Herbert Gardens

PHOTO: Herbert Gardens is officially earthquake prone, after the council issued a notice on Thursday. SHOPLESS NZ

Owners of a prominent high-rise in central Wellington, known as a “zombie building” due to its earthquake-prone status, now face two options: a $16 million repair project or continued uncertainty after years of stress.

Following the 2016 Kaikōura earthquake, the owners of Herbert Gardens on The Terrace have been patiently awaiting a solution for the building’s issues, including leaks, earthquake damage, and seismic vulnerabilities. Some owners have passed away during this period, leaving their families to carry on the battle.

Recently, a solution was presented to them, but it comes with a substantial price tag. This predicament is not unique, as the cost of earthquake strengthening projects in the capital has surged in recent years.

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Herbert Gardens operates as a company share, where residents are shareholders in a company that owns the building and its apartments. The management is overseen by a board of eight residents, including former Prime Minister Jim Bolger and former Wellington deputy mayor Ian McKinnon.

In August, the board outlined a plan to address the building’s issues, totaling $14 million for seismic work and an additional $2 million for weather tightness and fire protection improvements.

Gareth Sutcliffe, the son of an apartment owner, expressed skepticism about the board’s ability to finance the $16 million plan. He pointed out that the board had previously suggested that owners seek loans from their children or relatives to fund the work, illustrating the dire financial situation they were in.

Sutcliffe described Herbert Gardens as an “effectively a zombie building with nobody able to sell” and emphasized the crushing stress that owners had endured for years, spanning multiple generations due to estates and individuals in care. The cost of the repairs would average around $400,000 per apartment, significantly exceeding the $250,000 loan available from Kāinga Ora for earthquake-prone apartments.

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Sutcliffe presented his case at a recent shareholder meeting, urging fellow shareholders to vote against what he deemed an “unrealistic” proposal. He argued that for owners to break even, the repairs would need to increase the apartment values to $800,000, a scenario he found unlikely.

While owners might have been able to afford the repairs five years ago, the costs have since escalated beyond their means. Sutcliffe’s presentation highlighted that the resident population had diminished over the seven years of delay due to illness, infirmity, and death.

Sutcliffe pointed to the example of Tasman Gardens, near the Pukeahu National War Memorial, where owners in a similar situation chose to sell and exit. He described their decision as a sensible one.

In their most recent newsletter to residents, the board emphasized that they believed any alternative to strengthening would be detrimental to shareholders. Staying in the earthquake-prone building until the strengthening deadline or selling at a minimal price were not considered “realistic options.”

However, the board’s chairperson, Antony Paltridge, stated that the board was not fixated on a single solution and would present alternative options for shareholders to consider. He acknowledged that the strengthening proposal represented a massive financial commitment and acknowledged the challenges of the process.

Paltridge, a longtime resident of the building, emphasized that the shareholders were neighbors, not distant corporate investors. He expressed understanding of the anxiety some owners felt, as the board members themselves lived in the building and considered it their homes.

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The initial plan to address earthquake damage was presented to owners in 2021 but did not include seismic strengthening. It was only when apartment owners raised concerns that the board requested an updated seismic assessment in mid-2022, which ultimately deemed the building earthquake-prone. The Wellington City Council officially issued an earthquake-prone building notice recently.

Insurance will cover repairs for internal damage caused by the Kaikōura earthquake, but the claim remains unsettled and is headed for mediation. The board’s newsletter indicated a $4 million gap between their claim and what the insurer would provide.

The shareholders’ vote on the strengthening plan has been postponed to December, primarily due to the unresolved insurance claim.