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The church’s striking facade of white Corinthian columns has been an Auckland landmark since 1885. The ceiling of its 700-seat horseshoe-shaped auditorium was painted by church secretary Charles Blomfield, more famous for capturing the Pink and White Terraces. It’s still a busy inner city church, with 500 people attending four services each Sunday and a mission to international students and homeless people on its doorstep.
Yet it is also now officially an earthquake-prone building, which will cost “millions and millions of dollars” to fix, according to geotechnical engineers in Jones’ congregation. The Baptist Tabernacle has failed to meet the requirement of the new Earthquake-prone Buildings Amendment Bill that every commercial, public or multi-storey residential building must have at least 34 per cent of the earthquake design strength expected of a new building.
It scored a miserable 15 per cent of the New Building Standard (NBS).
Jones says he took the moral obligation seriously, asked around and was told the actual risk of anyone dying in his church during an earthquake was very low. He hasn’t asked for a detailed cost estimate yet, as this would be expensive in itself and the church has no hope of finding the money. “Our current annual income on the church is about $650,000, so you’re talking about a large multiplication of that.”
Jones’ next-door neighbour Glenn Teal, who runs the Baptist charity Tabernacle Trust, says his colleague is caught in a catch-22 situation.
“Even if they had the money to earthquake-strengthen it, some of what they would want to do would run foul of the heritage protections that are on it. So they don’t know where to go.”
Teal’s trust owns heritage properties on Karangahape Rd, including one ornately decorated building around the corner from the church, which is about 100 years old and has a 17 per cent earthquake rating. A quantity surveyor’s report estimates it will cost about $765,000 to strengthen but the whole site is worth only $2.2 million.
Teal says the best result the trust could get with such an old building is 40 per cent of NBS — still considered very low — and it could not justify charging any higher rent.
“So our return on investment just went down to about 2 or 3 per cent a year. You may as well put your money in the bank, it’s not worth doing.”
The trust hopes to preserve the facade but plans to demolish the building once the time limit for earthquake strengthening runs out. Teal expects a “fairly involved process” with Auckland Council as the building is in a heritage area, but says he has no choice. He appreciates the heritage and special character of K Rd but says the trust, which pays out to charitable causes, has to make a return on its investments.
Similar moral and financial dilemmas are happening across the country. About 193,000 buildings are caught up in the bill and between 15,000 and 25,000 are likely to need strengthening, at a cost conservatively estimated by officials at $1.7 billion.
Yet critics of the bill, ranging from business, farmers and local councils to engineering experts, say it is a huge overreaction to the Christchurch earthquakes, which will impose excessive costs on property owners, force the unnecessary closure of many old buildings in areas of low earthquake risk and possibly cost as much as $10 billion — roughly equal to the leaky buildings debacle — once heritage costs are taken into account.
The new rules stem from recommendations by the Canterbury Earthquakes Royal Commission and a review by the Ministry of Business, Innovation and Employment in the wake of the 2011 earthquakes, which killed 183 people, including 133 in the modern CTV and PGG buildings. Both were concerned at the lack of nationwide information about which buildings were safe and urged the Government to make sure that all buildings had at least one third of the strength of new buildings to resist the sharp horizontal ground movements caused by earthquakes. (The standard is graduated according to local seismic risk, meaning a new building in Wellington has to be four times stronger than a new building in Auckland.) The Government agreed and gave building owners and councils five years to assess all buildings, excluding single and double storey houses, plus another 15 years to complete any necessary strengthening work. Owners of heritage buildings could apply for an extra 10-year extension.
Although Building and Construction Minister Nick Smith has indicated a softer approach in today’s Weekend Herald, the law change is expected to be devastating for old buildings. In Auckland, it will affect heritage suburbs such as Ponsonby, Kingsland and Devonport, plus older arterial routes such as Dominion Rd and Mt Eden Rd. The impact will be even greater on provincial cities and towns which have a bigger proportion of pre-World War II buildings and less income from rents to pay for strengthening. A chorus of alarm has been growing louder over the past two years, from Wanganui, which has 11 per cent of the country’s at-risk buildings and is already losing commercial tenants, to Oamaru, which fears losing its historic stone buildings despite a Government promise that they will somehow be saved.
Often the tone has been close to panic — the mayor of Oamaru’s Glenn Teal’s Tabernacle Trust owns several historic Auckland buildings and can’t justify the cost of getting them all strengthened. Picture / Sarah Ivey It might be several millennia before a serious earthquake happens in Auckland, but it might be Friday this week.
Connal Townsend Property Council chief executive and neighbour John Coles, predicted the bill would flatten the 50 Edwardian buildings in and around the main street of his town with “catastrophic” results for the district. Dannevirke real estate agent Kerry Sutherland warned last year that three-quarters of the town’s buildings would fail the 34 per cent test. He said one sale had fallen through because the building would cost $100,000 to buy but another $350,000 to strengthen. A New Plymouth real estate agent predicted the city would be left in ruins.
Many councils are furious that the bill will force them to needlessly assess tens of thousands of buildings at ratepayers’ expense. Tauranga City Council, which earlier predicted the changes could cost the city tens of millions of dollars, told the select committee considering the bill that it would have to triple the number of buildings it checked, even though it knew already that most of them would pass.
Hamilton City Council, which assessed about 3200 buildings last year, said it was pointless to repeat the whole exercise.
The Waikato Mayoral Forum predicted a typical rural district faced costs of up to $5.5 million a year just to administer the scheme and estimated only about 20 per cent of buildings would turn out to be a risk. Like several councils, it warned of a likely skill shortage of engineers to do the work in five years and a conflict of interest if the same engineers were required to work for both building owners and councils. It predicted that owners faced with massive bills would simply abandon or demolish their buildings.
Auckland commercial landlord Terry Gould of Phillimore Properties told the committee that claims of financial ruin were not exaggerated. Banks were forcing owners to sell at huge discounts as the cost of upgrades breached loan to value ratios and bankers, insurers and corporate tenants demanded at least 67 per cent of NBS, rather than the legal minimum of 34 per cent.
He knew of one beautiful heritage building, a converted warehouse far stronger than a typical new office building, which was assessed at 32 per cent just because it was made of brick. Under the bill, the council would have to place it on a national register and inform panicked tenants and bankers that it was earthquake prone. The owner would probably try to demolish it as the bare land would be worth more than an upgraded building.
Several independent experts, including the leading engineering professional bodies, have also rubbished the bill. Tailrisk Economics consultant Ian Harrison said the 34 per cent trigger did not reflect the actual risk of an earthquake. Harrison said the figure was “plucked out of the air” with no supporting evidence when earthquake safety standards were revised for the 2004 Building Act, then attached to the bill. He predicted the regime would cost about $10 billion and take 4000 years to save a single life in Auckland.
Auckland Council’s submission included a report from GNS Science, which described the risk of death from an earthquake in the city as negligible. It said the estimated number of deaths was also virtually the same whether or not the city’s supposedly earthquake-prone buildings were strengthened to the 34 per cent standard. To put the risk in perspective, the council added that in the 10,000 year period between major earthquakes, the city could expect to deal with four Japan-sized tsunamis, 10 volcanic eruptions and thousands of floods.
GNS’ own submission said the blanket standard grossly underestimated the real ability of buildings to survive an earthquake. It pointed out that nearly all the older (pre-1976) buildings left standing after the Christchurch earthquakes would have failed the 34 per cent test.
GNS also argued that despite the allowance for local seismic risk, the scales were still weighted against low risk areas because of an earlier change in the earthquake design standard, which effectively meant Auckland had to be ready for a 1-in-1000 year earthquake, compared to 1-in-500 years for Wellington. The cost difference was minor for new buildings, which the standard was intended for, but became excessive for an owner trying to retrofit an old building.
Several experienced engineers wrote forthright personal submissions attacking the bill as unnecessary, including Robert Davey, an earthquake engineering specialist at Opus International Consultants (formerly the Ministry of Works), who said the cost of spending hundreds of millions of dollars would “grossly outweigh the benefits of the minor reductions in harm that would be achieved”.
He added; “As an earthquake engineer with a professional commitment to improving our community’s resilience to earthquakes, I would not make this recommendation if I did not believe it was necessary to prevent a waste of the community’s resources that could be better used elsewhere.”
Eventually the four leading bodies involved — the Institution of Professional Engineers, Society for Earthquake Engineering, Structural Engineering Society and GNS Science — joined forces to produce an alternative approach, which combined seismic risk, construction standard and the number of people using the building. The results ranged from a “red zone” for unreinforced masonry (URM) buildings in busy areas and high earthquake risk zones to a “green zone” for post-2004 buildings and most single and double storey timber buildings, especially those in low risk areas.
The joint working group added two specific suggestions. One was a stay of execution for unreinforced masonry buildings if their owners tied back all dangerous outside parts, such as parapets and chimneys (the main cause of the 43 deaths in the Canterbury earthquakes involving URM buildings). The second was a waiver for all other types of single and double storey buildings — such as timber — as it appeared that none had collapsed in an earthquake since 1931.
Building and Construction Minister Nick Smith told the Weekend Herald he agreed in broad terms with both these ideas but would not adopt the group’s risk measurement system because it left too much room for debate.
“This is an area where we need some degree of legal certainty and while I accept the argument that a 34 per cent standard is not as sophisticated a regulatory tool, sometimes you need to draw some arbitrary lines.”
He acknowledged the loss of tenants and plunging valuations of many heritage buildings. “There’s a lot of uncertainty in the property market around these older buildings and it is important that … we get the work underway for the assessment and the upgrading of these buildings.”
Dr Smith, an engineer whose PhD examined impact of earthquakes on landslides, was also sceptical of arguments based on the estimated frequency of major earthquakes.
“We’ve got good seismic records for New Zealand for about 40 years. How you make a judgment about what’s a 1-in-500 or 1-in-1000-year event is pretty tricky when your seismic record is quite short.”
Property Council chief executive Connal Townsend, who is based in Auckland, says the city is in “an almost complete state of denial” about seismic liability.
“The hard reality is there were a series of catastrophic earthquakes in Christchurch, a lot of people were killed. Everyone ‘knew’ earthquakes didn’t happen in Christchurch and we were all worried about Wellington — and we got it wrong.
“It might be several millennia before a serious earthquake happens in Auckland, but it might be Friday this week.”
Townsend is campaigning for tax breaks to ease the financial pain for landlords but generally supports the bill, which he says is only reducing the timeframe for work that had to be done anyway.
His main gripe is with Auckland Council’s blanket heritage protection codes for pre-1944 buildings across whole suburbs, which he says will massively increase the cost of earthquake strengthening to at least 67 per cent NBS and could mean predictions of a $10 billion cost blowout prove correct.
Wellington-based AllChurches Bureau chairman Don Baskerville, who represents major Protestant churches on property issues, says many churches like the Baptist Tabernacle could be in for some painful discussions with councils.
“It may be in some cases we’ll have to say to the local council, ‘You love this building so much, you own it’.”
He warns that the arguments against the bill may sound logical but engineering experts don’t bear the ultimate moral responsibility if a serious earthquake occurs.
“It’s the owners of the building that have to turn to the families of the people who die when the building has collapsed and say sorry.”
The Economist Intelligence Unit (EIU) has released its report on 140 cities, and for the fifth year in a row Auckland rounded out the top 10.
Melbourne was found to be the planet’s most liveable city, with Vienna and Vancouver taking the second and third positions respectively.
Wellington was the only other New Zealand city to be ranked, and was in 22nd place.
The report said the cities that scored best “tend to be mid-sized cities in wealthier countries with a relatively low population density.”
New Zealand has a density of 16 people per square kilometre, half of the United States average, the EIU said.
The report compared stability, healthcare, culture and environment, education and infrastructure to reach an overall score.
Auckland scored 95.7 overall, fewer than two points behind Melbourne, which scored 97.5.
Auckland scored a perfect 100 for education, but trailed the top 10 for healthcare with 95.7 points.
The city scored the second highest in the top 10 for culture and environment with 97 points, but scored only 92.9 for infrastructure.
Auckland Mayor Len Brown said Aucklanders should be proud.
“Aucklanders should rightly be proud that for the fifth year in a row we have been ranked a top 10 world city.
“However the number 10 ranking should remind us that we still have many challenges, not least of all starting work on essential infrastructure such as the City Rail Link, as we strive to become the world’s most liveable city.”
1. Melbourne, Australia
2. Vienna, Austria
3. Vancouver, Canada
4. Toronto, Canada
5. Adelaide, Australia
6. Calgary, Canada
7. Sydney, Australia
8. Helsinki, Finland
9. Perth, Australia
10. Auckland, New Zealand
131. Abidjan, Cote D’Ivoire
132. Tripoli, Libya
133. Douala, Cameroon
134. Harare, Zimbabwe
135. Algiers, Algeria
136. Karachi, Pakistan
137. Lagos, Nigeria
138. Port Moresby, Papua New Guinea
139. Dhaka, Bangladesh
140. Damascus, Syria
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The casino company’s profit for the year to June 30 fell 22.6 per cent to $98.5m after tax.
Revenue declined 4.8 per cent to $821.5m.
Chief executive Nigel Morrison said the result should be considered in light of the high exchange rate and disruption caused by the redevelopment of its Adelaide casino.
‘‘I think at a headline level it’s not great, but I think when you look at it and understand it, there are other factors at play,’’ he said.
SkyCity shares closed at $3.62, up 7 cents.
SkyCity said the exchange rate had led operating profit to slide $9.9m, while the the costs from Adelaide contributed A$4.4m (NZ$4.8m) of the decline.
‘‘Disruption [in Adelaide] has been significant and, to be fair, more than we expected,’’ Morrison said.
Work on the Adelaide casino project was due to be completed by Christmas, he said.
Morningstar senior equities analyst Nachi Moghe said the turnaround at Auckland, which contributes two-thirds of SkyCity’s earnings, was promising for the company.
‘‘I’m picking a better 2015,’’ he said.
‘‘All the refurbishment and restaurants opening up are adding to the appeal in Auckland and Adelaide.
‘‘It’s going expected,’’ he said.
Yesterday’s announcement better than coincided with news the company’s board had on Tuesday signed off on plans to expand the New Zealand International Convention Centre development with the addition of a 12-storey, five-star hotel on land previously acquired by SkyCity.
Morrison said SkyCity’s two existing hotels were experiencing 90 per cent occupancy and earnings from them had risen 17 per cent, so building a new facility to complement the convention centre ‘‘made sense’’.
Morrison said the new hotel would push the total capital expenditure in Auckland to $500m, including already-incurred land purchases and planning costs.
To meet these new costs, Morrison flagged turning some planned projects in Auckland and Adelaide into joint ventures, or the sale of its $35m car parking building in Federal St.
Moghe said the hotel development plans were likely to generate good returns, as the current high occupancy levels showed there was excess demand.
Moghe said the chief question over the hotel development was whether there was sufficient headroom with debt facilities to avoid a future round of capital raising.
‘‘It’s looking tight in the sense that their leverage is going up but it won’t trouble the credit ratings agencies,’’ he said.
SkyCity also said yesterday it had appointed a new chief financial officer. Rob Hamilton, former head of investment banking at First NZ Capital, will start in October.
Hamilton will join former Fairfax journalist Colin Espiner, who this week took up the role of SkyCity’s head of communications.
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Canterbury Earthquake Recovery Minister Gerry Brownlee has today joined Prime Minister John Key in announcing the selection of the preferred developers and operators for Christchurch’s new Convention Centre Precinct…
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