The University of Auckland has had to offload a boutique Remuera mansion at a massive discount after buying a leaky home for its former vice-chancellor.
The sale has now been held up as a cautionary tale by a lobby representing leaky home owners and comes after a top watchdog this week slammed the university for unjustifiably buying a separate Parnell mansion for its new boss.
The Loreto Heights home in Remuera fetched $2.97 million at auction in July.
However, that was $1m below its Auckland Council valuation and barely above the property's estimated $2.87m land value.
That meant the university only profited on the rise in land value but made virtually no capital gains on the home itself despite owning it for 16 years through multiple Auckland housing booms.
John Gray - who co-founded the Home Owners and Buyers Association - questioned the university's level of due diligence before buying.
Concerns about the "weather tightness" of plaster-clad homes was already well publicised by the time it bought the Remuera home in 2004.
"Hobanz would like to remind people even today to do their due diligence and get a registered building surveyor to do a pre-purchase inspection because this is an example of how buyers can get it so badly wrong," he said.
Auditor-General John Ryan this week released a scathing report stating there was no "justifiable business purpose" for buying a Parnell mansion for Vice-Chancellor Dawn Freshwater in November last year.
The university paid $5.06m - $1.5m above council valuation - for the four-bedroom luxury home in plush Parnell, near Sir John Key's St Stephens Ave home.
It then spent between $160,000-$170,000 repairing the home's roof and swimming pool.
Freshwater joined the university this year on a $755,000 salary. The vice-chancellor's role was listed as the nation's fourth highest-paid public sector job in 2019.
Despite that, she paid $1100 a week to rent the home, even though a valuer noted it could command $2000 on the open market.
The university earlier said the property was intended as a rental for Freshwater and venue to host university-related events.
But the Auditor-General did not agree Freshwater needed help finding a place to live.
"It is hard to accept that purchasing a house to provide accommodation for the incoming vice-chancellor, and to host an anticipated 14 events in two years, justifies the $5 million expenditure.
"Nor does that level of hosting, in my view, justify an almost 50 per cent reduction in the property's rent."
The Auditor-General also called on the university to consider whether Freshwater's arrangement should be treated as income under the Income Tax Act.
Education Minister Chris Hipkins subsequently labelled the university's actions "very disappointing", and staff and student unions lashed the deal and called for the home to be sold.
Adding to concerns about the Parnell purchase were mistakes surrounding the previous purchase of the Loreto Heights home in Remuera.
Former vice-chancellor Stuart McCutcheon had also rented that home at discounted rates of 50-52 per cent market rent from 2005 to 2020.
But alarmingly, the university confirmed to the Auditor-General the home had "weathertightness issues and was no longer fit for purpose" to host university-related dinners.
That had led to university-related events being hosted at "commercial venues" for the past two years.
It also likely led the university to miss out on up to $1m or more of extra capital gains upon the home's sale.
Bayleys selling agent Gary Wallace said the home was well presented and attracted good interest, but buyers were also alerted to its plaster-clad construction.
"You could sum the home up by the fact it was one of those homes built in the 90s that was of plaster construction," he said.
Marketing material also told potential buyers to "disregard the CV".
The home's new owners told the Herald they became interested in buying the house at auction because they were told it was selling at land value.
The university ultimately sold the home for $2.965m after paying $2.05m in 2004 - a 44 per cent rise in value.
By comparison, Remuera's overall median sales price had risen 181 per cent over the same period and Auckland's median sales price by 185 per cent, according to data by analysts OneRoof-Valocity.
The Auditor-General's Office said it was aware of the 2004 Remuera home purchase but was not investigating because it had to choose the issues it looked into carefully.
"In this case, the 2004 purchase is historical, and it would be challenging to inquire into actions from 16 years ago," it said.
The university didn't answer questions about what weathertightness issues the Remuera home had or whether it had spent money repairing it, saying it needed more time.
It earlier said it accepted the Auditor-General's findings about the Parnell purchase and had called in independent advisers to examine its sensitive expenditure policies.
Freshwater also told staff in an email in October she had now recommended to the university board that the Parnell home should be sold.