Chateau Tongariro restoration: $5m provision by former lessee provides glimmer of hope

The Grand Chateau Tongariro has been shuttered and empty since March 2023. Photo / Wikimedia Commons

The Chateau Tongariro may be in line for a payment of roughly $5 million to help defray the hefty cost of repairing and restoring the derelict building.

The funds would come from the building’s former lessee, Malaysian-based Kah, which shuttered the historic hotel at the entrance to the Tongariro National Park in March 2023.

Since then, the company has been embroiled in lease termination negotiations with the Department of Conservation (DoC), now responsible for the site and buildings. Those negotiations are ongoing.

However, in a recently released financial statement the company made a $4.9m provision for the cost of restoring the Chateau.

According to property reports commissioned by DoC, the Chateau returned to the Crown plagued by water ingress and leaks and in a “severe state of disrepair”.

The statement also noted that the company no longer expects any payment for the Chateau. While the Crown owns the land on which the Chateau sits, Kah bought the Chateau itself and many of its ancillary buildings.

The seeming progress in resolving the obligations of the Chateau’s last lessee may have given DoC confidence to press ahead with a small step toward seeking a new tenant.

Conservation Minister Tama Potaka said he is still receiving advice on the long-term options for the Chateau. Photo / Mark Mitchell

In March, the department’s consultants interviewed seven parties with preliminary interest in operating the Chateau.

The interviews completed an expression of interest (EOI) process that the Department began last year but abruptly suspended in September, at ministers’ request.

The possibility of a payment by Kah, and the indication that the Crown or a new lessee will owe no consideration for the buildings, provides a glimmer of hope for the Chateau’s future, which has otherwise been cast in doubt by the estimated size of both the repair bill and the earthquake strengthening that it requires.

The Treasury indicates that the cost could run higher than $100m.

The Cabinet is now set to consider “next steps” for the Chateau.

Considerations are expected to include, leasing the building to a new operator (and Government footing a portion of the bill), and decommissioning the building – boarding it up, shutting off core building systems and dropping insurance to save ongoing maintenance costs currently running at roughly $2m per year.

The Government’s upcoming Budget is expected to keep new spending on a tight rein.

Mike Tully, deputy director-general organisation at DoC, said “significant investment” is needed to strengthen and restore the Chateau, “however no decision has been made on how that work might be funded”.

The main building is considered “earthquake-prone” and it fails to meet safety standards; it requires strengthening, though the rules technically allow it to operate as it is for decades.

A spokesman for the Minister of Conservation, Tama Potaka, said the minister is still receiving advice to inform a decision on long-term options for the site.

Ministers steering the Chateau decision-making are: Potaka, Nicola Willis, Finance Minister, Shane Jones, Regional Development Minister, Paul Goldsmith, Treaty Negotiations Minister and Matt Doocey, Tourism Minister.

The imposing neo-Georgian building is a category one historic place, listed by Heritage NZ, and its fate is being watched closely by the New Zealand public.

The Chateau is considered a lynch-pin for local tourism and its continued closure and deterioration is likely a drag on the local skifields, Whakapapa and Tūroa, which recently passed to new operators after a protracted period of administration and a direct investment of taxpayer funds that topped $50m.

However, funding per se isn’t the only impediment to resolving the site’s future.

The Government has tens of millions of dollars into the Whakapapa ski field and gondola adjacent to the derelict Chateau. Photo / Mt Ruapehu

Taranaki-area iwi are expected to begin “cultural redress” negotiations soon, related to the Tongariro National Park, and some have indicated to DoC that, before that process unfolds, they would not support the issuance of a long-term lease for the Chateau.

A long-term lease, however, is almost undoubtedly a prerequisite for any prospective investor to sink meaningful sums of money into restoring and strengthening the building.

Whakapapa Holdings

In January, Tom Elworthy, director and indirect shareholder of Whakapapa Holdings, told the Herald that his company is interested in reviving the Chateau. He said the property requires an upfront investment of “many millions of dollars” but that the cost was likely to be substantially less than $100m.

Elworthy said his company would be willing to make the investment “on the right terms” – he suggested a peppercorn rent across a 30-year lease.

Whakapapa Holdings recently took over the operation of Whakapapa ski field with the help of a $5m government loan.

This week, Elworthy confirmed that Whakapapa was among the parties interviewed in the March EOI process; he said the company signed a non-disclosure agreement and that he could not discuss details of the process.

The EOI appears to have been very informal. Tully confirmed that no written information was provided to the participants and DoC did not receive any written indications or information from any participants.

Kah’s latest Annual Report

Kah’s annual report for 2023, recently released, noted that a $4.9m provision for Chateau restoration costs was: “based on the estimates of restoration costs and current claims from the lessor to satisfy lease conditions”.

“These amounts are yet to be settled with or paid to the lessor, are still subject to ongoing negotiation and there remains significant estimation uncertainty as to the final settlement or whether further obligations exist,” the statement said.

 Kah bought the Chateau and many of its ancillary buildings from the government-owned Tourist Hotel Corporation in 1991.

The 1991 contract stipulates that any subsequent lessee of the site will owe Kah for the buildings’ value (to be determined by appointed valuers), and, in addition, that the buildings must be returned in good repair and condition, otherwise the value owed to Kah should be diminished commensurate with any deficiency.

The company did not respond to a request for comment.