Underground landowners smiling all the way to the bank
Essentially worthless land beneath the earth brought for CRL while owners get to hold onto land above, Ben Leahy writes
Taxpayers have so far forked out almost $ 170 million to buy central Auckland land needed for the City Rail Link, including payouts for essentially worthless underground land.
The big cash splash went mostly towards buying 51 plots of surface land and buildings, but also involved $ 13.3 million spent on the rights to an additional 58 tracts underground.
And those selling the underground plots were likely smiling all the way to the bank.
That’s because they were able to keep hold of their surface land and titles while receiving an average $ 229,310 payout per underground title.
The City Rail Link builders were forced to buy underground land where they planned to tunnel — even though they didn’t need the surface land above — due to English common law precedent.
This ruled that New Zealand landowners didn’t just own their property’s surface land, they also owned a wedge of sky and earth stretching from the “heavens above” to the earth’s molten core.
That led Rainey Law’s property expert Jonathan Wood to call the payouts a “windfall”, saying landowners would have been unlikely to sell or find any other use for the underground land if City Rail Link had not come along.
“On one side, City Rail Link are getting properties for a relatively cheap price, but, on the other, the people selling that underground land would not have been able to make money from it anywhere else,” Wood said.
Few Auckland commuters would likely quibble with the payouts either.
Recent damage to the Auckland Harbour Bridge, when freak winds blew a truck into a support strut, led
People would not have been able to make money from it anywhere else.
Jonathan Wood, Rainey Law
to the closure of multiple lanes for more than two weeks and brought Auckland’s road network to a grinding halt.
The traffic jams that spilled for kilometres highlighted the congestion that has increasingly built on city motorways.
The $ 4.4 billion City Rail Link project aims to tackle this by doubling the number of passengers city trains are able to carry.
Planned to open in 2024, it involves building 3.45km of underground railway together with new and improved stations. Last month that led work teams to begin digging what will be the country’s deepest train station at Karangahape Rd, where 217m- long platforms will be built as much as 35m underground.
Mercury Plaza — earlier home to a popular Asian food court — had previously stood on the site where the digging is now taking place.
By buying the property, City Rail Link Limited — the government agency responsible for the railway — gained the above- and below- ground rights to the site.
Now giant sheeting temporarily stands above where the demolished Mercury Plaza had once been, acting like a silencer to reduce noise emanating from an access shaft being dug below.
Among other buildings deemed as being in the way of the K Rd station was an old Auckland tram that had previously been converted into a cafe and wine bar. But instead of being demolished, the City Rail Link builders agreed to relocate the tram 2500km away to the Pacific Island nation of Niue, where its owner Rob Roughan had business links.
Elsewhere, one of Auckland’s oldest pioneer homes — a Kauri weatherboard cottage thought to have been built up to 143 years ago — was relocated to the Waikato from Mt Eden where another major CRL station is being built.
By contrast, however, most buildings bought for the project ended up facing the wrecking ball.
This $ 168.8m buy- up of land has so far totalled 3.82 per cent of the project’s overall $ 4.4b price tag.
CRLL would not reveal which
parcels of surface or underground land were the most expensive to buy.
It cited “privacy and commercial reasons”, saying releasing the information may “unreasonably prejudice” landowners still in negotiations for the sale of their properties.
Yet the land purchases were unlikely to be a total loss for CRLL.
Pete Evans from commercial real estate agents Colliers International said CRLL would likely resell some of the land to developers just before or after the project was completed.
CRLL would be able to command top dollar for the vacant blocks because of their high value as “development ready”, inner city land close to future train stations, he said.
The underground land was different, however. Evans said the value of underground land in the city usually lay in its potential to be converted into basement car parks.
But digging in rocky Auckland was expensive and car parks rarely ran more than two levels down, he said.
“The cost of building a carpark underneath your building gets progressively more expensive every floor you go down to a point where it becomes uneconomical,” Rainey Law’s Wood said.
This, combined with CRLL’s legal power to force landowners to sell land to it, made it hard to accurately value underground land.
“You own a thing that has no value to you and someone comes along and says, ‘ I want to buy that thing from you, here’s what I’m prepared to pay and I’ve got the ability to compel you to sell it to me’,” Wood said.
“So you can imagine that means the values aren’t gonna be great.”
The one place where underground land might increase in value was close to where the underground rail network emerged on to the surface.
“Possibly where the trains are coming out at Mt Eden, where the actual tracks are closer to the surface, there may be an ongoing nuisance factor from vibration and that is more readily price- able,” Wood said.
Either way, both CRLL and the landowners were likely to view the underground land sales as a win, he said. “It is your classic willing seller, willing buyer.”
It is your classic willing seller, willing buyer.
Jonathan Wood, Rainey Law