Auckland Council relied on a visual inspection to purchase the former ASB Tower, now facing repairs which have blown out from $4.2 million to $31 million.
The council has defended its due diligence process, but a building standards advocate said it should have carried out more extensive tests once an initial report on the tower revealed a list of problems.
A raft of documents about the new council headquarters have been released by the council that show events around the $104 million purchase in 2012.
The documents show the council was advised about cladding and other problems on July 3. It went unconditional on the purchase 15 days later on July 18.
During that time a project team of officers from council and Auckland Council Property Ltd (ACPL) considered the "facade condition review" by engineering firm Mott MacDonald.
The team was advised by real estate consultants Wareham Cameron + Co on the findings in the report and told problems to the facade and roof would cost an estimated $4.2 million to repair.
In the review, Mott MacDonald said it was limited to a visual assessment, had limited access to the tower facade, the technical drawings of what was built were not made available and information provided by the architect was verbal and informal.
Mott MacDonald said the background information was useful and generally aligned with its site observations and document reviews, but it "was not detailed information and was not relied upon" to form opinions in the report.
From its inspection, Mott MacDonald identified problems relating to the cladding, podium and roofing. Subsequent investigations after the purchase found the problems to be worse.
In April this year, the council approved a full reclad estimated to cost $31 million.
Council general manager of finance and property Kevin Ramsay said the project team found an appropriate level of due diligence had been undertaken, any issues identified were manageable and recommended to purchase the building.
Mr Ramsay said the inspection was visual. Engineers looked behind, where they could, at any degradation of the cladding, as opposed to taking pieces off and drilling.
He said although Mott MacDonald did not have the technical drawings, the firm did have access to the architectural drawings of what was intended and spoke with the architect and some parties involved in the construction.
"It [Mott MacDonald report] did raise issues, which is why we put aside $4.2 million. Did it raise issues to go beyond that? No, based on the notion of the vendor not wanting to go further as far as impacting on occupants," he said.
Councillor Chris Darby said documents he obtained showed ACPL was charged with doing due diligence and he struggled to see how it had exercised that responsibility.
He said ACPL, the specialist entity with highly skilled property people within management and sitting on the board, should have questioned the Mott MacDonald report at board level.
"If it was properly interrogated, we would not be facing the skyrocketing costs that we are having to foot the bill for now," he said. "When you scan that Mott MacDonald report you quickly get the sense that there are some significant failings in the fixings of the granite, pins missing and the list goes on and on and on."
ACPL chairman Sir John Wells said he had no comment, nor did ACPL chief executive David Rankin. Since 2012, ACPL has merged with Waterfront Auckland to form Development Auckland.
Mr Ramsay said the ACPL board was not directly involved nor privy to the reports but provided brief updates. The project team, overseen by then council chief executive Doug McKay and including Mr Rankin and other ACPL staff members, oversaw due diligence on the building, he said.
Home Owners and Buyers Association president John Gray said it was clear from the Mott MacDonald report the building needed significant maintenance and repair and detailed and invasive testing was needed.
It was ironic, he said, that a subsequent Mott MacDonald report revealed the extent of the problems foreshadowed in the original report.
"It is disappointing that they bought the building at all and that they did not deeply discount the price when they decided that they would," Mr Gray said.
Following the Mott MacDonald report, the original purchase price of $105.1 million was lowered to $104 million to compensate for maintenance requirements and a carparking issue.
Engineers Mott MacDonald report to council on ASB tower facade. The visual assessment identifies degradation and deterioration of some materials. Advises remedial action is needed. Problems include the need to replace most sealant on stone facade, roof canopy membrane in poor condition, corrosion to cladding fixing systems.
Post July 3:
Report considered by a joint council/Auckland Council Property Ltd (ACPL) officer project team.
Corporate real estate consultant Wareham Cameron + Co reports to project team on due diligence process. Says building is structurally sound but facade and roof have problems that could cost $4.2 million to repair.
ACPL makes business case on conclusions of due diligence findings. Points out facade and roof have unexpected areas of premature degradation with potential to cost $4.2 million. Original purchase price of $105.1 million adjusted to $104 million to compensate for maintenance requirements and a carparking issue.
ACPL chief executive David Rankin emails council chief executive Doug McKay recommending the purchase goes unconditional. McKay completes purchase.
Mayor and councillors verbally informed of purchase by McKay.