Weekend Herald

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

- New Zealand · Waitemata Harbour · Iceland · Niue · Waikato · Pete Evans · Colliers International

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

 ?? Alex Bur­ton Photo / ?? Craig Johns in his Crys­tal Mo­tors work­shop. He has had to move from Mt Eden to Kings­land but is very happy with the out­come.
Alex Bur­ton Photo / Craig Johns in his Crys­tal Mo­tors work­shop. He has had to move from Mt Eden to Kings­land but is very happy with the out­come.

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