Apartment owners at the country’s biggest leaky building project are being hit with invoices this week of up to $195,000 each to finance the next stage in a $240 million repair disaster.
But beleaguered owners at St Lukes Garden Apartments in Auckland, who have faced years of stress and financial uncertainty, have been warned there are further invoices to come amid cost blowouts and delays.
It comes as newly appointed administrators scramble to get up to speed with the remediation project and secure external finance to fund tens of millions of dollars of further work.
The total projected repair bills on some apartments top $800,000 each, documents obtained by the Herald reveal.
And though costs continue to mount, owners saddled with defective properties are being cautioned against trying to hock off compromised units before remediation is complete.
“Although some owners have chosen to sell their units ahead of completion, the prices they have achieved are very low, which reflects the perceived risk associated with the project,” an update from the Home Owners and Buyers Association (Hobanz) states.
Rather than accepting peanuts for their investments, owners are advised to stay the course, even those who can’t afford to pay the new body corporate invoices by a September 17 deadline.
Hobanz says the need for external funding recognises that many owners are unable to fund their full share of the projected costs, “which would put the completion of the project in jeopardy”.
“One of the options that Hobanz and the body corporate has been investigating to manage this situation is to borrow funds to fill the gap.
“Although the cost of doing so will fall on those owners who are unable to pay their required contributions, this will allow them to retain ownership of their units until the repair project is completed.
“At this point, more financing options are likely to become available to owners and those who need to sell will be able to do so with the value of their units improved relative to the present time.”
However, an affected owner told the Herald claims they would be able to sell remediated units at decent prices were “nonsense”.
Even once repairs were finished, they believed the stigma attached to the complex would severely compromise sale prices and buyer interest.
Owners faced the choice of selling up now for a huge loss on their initial investment, or paying up to half a million dollars on repairs in the gamble of securing a better return post-remediation.
The unit owner had resorted to high-interest finance and credit card debt to fund the ongoing body corporate repair costs, and described the situation as a “nightmare”.
“We wish this would end because it’s too much.”
Another owner knew of people coming out of retirement to fund the repair levies. Others had moved into caravans on their children’s lawns.
The woman said she checked LIM reports, body corporate minutes and commissioned a building inspection as part of her pre-purchase due diligence but “still got caught out”.
She asked not to be named and doubted whether other owners would want to be identified.
“Everybody is worried about consequences. It’s just a fear of banks not wanting to loan money. No one wants to be singled out. There’s so much at stake here. It’s people’s lives.”
The Herald reported last month that a High Court judge had appointed independent administrators to oversee the repair project, which has previously been managed by the body corporate.
St Lukes Garden Apartments is a 17-building, 285-unit complex built between 2003 and 2011.
Weathertightness defects were first detected in 2014. It is now considered New Zealand’s largest leaky building repair project, with remediation work estimated to cost $240m.
A settlement worth tens of millions of dollars involving Auckland Council was signed in 2019. Repairs were then estimated to cost $85m and last four years.
In a letter to owners last week, obtained by the Herald, Deloitte administrator Robert Campbell said his team had visited the site and was now conducting an initial review to familiarise themselves with the remedial work programme and financial position of the body corporate.
“We are working closely with Hobanz around ongoing funding, including levies and discussions regarding external finance.
“We wish to reiterate that our priority is to complete our work efficiently, cost-effectively and minimise disruption to the ongoing progress of the remediation project.”
Invoices issued this week to unit owners in blocks 10 and 20 were for 40% of the “required contribution”, based on an earlier $195m development budget.
Documents viewed by the Herald show the instalment invoices ranged from $135,000 to $196,000, with the funds to be paid within six weeks.
A similar instalment would be invoiced for remaining works at a later date.
Total per unit estimated remediation costs ranged from $605,000 to $826,000, but this is likely to rise as costs increase.
However, those costs would be offset by settlement funds of between $241,000 and $346,000 per unit, the documents show.
“We have been made aware of the stress the remediation project continues to have on owners,” Campbell wrote.
“We wish to reassure owners that the administrators have been appointed to act in and protect your best interests in relation to ongoing project matters and project funding requirements.”
The Hobanz update says owners in most apartment blocks had now been invoiced the full amount based on the $195m budget.
Those in blocks 10 and 20 were receiving their second instalment invoice this week for stage three work scheduled to begin in October.
The remaining 40% contribution would be invoiced sometime in the future.
“The timing for these contributions and levying, and collection of the contributions required to cover the additional project cost (still estimated to be around $40m), is currently being determined and will be subject to a future project update.”
Hobanz acknowledged the impact on owners and their families, but said “the pathway to the end of the project is becoming clearer”.
“All that we can ask is that you continue to give us your support as we work to bring this long and stressful journey to an end.”
Lane Nichols is Auckland desk editor for the New Zealand Herald with more than 20 years’ experience in the industry.
Sign up to The Daily H, a free newsletter curated by our editors and delivered straight to your inbox every weekday.