The following is the text of the Submission made by Peter Dowell.

NOTIFIED RESOURCE CONSENT - APPLICATION UNDER SECTION 95(A) OF THE RESOURCE MANAGEMENT ACT 1991- HARCOURTS BUILDING, 30 GREY STREET / 203 - 213 LAMBTON QUAY

 

Evidence of Peter Dowell in support of submission by Historic Places Wellington Incorporated in opposition to the application.

Peter Dowell (DipBusStd –VPM).

• I have worked 22 years for ANZ Investment Bank, globally.

• I part own and manage a portfolio of heritage buildings in the Wellington CBD, and have done so since 1994.

•  I am a past Chair of the Wellington Branch of the Historic Place Trust

• I am currently on the Executive of Historic Places Aotearoa, and am Treasurer of Historic Places Wellington which is making the submission to you today.

• I have also spoken at conferences on the economics of heritage buildings in both Wellington and Auckland.

• In July 2010 I wrote to various Ministers urging them to investigate the possibility of making earthquake strengthening an expense item rather than a capitalised item. The aim of this was to facilitate the rate of strengthening to the building stock of NZ, whilst creating jobs in a recessionary environment.

Heritage Buildings

• As a fellow heritage building owner I can fully understand Mr Dunajtschik’s difficult position as the Christchurch earthquake has had a huge impact on the values of URM buildings not only in the Wellington region but right across the country.

• In saying that, Wellington is well known for its unique architectural heritage.  The Spargo report[1] commissioned by the Wellington City Council highlights the benefits that heritage brings to Wellington city, as summarised below

Heritage … makes a particular contribution to several of the Wellington City Community Outcomes under the adopted LTCCP. Those relevant are:

• Wellington will become more liveable
• Wellington will develop a stronger sense of place
• Wellington will become more sustainable
• Wellington will become more prosperous
• Wellington will become more competitive

 

The Council has recognised the importance of ‘sense of place’ as it impacts decisions to live, work and invest in Wellington City. Built heritage is an important contributor to this.

The top five cultural products in the Wellington City area for international visitors are:

1. Museums (49%)
2. Shopping for souvenirs (48%)
3. Historic buildings (39%)
4. Exhibitions on New Zealand history (34%)
5. Sites important to New Zealand history (33%).

 

• A copy of this report can be provided on request.

 

Demand for Office Space

• As we know, with Government looking to downsize its office space requirement by some 17%, this has put huge pressure on landlords of large floor plates to provide  incentives (12 months plus) to attract new tenants to their buildings.  There are over 50 – 1000m2 floor plates vacant in the market at present and these are generally in B and C grade buildings with low stud height and very little character. (This opinion differs somewhat from Mr Corleison’s view).

• Conversely there is still good demand for good B grade Character office space in the CBD, with very few floor plates in excess of 1000m2. The majority of demand in this market is sub 500m2.

• Whilst Government tenants tend to stay away from character space, top commercial and corporate tenants are attracted to this.  An example with which I am familiar is the 1927 former Poultry Building at 56 Victoria St (as part of the Chews Lane Development), which is occupied by Meridian/Powershop and public accountants WHK.

• Demand for even smaller spaces, with tenants having their own exclusive floor, is well documented in the Colliers Valuation for 58 Victoria St, being the former Ballinger building. This is a fine example of what can be done with the façade and a new build behind whilst attracting rates in excess of $400m2 for the smaller floor areas.

• Neither of these buildings is at 100%NBS but both are greater than 67%NBS which seems to be the accepted norm for a fully strengthened heritage building of today.

Accepted NBS %

• There seems to be a lot of talk around the required NBS% required to attract suitable tenants (especially Government) and that 100%NBS is the only viable option available to attract such tenants.

• It is well documented by various ministries and corporate tenants that the minimum  that they require is in fact 67%NBS and not 100%NBS.

• I manage buildings that sit around 50%NBS, are of C Grade in standard, but are still in demand by small businesses at approximately $250m2. This is a mechanism of small businesses taking on some risk that allows them to utilise cheaper office space that meets their financial and business requirements.

• I also note that the recent Royal Commission report states that the minimum NBS should remain at 34%NBS

• It must also be acknowledged that tenants are driving landlords to strengthen their buildings to not only retain them long term, but to also attract new tenants on long term leases to meet financial covenants with owners’ financiers.

Comparable Buildings Being Strengthening

• It should be noted that there are currently two similar sized buildings of heritage significance being strengthened and refurbished within the Wellington CBD.

1.  The Huddart Parker Building in Post Office Square
2. The Hope Gibbons Building in Courtenay Place

• In making any decision in regard to the demolition of the Harcourt’s building, both the strengthening schemes and the costings of the above two projects should be reviewed by WCC and the Commissioners.

Economics of the Harcourts Building

• It is easy to see that the Harcourt’s building, within its current envelope, doesn’t stack up from a financial perspective.

• One of the ways to reduce the costs and to make an URM/heritage building more viable is to add additional floors to produce additional value and income.

• Under the district plan the height limit available to the building owner could be 80m or close to an additional 20 floors.

• Given that the owner of the HSBC building and Harcourt’s are one and the same, significant value remains with the current owner.

• This is not the case for any new owner as the services area of the HSBC intrudes into the airspace of the Harcourt’s building making such a development very difficult under the current title.

• Hence at the time the HSBC building was redeveloped significant value was transferred from Harcourt’s to HSBC.  These approvals are recorded in WCC, SRs 90516 and  96360, dated 2002 and 2003.

Incentives by WCC

• The Wellington City Council has in the past provided financial incentives to retain significant heritage buildings that form an important part of the Wellington streetscape, eg. The Old Bank Arcade received rates relief in the mid 1990s

• As with HSBC the current owner could be allowed to build an extra 2 floors and/or receive some rates relief for either retaining the current building structure or at least the façade and  foyer areas, with have significant heritage values.

• This in turn could be a win-win for all parties

Conclusion

As a heritage property investor of some 20 years standing I trust that the above is helpful in trying to deliver a balanced view of the difficult economic climate we are in and the issues we all face as owners.

Unfortunately I am unable to be present on the 18^th/19^th December to take questions from the panel, as I will be in Australia with family until the 3^rd January 2013.

I would be more than happy (if required) to appear before the panel for questions on the above at a later date.

Thank you for your time

 

Peter Dowell