CITY CORPORATION CRITICISED

Dominion, Volume 29, Issue 302, 17 September 1936, Page 4

CITY CORPORATION CRITICISED

“Prosperity Assumed In Fixing Ground Rentals” EVIDENCE OF VALUERS Criticism of the action of the Wellington City Corporation in allegedly fixing ground rentals on the assumption of constant progress and prosperity was made by Mr. C. A. L. Treadwell at the Supreme Court yesterday in proceedings to determine the ground rental of a property at the corner of Waring Taylor Street and Lambton Quay. The lessor is the city corporation, represented by the city solicitor, Mr. J. O’Shea, with him Mr. J. R. Marshall, and the lessee the Post and Telegraph Employees’ Association, tor whom Mr. Treadwell and Mr. H. J. V. James appeared.Mr. Justice Smith presided. The corporation’s case concluded yesterday and that for the lessee association’commenced and will proceed to-day. Interesting evidence was given of the rentals obtained for offices in big city buildings, construction costs, the drift from older into new buildings, and other matters relating to city properties. To erect a five-story building on the property would, he thought, cost 21/- a foot over the whole area, say, £15,000, said John Gordon Harcourt, land agent. From five shops on the ground floor £2O 10/- weekly—£lo66 per annum—should be obtained., After waste space allowance there should be 2000 square feet upstairs available for letting. He estimated that from this, at 3/6 for 1400 feet of front space, and 3/- for 600 feet back space, £335 a floor would be obtained. This would be £1340 for four floors and £2406 for the whole building. Outgoings he estimated .at £1467. (these were administration, collection and letting, each 2j per cent.; vacancies 71 per cent, (total £300); rates, £295; insurance, £47; maintgtianee, £200; depreciation and sinking fund of 1 per cent. (£75); interest at 4j per cent., £675; contingencies, £175. This made total estimated outgoings £1467, which, taken from the net rental, left £633 available for payment of ground rent. Assuming this represented the return on the land, at 41 per cent., it represented a value on the land of over £14,000, equalling £350 a foot for the site. Rush to New Building. As far as office space was concerned the most modern building erected in Wellington was that of the Commercial Bank. Open a month, it was let at 5/6 a square foot, and there was now no space available. The A.FA. in its pld building had all its new spacs jet at 5/-. The New Zealand Insurance Company, building in Street, was letting its space at 4/6. These were all upper floors. The Prudential company had let its space at 4/6 and 4/-. Last year he negotiated for 4000 feet of space in Waring Taylor Street, opposite the site concerned, in a proposed new building. The agreed rental was 4/-, but the building project fell

through. The 3/6 a square foot he placed on the five-storv building on the site represented 12/8 weekly for a room 16 feet by 12 feet; 3/- represented 25/weekly for a 25 feet by 17 feet room. As to shop letting, the corner of Waring Taylor and Featherston Streets was let for £4/15/-, the next Shop at £3, and the next up Featherston Street at £3/5/-. Some months ago small shops in Panama and Brandon Streets were let at £3/10/weekly. In Picot’s new building at the corner of Lambton Quay and Toklo Lane, a shop with a 12-fgpt frontage had been let for occupation on completion at £5 weekly for two years, rising to £6. Shops on the western side of the Quay let gen- ’ erally at rentals up to £1 a foot weekly. Mr. O’Shea: That was the position in Queen Street, Auckland, 30 years ago. ..To Mr. James, Harcourt said he mentioned a five-story building because the Situation did not warrant eight stories. He had been 25 years a land agent. He had not known a bank or insurance company to build on a leasehold site. Frederic Leonard Staunton Turnbull, land'agent, said the first floor of Pi«>t’s building was offered and was now being negotiated tor by a Government department at 2/8 a square foot. Turnbull replied to Mr. Treadwell that the western side of Lambton Quay was without doubt a better shopping area than the eastern side. Corporation Criticised. Opening for the lessee association, Mr. Treadwell stated that leases were valued in the past by the city ;■ corporation as if there were constant progress and prosperity. It seemed there had never been a decrease in ground rent despite the fact that relevant charges had increased. On this point nothing more eloquent than the rates could be cited. The corporation had no right to assume that there was going to be progress and constant prosperity for another decade or two. The last decade had taught a lesson not to assume anything of the kind. The opposing counsel had remarked facetiously that it would soon be submitted that the ground would be worth nothing, but it might well be that that position was coming. His Honour inquired if the Supreme Court had ever before been asked to fix a rental. Mr. O’Shea replied it had not. It 1 had been suggested in the past that a Supreme Court judge should be the third arbitrator with the two others, but this had not been possible. The argument against this had been that it was not politic for judges to act, but it had been ordered in the present case. Mr. Treadwell said the present case was a classic one, where a judge should act. Mr. O'Shea interposed that there had been some “underground” going on -the like of which had not been known before in Wellington. Mr. Treadwell proceeded that it might prove a salutary warning and example against the tendency hitherto existing to charge rents which could not be justified economically. For the defence, Joseph McClatchie Dawson, architect, of 27 years’ active practice, said that a four story building at 25/- a square foot would cost £12,680; six stories, £19,020 ; eight stories, £25,36Q. Construction costs were advancing Because of the 40-hour week. Charles J. S. Harcourt, land agent and valuer, Rvith 39 years experience in Wellington, said he valued for a majority of buyers, two banks, the Public Trust, insurance and investment companies. Since the Commercial Bank building had been completed another bank

had lost several valuable tenants and aa insurance company building had the ’same experience, leaving a whole floor vacant This change to new buildings .was txpistantly taking place. There were plenty of, buildings m Wellington 15 to 2Q years, old which were definitely out of date. ' ■ . • A't present there were council leaseholds in the vicinity of the property concerned in the case which nd one would take up, said Harcourt Mr. O’Shea said that there were only three sections left of all the council’s reclamation available for building. A, Mr. Fletcher was going to build a garage on one. He had been relying on a bylaw preventing extended time for parking but it had been amended and Mr. Fletcher did, not go oh with his project The ground rent of the Midland Hotel had not been doubled in 1928; it waa increased from £921 to £l7OO, said Harcourt under cross-examination. Mr. O’Shea said a powerful advocate had appeared for the owners—Sir Michael Myers. ■ t Mr. Harcourt: You appeared for the corporation! Mr. O’Shea said that when the Midland Hotel was £921, the Johnston Street ■frontage was valued at £5 a foot and that of Waring Taylor Street at £3. To some remarks by Mr. Harcourt on this matter, Mr. O’Shea replied: “The city has been thrashed enough about that. You know as well as anyone how fair that valuation was.” Mr. Harcourt: What, with Mr. Justice Stringer as arbitrator. His Honour said he could not go inte the decisions of previous arbitrators. The hearing continues to-day.