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Former council building sold after value plummeted

Flagstaff Team

The former Devonport Borough Council building at 3 Victoria Rd was sold towards the bottom of the market for a less than optimal price, according to documents obtained under the Official Information Act.
Auckland Council property arm Eke Panuku initially refused to release valuation and sale-process documents but has now done so following a Flagstaff complaint to the Ombudsman’s Office, which launched an investigation.
The Ombudsman’s office confirmed Eke Panuku “reconsidered the decision” after being notified of the investigation
The building was sold to Peninsula Capital for $2 million in April 2023, with settlement a month later.
A valuation by Seagars property valuers in September 2021 put the value of the building at $3 million.
However, in March 2023, Eke Panuku asked Seagars for a “market update” on the value of the property, which the valuers downgraded to between $1.425 million and $1.75 million.
“This is well below the value adopted 18 months ago, arising firstly due to an increase in investment yields generally, and secondly more cautious buyers are going to want a bigger incentive to take on properties with engineering, vacancy and character protection challenges,” the Seagars review said.
“Vendors choosing to sell into a softening market are being met with muted demand and purchasers expecting large discounts from prior asset values,” it said.
“We are typically re-valuing commercial property downwards as investment yields are increasing.”
The former borough council building had been vacant for six years until recently, when new owners Peninsula Capital let out the upper floor to the Depot for its affiliated artists. The Depot is now using the ground floor as well, as gallery and shop space.
The Flagstaff asked the Ombudsman’s office for comment on whether the case set a precedent for local authorities handing over valuations used for sales of public property. The newspaper also asked for comment on whether it was appropriate for Eke Panuku to withhold information from the media and public and only release it when the Ombudsman launched an investigation. Responses were not received by deadline.


Comment: Fire-sale outcome has whiff of farce

Eke Panuku’s release of the valuations for 3 Victoria Rd is a victory for openness over council decision making. Hopefully this means the free flow of information will continue in the future. As I said in my complaint to the Ombudsman, following the end of the sale process there was no logical or commercial reason for withholding the valuations.Indeed, they offer important insights into the process whereby a long-held public building was sold. To some keen local-authority watchers what has eventuated with the building has elements of farce. In summary: Auckland Council kicked out all the tenants citing earthquake safety issues as a key reason. Community groups, including the Depot, wanted it retained for public use, but these overtures were rejected, with council deciding to sell it. Iwi were offered it first but did not want it.It was always going to be a tricky building to sell – heritage listed, with a not particularly attractive street frontage, and needing earthquake strengthening. Peninsula Capital bought it and followed up with the purchase of more than a dozen other village buildings. The company felt it was safe for tenants, and has done an excellent facelift of the building, taking out partitions downstairs, ripping up carpets and sanding floors. Good enough anyway for a temporary tenant – the Depot. The beancounters at Eke Panuku are probably happy they managed to sell the building at what some would say is a fair price in a depressed market. But if the same logic is applied to residential homes, how many people sell at the lowest ebb? That would be called a fire sale.

Rob Drent, Editor

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