Simon Wilson: How that council heritage building deal really went down

Civic Lane has big plans for the area which include building a new residential block (left) and turning the Civic Administration Building into apartments.

Comment: Auckland Council has sold its precious heritage-listed Civic Administration Building (CAB) at the bottom of Greys Ave for a mere $3 million. Is that incompetence, negligence or a smart move? Until now, it's been hard to know, because the conditions of the deal have been kept confidential.

No longer. Here's my exclusive account of what happened, and why I think it's a smart move.

It's a building that divides people: You love it or you don't care about it. I confess I love it. Erected in 1951, the CAB was Auckland's tallest building and, to my mind, it's a fine example of the beautiful non-brutal modernism practised by the great Tibor Donner. He was chief architect to the Auckland City Council – a job that, like much of the city's heritage, no longer exists.

Auckland City Council was based in the CAB for decades and in 2010 the new amalgamated Auckland Council (AC) moved in.

But AC was in the "don't care" camp. Independent hearings commissioners insisted the building receive a category A heritage listing in the council's Unitary Plan, so it couldn't be demolished, but the council wanted to move out anyway.

It had good reasons. The building was an asbestos and fire risk, and it leaked. Restoration would cost tens of millions of dollars and even then it would not be fit for purpose. Tall and narrow, its floors are too small for the demands of a big office.

In 2012 the council spent $102 million buying new headquarters in Albert St. Then it had to spend at least $30 million more on the cladding. Argument continues about the wisdom of that purchase, but it's a separate issue from the fate of the CAB.

What was that fate to be? Council handed the project to Panuku, its property development agency.

The CAB is in a very bad way. Although the easy-to-remove asbestos has been taken out, much more remains. It's in the floors, it's embedded throughout. The entire building except its steel framing and a few other elements will have to be removed: It's a massive job the council has no budget for.

So Panuku created a development package: The building would be offered for sale along with 5000sqm of neighbouring land, mainly used now for car parking. It called for expressions of interest.

There were conditions. The building had to be restored "subject to a detailed heritage restoration plan developed with the council's heritage team". The development would have to be compatible with the council's wider goals for the Aotea precinct, which include adding day/night population density and boosting arts and entertainment activities.

Design standards should be "exemplary": Informed by Te Aranga Māori design principles set out in council's design manual, meeting high standards of sustainability and following "design best practice".

Panuku received nearly a dozen expressions of interest and from them created a shortlist of three.

Then it was advised by commercial real estate consultants CBRE that "negative bids" would be likely. That is, CBRE expected developers would want to be paid to take the CAB off the council's hands. The figure of $15 million was mooted.

The issue went to a confidential session of the council's Finance and Performance Committee in March 2016. That committee includes all councillors and two members of the Independent Māori Statutory Board (IMSB), one of whom was John Tamihere, now a mayoral candidate.

Panuku advised that negative bids were possible and asked how to proceed. The committee agreed that negative bids were not acceptable. It authorised Panuku to continue the sale-and-development process on the basis of positive bids.

Panuku issued an RFP (request for proposal) to its three shortlisted bidders, based on the agreed design and financial requirements. Negotiations followed and, in December that year, Panuku signed a development agreement with one of them, a company called Civic Lane, formed by the development company Love & Co, headed by John Love.

Civic Lane proposed four buildings: The CAB, converted to apartments, plus a new hotel, another residential block and a whare tapere - a community and cultural building fronting onto Aotea Square. There's a sculpture walk, laneways and terraces and a range of hospitality and shopping outlets.

The bid met Panuku's requirements. It was positive: Civic Lane would buy the building. Its architect was Jasmax, one of Auckland's leading firms, with assistance from the leading heritage architecture firm Salmond Reed. The proposal was assessed by a "technical advisory group" which included other leading architects. The high design requirements were met.

The council had started 2016 with a building that could not be used, could not be torn down, would cost tens of millions to restore and might even cost $15 million to hand off to a third party. It ended the year with a deal to have the building restored, the precinct enriched, and the costs and development risks taken off it. Council would even make a bit of money.

Civic Lane was going to pay the council $3 million and spend more than $100 million to develop the precinct. It was widely acclaimed as an exciting inner-city project.

There were some tough new conditions. Council decreed the land would be transferred only when Civic Lane had its funding in place, which required apartment pre-sales and lender support. The company needed a signed contract with a construction company, plus final council approval of the design and a building consent.

The Cab is a building people either love or don't care about.

Civic Lane also had to agree the CAB would be restored before the other work. No chance to get the easier stuff done and then do a runner. And the magnificent plane trees on Mayoral Drive, which also have heritage protection, could not be disturbed.

It started well, with good pre-sales in early 2017. Later that year, though, there was a slump on the city's apartment market. Some 30 residential development projects around town were scrapped. Pre-sales for the CAB dropped off.

Civic Lane's lenders took a keen interest in this, as you might imagine. The Australian real estate financier and investment manager Qualitas was called in and has assumed a lead role in running the project.

Last week, the company advised Panuku that all the conditions had been met. Council met, again behind closed doors, and was satisfied Civic Lane has the money and the construction company, everything's approved and there's a project management structure that satisfies the lenders. Work on the CAB is scheduled to start in late July.

Is that a good outcome? It looks like it to me.

For comparison, look at the nearby St James building. The council didn't own that building and was not able to manage or set conditions on its restoration. Now, the project languishes, an important but near-derelict building site blighting the area from the library to the Civic.

Still, not everyone agrees. Councillor Mike Lee says the deal is "disgraceful". Mayoral candidate Tamihere has also called Panuku's actions "a disgrace". He's referred them to the Serious Fraud Office. Tamihere voted for the deal in that March 2016 meeting.

Tamihere says now: "If what we hear about a $3 million quick sale price is true, I on behalf of Whanau Waipareira will offer $4m right now and develop this site ourselves – thereby giving ratepayers 33 per cent more on the price."

No word yet on what Whanau Waipareira thinks of that. Nor on whether he'd try to keep the whole $100 million development alive, or how.