uncertainty and delays is causing investors to vote with their wallets and feet.  Based on what we are aware of, at least $125m has left the city for other centres and overseas. The actual amount is likely to be greater. Large amounts have been shifted to Auckland, Tauranga, Australia and other regions as well as outside of the CBD.

We have attached a recent Australian Financial Review article showing one prominent local property investor has moved $A50m (NZ$62m) into a hotel acquisition in Melbourne.

The media continues to publicise capital flight with other prominent investors/developers electing to shift funds to other offshore destinations, eg USA.

We believe opening the city up and the steps being taken to commence some of the key projects will slow this process down and are of primary importance.

We thank you for taking the time to read the views of property owners.

Ernest Duval.

Dean Marshall

(For  and on behalf of the CORE membership and committee)

Christchurch.
Cell : (027) 22 64 123
E mail : etp@etp.co.nz

The information contained in this mail message is confidential and may be subject to legal privilege. If the reader is not the intended recipient, you are hereby notified that any use, dissemination, distribution or copying of this message is prohibited. The views expressed in this document do not necessarily reflect those of the company.

March 2013

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4 thoughts on “Property Owners Criticise CERA/CCDU

  1. Hi there,
    As always your blog is the most informative news source in chch on this stuff. Keep it up! I am sorry for your situation.

    • Hi Tim, thanks for the nice comment. It is very worrying to me that there appears to be a lack of reporting of the true situation in the CBD. My story is not dis-similar to that of a number of small business owners. Most have not been as vocal as us. One of the reasons for this is that many building owners are not entirely comfortable with the idea of blogging and using social media. I suspect that the age group may have some bearing on this. ( I must confess that blogging was a new concept for me as well) And maybe they had more faith in the “powers that be” than I had. I am a tad cynical these days! thanks for listening to my on going rant!

  2. You really make it seem so easy with your presentation but I find this topic to
    be actually something which I think I would never understand.
    It seems too complicated and very broad for me. I’m looking forward for your next post, I will try to get
    the hang of it!

    • Hi, you are right, the issue is so complex that there are days when I do not understand it either. I think part of the problem is that there are multiple issues that are all interconnected. Its a bit like a ball of spaghetti, pull one strand and there is still a mess! And as one issues gets resolved there are many more waiting to be sorted.

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