‘Terrible situation’ for owners in limbo over quake prone apartment complex

Friday, 29 September 2023

A $16 million repair or ongoing limbo after years of stress are the options facing owners of a prominent central Wellington high-rise, labelled a “zombie building” because of its quake-prone status.

Since the Kaikōura earthquake in 2016 owners of Herbert Gardens on The Terrace have been waiting for a solution to the building’s leaks, earthquake damage and seismic risk. Some have died in the years since, with their families now taking on the battle.

This month they were finally presented with a fix, but it comes with a hefty price tag.

It’s a challenge facing many building owners in the capital — the cost of earthquake strengthening projects has skyrocketed in recent years.

Herbert Gardens is a company share, where residents are shareholders in a company which owns the building and apartments. It is run by a board of eight residents. Former Prime Minister Jim Bolger and former Wellington deputy mayor Ian McKinnon are shareholders.

The board presented its plan to fix the issues at a meeting in August, outlining $14m of seismic work and a further $2m in weather tightness and fire protection work.

Gareth Sutcliffe, the son of one apartment owner, said the board was in denial about their financial capacity to afford the $16m plan.

The board had previously suggested owners ask for loans from their children or relatives in order to afford the work. That clearly showed what a “terrible situation” they were in, Sutcliffe said.

Herbert Gardens was “effectively a zombie building with nobody able to sell”, he said.

“The stress on owners for years now has been crushing, and is effectively multi-generational given the number of estates and those who are in care.”

The cost would come in at an average of $400,000 for each of the 54 apartments — well above the $250,000 loan available to strengthen earthquake prone apartments from Kāinga Ora.

Sutcliffe made a presentation at this month’s shareholder meeting where he urged shareholders to vote against the “unrealistic” proposal.

For the owners to break even, the work would have to increase the value of their apartments to $800,000, which he did not believe was likely.

While shareholders might have been able to pay for repairs five years ago, costs had only increased, meaning it was now beyond their means.

His strongly worded presentation noted the pool of residents had shrunk over the seven years of delay due to “illness, infirmity and death”.

The final slide points to the example of the Tasman Gardens, near the Pukeahu National War Memorial, where owners faced with a similar situation voted to sell up and get out. “They made a sensible choice,” Sutcliffe’s presentation said.

In its most recent newsletter to residents, sent on Tuesday, the board said it believed that any alternative to strengthening would be detrimental to shareholders. Living in the earthquake prone building until the strengthening deadline or selling for a minimal price were not “realistic options”, the newsletter said.

But yesterday chairperson Antony Paltridge told The Post the board was not “fixated on any one solution” and would provide other options for shareholders to consider. He acknowledged the strengthening proposal was a “massive financial commitment”.

The board was trying to act in the best interests of the owners by strengthening the building and fixing the weather-tightness issues, he said, but it had been a “difficult process”.

Paltridge had lived in the building for almost 15 years and said the shareholders were neighbours, not distant corporate investors.

“Naturally, some owners are anxious and so are we. We live here too and it’s our homes we’re talking about.”

The first plan to fix the earthquake damage was presented to owners in 2021, but did not include seismic strengthening.

It wasn’t until apartment owners raised the issue that the board asked for an updated seismic assessment of the building, which found it was earthquake prone in mid-2022.

The Wellington City Council officially issued an earthquake prone building notice yesterday.

Repairs to internal damage caused by the Kaikōura earthquake would be covered by insurance, but the claim has not yet settled and is going to mediation.

The board’s newsletter to the apartment owners said there was a $4m gap between what they were claiming and what the insurer would provide.

The shareholders’ vote on the strengthening plan had been pushed back to December, mainly because the claim had not been settled.