AGENDA NO.
5-2(a)
Responsible GM:
Sean Bignel
General Manager Asset Development
Endorsed by:
Glen Sowry
Chief Executive
Board meeting date:
29 August 2013
Subject:
McLean Flats and Gordon Wilson Flats
1982
Executive summary
1
The purpose of this paper is to inform the Board on the status of negotiations
regarding the partial divestment and redevelopment of the Gordon Wilson site
located at 314 The Terrace, Wellington.
the Act
2
This paper also outlines the preferred opportunities presented by retention of the
McLean Flats site.
3
The McLean Flats and Gordon Wilson Flats buildings require major upgrade,
including seismic and structural repairs.
4
The condition of the buildings is currently well below Housing New Zealand
standards and the buildings are both vacant.
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5
The Gordon Wilson Building is listed in the Wellington Council District Plan as a
Heritage Building.
6
There is no longer an imperative to return 105 units to the Housing New Zealand
portfolio in this location which provides greater investment flexibility.
Information
7
Victoria University is very interested in purchasing either both properties, or just the
Gordon Wilson property. Sale to the University is dependent on The Port Nicholson
Trust, which has Right of First Refusal (RFR), confirming no interest in purchasing
the property/ies for it’s own purposes and or lease to Victoria University.
8
The preference is to sell the Gordon Wilson property on an ‘as is where is’ basis,
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and for Housing New Zealand to demolish the McLean Flats building and
redevelop the 1,492m2 site with terraced housing as part of a truly innovative mixed
tenure and place based development.
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9
The Housing New Zealand Finance team has yet to comment on the preferred
scheme and wil provide financial analysis and funding advice once further
feasibility work has been completed.
10 There is a risk that the Heritage listing on the Gordon Wilson Flats building wil not
be able to be removed, or that the building becomes registered with the New
Zealand Historic Places Trust (NZHPT). There is also a risk that a Heritage rating
is applied to McLean Flats building.
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Recommendations
11 It is recommended that the Board:
note the Housing New Zealand preference for retention of a (reduced)
presence on The Terrace as part of a place based master-plan
note Victoria University has offered to purchase the 314-320 The Terrace
properties outright
note Victoria University
9(2)(j)
are supportive of Housing New
Zealand to retaining 320 The Terrace (McLean Flats).
note The Port Nicholson Trust has the Right of First Refusal on the property
and any offers must initial y be invited from the Trust as a matter of statute -
this may preclude Victoria University altogether.1
note the Gordon Wilson Flats building is listed on the Wel ington Council
District Plan as a Heritage Building
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note the Asset Development Group (ADG) is preparing a redevelopment
design for the McLean Flats site which optimises site occupancy, and enables
cost estimates and an ‘as completed’ valuation to be produced
note the ADG wil finalise RFR discussions on the Gordon Wilson property
with The Port Nicholson Trust, and subsequent discussions with Victoria
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University (if any).
Prior Approvals
12 The Asset Investment Commit ee (AIC), on 17 July 2013, endorsed:
the proposed retention and refurbishment of the McLean Flats
consideration of developing new terraced units on the McLean site – so that
under
the property returns up to circa 40 units
the entire Gordon Wilson site is sold to Victoria University ‘as is where is’,
which includes, Victoria resolving the RFR and demolition of the Gordon
Wilson Flats building, and using the site as an open space ‘Front Door’
access way to the University Campus.
Information
Existing Situation
13 McLean and Gordon Wilson Flats comprise of 105 vacant units in critical disrepair
at 314–320 The Terrace, in the Wel ington Central Business District.
14 McLean Flats were vacated in October 2011 and Gordon Wilson in May 2012
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following a seismic and strength assessment rating below the National standard on
McLean Flats and falling masonry on Gordon Wilson.
15 Table 1 provides a summary of existing property configuration.
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Table 1 – McLean Flats and Gordon Wilson Flats existing property configuration summary
Site area
Gross
Number
Number of bedrooms
(m2)
Floor
of units
Bedsit
1 bed
2 bed
Total
Area
McLean
1,492
1,343
18
1
13
4
22
1
9(2)(j)
2
Gordon Wilson
7,139
7,041
87
11
0
76
163
Total
8,631
8,384
105
12
13
80
185
16 The existing dwelling units in the Gordon Wilson building do not meet current
Housing New Zealand design standards. The bedsits are undesirable and the two-
level apartment units have inherent design faults which limit accessibility.
17 Since January 2013 the ADG has:
explored office building conversion opportunities
discussed with Victoria University its interest in purchasing the site
commissioned Durability Assessment Testing to confirm life expectancy of
existing structures
commissioned invasive Geotech and Seismic testing to confirm seismic
retrofit engineering design and cost estimates
continued to pursue one-off and bulk sale apartment purchases in the
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Wel ington CBD
engaged consultants to develop, cost and value redevelopment concepts
engaged with Council on negotiating the Resource Consent process if
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demolition and redevelopment becomes the Housing New Zealand approved
position.
Problem and/or opportunity
18
Condition issues: seismic testing confirms a rating of 68 percent of NBS for main
structure and < 20 percent for infil panels on McLean Flats and 58 percent on
Gordon Wilson.
under
Durability testing has been carried out estimating the life span of the building
providing the buildings are refurbished, the estimations are:
McLean Flats - 50 years
Gordon Wilson Flats - 40 years.
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The ADG has investigated the options of refurbishing and replacement of
McLean Flats.
Refurbishment of the existing 18 McLean Flats to 67 percent of NBS has a
cost of $4 mil ion.
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19
Heritage constraint: Gordon Wilson Flats is listed on the Wellington Council
District Plan as a Heritage building.
Asset Development has engaged with Council over what the process wil be
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to gain resource consent if demolition and redeveloping Gordon Wilson is
Housing New Zealand’s approved position.
The resource consent process to achieve demolition of Gordon Wilson is
likely to be notified and could take from 3 to 6 years depending on weather
an Environment Court hearing is required.
20
Replacement acquisitions: other opportunities have been activated including the
redevelopment at Hanson Street and acquisitions across the city.
3
The ADG has explored office building conversion opportunities in the
Wel ington CBD. Except for conversion to student accommodation only one
building in the market has been identified as having any potential - 143 Wil is
Street. After investigations this building was rejected due to risks associated
with IEP and conversion from office into residential. In addition, the property
could not be secured for an exclusive period as it was tied up as part of a
portfolio sale.
21
Tenant demand opportunity: the urgent need to re-house Earthquake Prone
Buildings affected tenants in the Wel ington CBD has subsided since the decant of
tenant households from the McLean and Gordon Wilson Flats.
While demand is expected to remain high in this location, there is no longer
an imperative to return 105 units to the Housing New Zealand portfolio in this
location given the poor condition of the buildings and opportunity for
divestment.
Tenancy Services and Property Services would like to recover some units on
the 314–320 The Terrace site due to the prime location for high needs
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tenants.
22
Divestment: the properties are located in front of the University of Victoria and
behind the Wellington CBD. The University has made an unsolicited offer to
purchase the McLean / Gordon Wilson property outright from Housing New
Act
Zealand.
the
9(2)(i),9(2)(j)
The Port Nicholson Trust has the Right of First Refusal on these properties
and any offers must initial y be invited from the Trust as a matter of statute.
This may preclude Victoria University altogether.
under
Housing New Zealand is currently seeking an offer from The Port Nicholson
Trust for 318 The Terrace (the Gordon Wilson site).
Proposal
23 It is recommended that shared ownership of 314-320 The Terrace continues to be
Information
pursued, with either The Port Nicholson Trust or Victoria University purchasing the
Gordon Wilson Building and Housing New Zealand building a replacement
complex on the McLean site.
24 Housing New Zealand has two viable options available when considering shared
ownership over the land with the University2.
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9(2)(j)
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2 Assuming The Port Nicholson Trust confirm they are not interested in the site.
4
25 The University wants to obtain rights over at least the Gordon Wilson site to enable
a ‘front door’ to the Terrace and CBD. This may result in an easement granted to
Housing New Zealand over the site entrance and drive way.
26 The option for Housing New Zealand to retain the McLean site is recommended
because:
this option allows Housing New Zealand to replace existing high rise with a
new lower density community which in turn wil return greater opportunities
and reduce social isolation of low income individuals and families, sooner
rather than later
it wil transform the existing development into lower density higher quality
housing and attract higher income families to rent and purchase, enabling
flexibility and a blend of low, middle and high income households
it provides an opportunity to divest and demolish buildings that are
problematic in terms of maintenance, management, economic viability and
architectural significance
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the University’s desire to develop a front door to the campus through the
Gordon Wilson site is accommodated comfortably alongside quality public
housing and it’s synergies with student accommodation
selling the Gordon Wilson property wil be less controversial with the
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presence retention and reinvestment on the site components
this option shows logical progression towards solving the Gordon Wilson
problem in a clever and sensible way
it offers an opportunity of a resource consent concession enabling
development of an optimal number of units on the McLean site.
under
27 Figure 1 below provides an example of a replacement McLean Flats based upon
current planning rules.
Figure 1 – Development of 23 one-bedroom units utilising existing McLean site boundaries
Information
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28
9(2)(i),9(2)(j)
29 There is a risk that the buildings could become registered with the NZHPT. In this
situation there may be an opportunity to receive grants to assist with any building
upgrade.
30
9(2)(i),9(2)(j)
31 There is a political risk and potential negative media to Government by divesting
and demolishing the Gordon Wilson Flats, mitigated by improving the McLean site.
32 The anticipated time frame for delivery of the proposed McLean option is up to 3
years (circa 1 year negotiation / resource consent / plan change, 7 to 9 months
design, and 8 to 11 months build). The RFR process has potential to lengthen this
timeframe.
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33 A new McLean Flats would enable best practice design features to be
incorporated, such as access, outdoor spaces and carparking. These
environmental design features wil contribute to increased crime prevention and
improved CPTED principles, technology future proofing, asset management, life-
cycle maintenance, and place-making.
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Finance inputs
34
9(2)(i),9(2)(j)
under
Information
Released
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39 Should this option be considered viable we would recommend an updated
valuation be completed on the basis of the sale offer to check for potential
impairment to the recent revaluation.
40 Detail surrounding the proposal to re-build McLean Flats is very limited at this early
stage in the project.
41 A full financial analysis wil be completed once redevelopment designs providing
number and size of units, and costing and value estimates have been obtained.
Logistics and next steps
42 The existing buildings are vacant – so no tenant logistics plan is required. Once the
proposed option planning is at an advanced stage, a full Communications and
Stakeholder plan wil be completed and enacted.
43 The ADG wil :
progress RFR discussions with The Port Nicholson Trust on the sale of the
Gordon Wilson Flats property.
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prepare a site optimising concept design, cost estimate and valuation for the
McLean Flats property.
the Act
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Information
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Fact Sheet
McLean and Gordon Wilson Flats
Total
314-320 The Terrace, Wellington – partial sale
Cash-flow
Accounting
Impact
Investment
NPV (20yr)
l and redevelopment
TBC
TBC
TBC
TBC
a
s
Current Configuration
Planned Configuration
Planned Delivery Cycle
105 apartments over two multi-story
Up to 40 new terraced houses on the
Start
Completion
Propo buildings:
McLean site:
25 one-bedroom
Configuration TBC
Sep-13
TBC
80 two-bedroom
AMS Market Segment & Segment Response
Property Demand
CAU Concentration
gy
Forecast Demand
Current Shortfall
Current
Target
Proposal
High density city suburb – portfolio
acquisitions
1 Bed: TBC
1 Bed: 36
Strate
2 Bed: TBC
2 Bed: 18
10.47% <15.0%
7.64%
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McLean Flats and Gordon Wilson Flats comprise 105 vacant units lying vacant in critical disrepair
on The Terrace in the Wellington Central Business District.
McLean Flats were vacated in October 2011 and Gordon Wilson in May 2012 following a seismic
and strength assessment rating below the National Building Standard on Flats and falling
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masonry on Gordon Wilson.
Gordon Wilson is listed on the Wellington Council District Plan as a Heritage building.
under
Information
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The forecast demand for Wellington Central Business District and city fringe state housing over
the next ten years is uncertain and the demand for private market housing is flat. Other
opportunities have been activated including new redevelopment at Hanson Street and
acquisitions throughout the city.
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While demand is expected to remain high in The Terrace location, there is no longer an
imperative to return 105 units to the Housing New Zealand portfolio in this location.
The properties at 314 and 320 The Terrace are located in front of the University of Victoria and
behind the Wellington Central Business District. This creates an opportunity for Housing New
Zealand to investigate a mixed tenure environment given the proximity to Victoria University and
absolute prime location of this site.
The University has offered to purchase the McLean and or the Gordon Wilson properties outright
from Housing New Zealand.
8
Complete sale is not the optimal solution, instead an opportunity for mixed tenure with Victoria
University is to be pursued as the first priority.
Key Assessment Metrics
Table i – Project performance against Asset Management Strategy Goals
Asset Management Strategy Goal
Existing
Re-build
Goal 1: Increase the rate of churn of assets to at least 1 in
Fails
Improves
50 homes per annum
Goal 2: Ten year funds retention and reinvestment funding
Fails
Improves
envelope
Goal 3: Better align the location of the housing portfolio with
Fails
Improves
regional demand
Goal 4: Improve the match of asset types to applicant
Good
Improves
demand to 90 percent
Goal 5: No community wil have more than 15 percent state
Good
Improves by mixed
housing presence
ownership potential.
Goal 6: Increase the number of assets where the Property
Fails
Fixes
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Quality Index rating aligns to the Corporation’s future
intentions for the property
Goal 7: Reduce the cost of building by up to 25 percent
No
Improves by reduced
Change
maintenance costs and
increased building life.
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Other Considerations:
Delivers decanting and relocation options
Fails
Improves
Infuses best practice management
Fails
Improves
Improves Tenant Amenity, reduces complaints
Fails
Fixes
Infuses best practice urban design
Fails
Improves
Enables lower lifecycle expenditure (maintenance + CAPEX) Fails
Improves
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Improves CPTED requirements
Fails
improves
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