As-is market grows in Christchurch
Cantabrians are used to it in the residential real estate market - buying and selling damaged houses in as-is-where-is condition.
Now the trend is becoming common with commercial property.
Substantial insurance settlements and fast-rising construction costs are making selling cast-offs attractive to both buyers and sellers. Commercial real estate agents say the properties are fetching surprisingly good prices.
But sales of unrepaired buildings are not without risk or complication. Buyers are being warned to do their homework thoroughly, or face costly consequences.
Property lawyer Tim Barclay from Anthony Harper advises buyers to investigate cost, insurance, leasing, and financial and legal issues first. Craig Lewis, head of Lewis Bradford Consulting Engineers, warns due diligence must include thorough engineering assessments and planning.
Real estate agents are being very upfront about the pros and cons of as-is properties for sale.
NAI Harcourts advertisements for the former Canterbury Officers' Club going to auction in Gloucester St highlight its location and mixed-use possibilities. They also warn it contains asbestos which buyers will have to factor into plans.
The tallest damaged structure for sale in town is the 17-storey Forsyth Barr office tower, now under offer to a developer with hotel conversion plans. This building offers top visibility and location, but also earthquake memories of office workers abseiling from windows.
One as-is building already being revamped is the former Chateau Blanc apartments in Montreal St. Here, the big issue was out-of-whack floors which had to be levelled.
Lilly Cooper, the developer who transformed The Colombo mall and several heritage buildings, will reopen Chateau Blanc in September as a five-star boutique hotel called The Montreal.
Son and hotel director George Cooper Dixon says they had a "strong track record" in refurbishing buildings, so the project fitted their knowledge and capabilities. They went big on due diligence, investigative reports and insurance talks, and were aware of the risks, Cooper Dixon says. "It's about seeing potential in an as-is-where-is, and making sure you're going into the process with your eyes open."
Jonathan Lyttle, general manager of realtor Colliers, is seeing growing demand for as-is properties. In the face of "out of control" construction costs and long time frames for new builds, developers were recognising the residual value in damaged stock.
"In the past, some landowners demolished the buildings and then sold the land without investigating the possible value left in the building.
"But now we're handling more and more of these properties."
While some structures are being demolished to give a clear run at a new build, most will be reworked.
Lyttle says would-be buyers need to understand the considerable risk. They need experience, skill and feasibility research to successfully convert buildings back into usable space, he warns.
Engineers agree. Lewis urges buyers to look out for critical structural weaknesses in as-is buildings. Also important, he says, is to establish whether the building remains quake-prone, what percentage of new building code it meets, and the work and cost of any strengthening work.
Getting a building cost-effectively up to code will determine "whether the exercise is economically feasible."
Lewis notes that some damaged buildings have only salvage value. Others could be safely enhanced for new users, even if they were out of level and retained some damage.
"As-is-where-is needn't be a stigma . . . remembering that not many buildings were in perfect condition and perfectly level before the earthquakes."
Commercial realtor Mark Macauley, managing director of CBRE says they have sold about 30 as-is buildings, all attracting keen interest.
"The term can be misleading. All it means is people have accepted an insurance payout, rather than repairing. It doesn't mean they can't be repaired."
Insurance hurdles are being cleared, too.
Executive broker Storm McVay from insurance brokerage Crombie Lockwood reports being able to find cover for some Christchurch as-is buildings, mostly through London markets but also locally.
First she must know a client's exact intentions for a building, and get a valuation, geotech report and detailed engineering evaluation (DEE).
This helps form a solid case to insurers, helping them understand the risk of writing cover on what another insurer may already have written off.
Amuri Park, 280 Bealey Ave. Complex of 42 apartments. Sold at auction for $2.6m.
McKay House, 383-385 Colombo St, Sydenham. Two adjoining buildings, sold for $4m to an owner occupier.
Forsyth Barr House, 764 Colombo St. Office tower under offer. Could be refurbished subject to consent.
Deloitte House, 32 Oxford Tce. Sold to developer Richard Diver, who will gut and refit it for new offices.
Age Concern, Cashel St-Cambridge Tce corner. Sold for $2.57m. Building demolished to make way for a six-storey offices.
36 Park Tce. Three-storey apartment building in strata titles. Sold at auction to Cathedral Grammar School for $1.43m.
Cranmer Court, 350 Montreal St. Cleared for redevelopment but sold with damaged townhouses. Bought for $10m by Majestic Church.
Canterbury Spinners, Bromley. Sold for $3.365m. Several buildings on 5ha. Bought by a local developer.
Ian Johnstone Joinery complex. Industrial site and buildings on Montreal-Disraeli streets corner, Sydenham.
Property Finance House, 104 Victoria St. Office building bought for $3.1m by Richard Diver for refitting.
Chateau Blanc, Montreal St. Damaged apartments sold to Cooper Developments.