Vos Yard and Waterspace Development Single Stage Business Case

Prepared by: Shona McMahon Prepared for: Waterfront Auckland Board

Date: 16 April 2013

Version: 4.0

Status: Final

Single Stage Business Case Document Control

Document Information

Position

Document ID Vos Yard Development and Waterspace

Document Owner Richard Aitken

Issue Date 16 April 2013

Last Saved Date 16 April 2013

File Name U:\CCO\Projects\

Document History

Version Issue Date Changes

1.0 4/4/2013 GM Property & Assets first review – Options, WP goals, messaging

1.0 5/4/2013 Peter Walker (PVCT) & GM Property & Assets – General review

2.0 10/4/2013 Peter Walker (PVCT) and GM Property & Assets review notes amended

3.0 11/4/2013 PVCT Business Plan and funding plan incorporated

4.0 16/4/2013 General review and refinement and focus on BCR

Document Review

Role Name Review Status

GM Property & Assets Richard Aitken Reviewed v1.0, v3.0

Chair Percy Vos Charitable Peter Walker Reviewed v1.0, v2.0 Trust

Project Director Daniel Khong Reviewed v3.0

GM Corporate Services Carl Gosbee Reviewed v3.0

Chief Executive John Dalzell Reviewed v3.0

Document Sign-off

Role Name Sign-off Date

GM Property & Assets Richard Aitken 16/4/2013

Chief Executive John Dalzell 16/4/2013

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Contents

1. Executive Summary 4

2. Introduction 7

3. Summary of Recommended Option 10

4. The Strategic Case – Making the Case for Investment 15

5. The Economic Case – Determining Best Value for Money 21

6. Commercial Case – Preparing for the Potential Deal 26

7. Financial Case – Affordability and Funding Requirements 30

8. Management Case – Planning for Successful Delivery 34

9. Recommendations 38

Attachments

1. Draft Concept Design (FearonHay March 2013)

2. Construction estimate (Ebert Construction, 2012)

3. Percy Vos Charitbale Trust Pyramid of Funding and Capital funding plan

4. Project programme (MPM Projects)

5. Waterfront Auckland Board resolution minutes, August 2011

6. Built Heritage Acquisition Fund proposal criteria

7. Subdivision map, Hamer St, Wynyard Quarter

8. Investment Logic Map (ILM)

9. Percy Vos Charitable Trust Business Plan (Management and Maintenance)

10. Cost Benefit Analysis

11. Demand Assessment

12. Commercial Case components

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1. Executive Summary

Introduction

1. This business case is for the conservation and development of the Vos site and waterspace (Lot 3, Hamer Street, Wynyard Quarter) into a broad-based heritage and maritime themed experience for the public, visitors and the boating community. The main focus of the development will be conservation of the last wooden boatbuilding shed in New Zealand. This historic site (land and waterspace) will be converted into a Marine Heritage Centre to engage a diverse range of users in the heritage and commercial activity of a living and working harbour edge. The development will continue the legacy and art and craft of wooden boatbuilding, established by Percy Vos.

2. The dominant benefit of the proposal is the heritage conservation of the Vos boatbuilding shed, the last wooden boatbuilding shed in New Zealand. A BCR has been calculated at 1.8:1.5 (refer Attachment 10) showing a positive result. It is estimated that the BCR could be higher given there a number of smaller benefits identified that were not monetised. This is a positive outcome for a public project that conserves a building of heritage nature. The cost is the NPV of the foregone commercial market income to Waterfront Auckland, to 2042. Note that the BCR is yet to be professionally peer reviewed by SGS Economics and Planning.

3. The Options analysis for the Vos site was performed in the July 2011 Vos and Brijs Development Study (refer Introduction, Section 2). The recommended Option A was confirmed and agreed by the Waterfront Board to retain the heritage part of the Sanford site (“the optimum character solution”) and allow future redevelopment of the remaining site and waterspace. The subdivision of the Sanford site has now been completed (March 2013) to allow for the conservation and development of the heritage component to proceed i.e.: Vos Yard and waterspace development. Refer Attachment 7 for subdivision plan.

4. The Development Study also recommended the establishment of a Trust comprised of interested groups that could see the Vos Yard developed as a Marine Heritage Centre. The Percy Vos Charitable Trust (PCVT) was formally established in November 2011 and gained charitable status 19 March 2013.

5. Waterfront Auckland will Project Manage this Council funded project, working in partnership with the PVCT who will build, manage and maintain the new facility. As custodians of the new Vos facility, PVCT will manage the building against a Business Plan (refer Attachment 9) and Conservation Plan. The fallback position will be Waterfront Auckland as managers and owners of Vos Yard should the PVCT fail as custodians.

6. The recommended lease and funding structure to enable the development is outlined in Section 3. Waterfront Auckland remains landowner, ground leasing the Vos site to the Built Heritage Acquisition Fund (BHAF) of Council at $0. BHAF sub-lease the site to the PVCT (as owners of the improvements) funding the PVCT led development at a cost of $4.7m. BHAF will require PVCT to buy back and own the asset in ~ 4 - 5 years (terms to be agreed). PVCT will take full development, management and operational responsibility of the new Marine Heritage Centre (refer Attachment 9).

7. To facilitate progress Waterfront Auckland must apply to Council to change the designation of the Vos site from a Commercial to Public property asset (receiving $0 income with no 8% ROI required).

8. Remaining actions required following relevant approvals are for the development of the Vos Yard and waterspace to progress via the proposed partnership with the PVCT and the proposed funding and leasehold arrangement (refer Section 3, Figure 3). PVCTs funding sources and approach are summarised in Attachment 3. The main commitment for capital funding will be sourced from a fixed number of High Net Worth individuals who will provide ~ $3m over three years.

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9. LTP budget (FY 2013) for the Sanford subdivision is $1m. This budget allows completion of Waterfront Auckland’s Annual Business Plan 2012 / 13 initiative Stage 1: Subdivision and new lease with Sanfords. This proposal progresses Stage 2: “Finalise agreement to facilitate the development of a Marine Heritage Centre.”

10. Changing designation of the Vos site to Public presents potential lost revenue for the 1,115m2 land space and 2,043m2 waterspace of $130k pa + future rent reviews and escalations. Total rental income foregone to Waterfront Auckland to 2042 is $5.3m; opportunity cost NPV of ($1.58m) (8.25% discount rate 2015 – 2042).

11. Subject to Waterfront Auckland, BHAF and Council approvals, the project is estimated to take 18 months to complete with completion programmed for January 2015.

Strategic Case

12. The 2012 Waterfront Plan specifically refers to the Vos & Brijs Heritage Slipway as a key initiative in the Wynyard Quarter. The Waterfront Plan also refers to the project as “preservation of the historic boatyard and slipway as part of a broader redevelopment project.” This proposal is also indicated in the Waterfront Plan as a project to support the marine and fishing industries. The projects and actions to support the marine and 13. Waterfront Auckland’s Statement of Intent (SoI) to 2015 includes the Vos Yard and waterspace development Stage 1 as a “Confirmed Strategic Project / Public Project” with Capex budget (public) LTP 2012 – 2022 $1m. As outlined in the Introduction, this proposal is in Waterfront Auckland’s current Annual Business Plan 2012 / 13 as an “Agreed project.”

14. This proposal is significantly aligned with Waterfront Plan objectives of “Public Waterfront,” “Smart Working Waterfront,” “Blue Green waterfront,” and “Liveable Waterfront.” This is in particular with regard to the Culture and Heritage aspects of a Public Waterfront and providing a place for authentic and gritty waterfront activities.

15. The key project outcome is preserving the maritime heritage of the Vos Yard site which directly contributes to the Auckland Plan’s Strategic Direction 4: “Protect and Conserve Auckland’s Historic Heritage for the benefit and enjoyment of present and future generations.”

16. A facilitated Investment Logic Mapping (ILM) workshop for the Vos Yard Development and waterspace was held on 21 March 2013. The investment benefits delivered by this project are: Conservation of Vos Yard; a well utilised public facility with debt repaid, creation of a public destination with regular visitation and Vos Yard becoming an exemplar heritage organization.

17. One risk has been assessed as inherently “High” in the proposal: Consenting risk from a public safety aspect due to proximity of the Bulk Liquids operations (lease expiry / exit ~ 2022). However, given the mitigation strategies in place and normal business processes will apply, it is anticipated that this will not cause significant project disruption.

Economic Case

18. This proposal is predicated on the Vos & Brijs Development Study, July 2011, Option A as agreed by the Waterfront Auckland Board (refer Attachment 5). Option A separates the heritage component of the Sanford site. The subdivision has now been complete utilising LTP budget of $1m.

19. A high level Cost Benefit Analysis (CBA) was appraised (refer Attachment 9) based on the SGS Economics and Planning (Melbourne) framework. The BCR is 1.8:1.5 and does not monetise a number of smaller benefits that the new Marine Heritage Centre will afford. While this is a positive BCR for a public project, the overarching benefit also remains; that the last wooden boatbuilding shed in New Zealand is conserved.

20. The opportunity cost (used in the BCR) to Waterfront Auckland is the foregone commercial market rental achievable for the Vos site (land and waterspace) which could otherwise be achieved; $5.3m to 2042; NPV cost of ($1.58m).

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21. The preferred option is the Vos Yard and waterspace development, because it:

Progresses conservation of the last wooden boat building shed in New Zealand, as predicated through the Vos & Brijs Development Study

Best supports Waterfront Auckland, Auckland Council, Waterfront Plan and Auckland Plan objectives by creating a new public facility that conserves a significant piece of Aucklands maritime history

Has an assessed positive BCR of 1.8:1.5

Provides enhanced access and connection to the waters edge and supports activation of the Wynyard Quarter and its mixed use development

Develops a unique heritage offering that has future potential to link (via the water) with other waterfront / harbour heritage sites

Supports the wooden boat building industry that is the largest fleet of restored original classic yachts in the world

Has the potential to create an exemplar Trust organisation and model for heritage conservation and development of heritage buildings that is financially efficient with a broad use and application

Commercial Case

22. Waterfront Auckland will Project Manage the development in partnership with the PVCT. PVCT will undertake all procurement in relation to the development project. The project will be managed by MPM Projects who will use the procurement strategy and approach in place for Waterfront Auckland. The procurement process will take place on an auditable and contestable basis (aligned with Waterfront Auckland / Council policies).

23. The Procurement strategy adopted will be on a “Lump Sum” basis and the evaluation team will be made of relevant persons from Waterfront Auckland, the PVCT and MPM in accordance with MPM’s procurement policies. A PCG will be in place made up of Waterfront Auckland, PVCT and MPM staff).

24. Contracts will be required to be in place with consultants and constructor for the project as will the lease agreements and terms and conditions under the recommended development structure (refer Figure 3).

Financial Case

25. MPM Projects have provided a capital cost for the Vos Yard proposal (estimated by Ebert Construction on a “No Obligation basis,” November 2012). The estimate of $4.7m is based on the preliminary design (excluding GST and consent fees). BHAF will provide full funding to PVCT who will be required to payback the construction cost resulting in PVCT final ownership of the Vos Yard asset. Per annum operating costs and revenues are estimated (by PVCT) to offset at $344,500.

26. As outlined in the Introduction, Waterfront Auckland has $1m of public funding in the current LTP to FY 2013. This is for the facilitation of the proposal per the Vos & Brijs Development Study (July 2011) for subdivisional costs to Sanford and Firth Industries ($674k compensation to Sanford, $200k to Firth and $150k sundry costs).

27. PVCT has a funding source plan (refer Attachment 3) which targets local community funding, high net worth individuals, the PVCT / CYA / NZRYS network and membership and sponsors. A number of Founder Donors (strictly limited to twelve) who are high net worth individuals with a special attachment to boating and wooden boatbuilding, will be committed to funding the refurbishment providing a total of ~ $3m over 3 years. Grants and Sponsorship are projected at a flat annual rate of $100k p.a.

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Management Case

28. As per the Commercial Case, MPM Projects will project manage the procurement and construction of the Vos Yard Development under the Waterfront Auckland / PVCT partnership. In the event that this proposal receives formal approval and funding, the project will be managed by MPM using their project management methodology which is aligned with the Council PMO methodology. A timeline with project milestones is set out in Section 8 (full programme is at Attachment 4).

29. The Concept Design is subject to TAG and Planning and Design Committee Review, which is a key step in the project milestones programme.

30. The PVCT propose three key management staff: A qualified Slip Way Master, GM Boatbuilding and a Building Manager. All managers will report to the PVCT on a regular basis (refer Attachment 9 for a PVCT Management and Maintenance Business Plan).

Recommendations

Decisions required

(i) That this Business Case to progress the Vos Yard and waterspace development as a heritage, maritime-themed experience (a “Marine Heritage Centre”), is formally approved by the Waterfront Auckland Board. The key components underpinning approval and requiring Board agreement in relation to this proposal are:

a. That Waterfront Auckland apply to Auckland Council to transfer Lot 3 (the Vos Yard site) from a commercial private property asset to a public asset (foregoing the otherwise required 8% ROI1);

b. That the proposed funding and leasehold structure to proceed with the Vos Yard development is approved as follows:

i. Waterfront Auckland ground lease Lot 3, Vos Yard, 38 Hamer Street to the Built Heritage Acquisition Fund (BHAF) of Auckland Council at $0

ii. BHAF sub-lease the site (as asset owner) to the PVCT and fund PVCT $4.7m for construction of the development

iii. The PVCT in partnership with Waterfront Auckland construct the Marine Heritage Centre

iv. The PVCT manage and operate the Marine Heritage Centre on the site and payback the $4.7m to the BHAF (at terms yet to be agreed), becoming final owner of the Vos Yard asset

c. In ground leasing the Vos Yard site to the BHAF, the Board approves the partnership between Waterfront Auckland and PVCT, including the PVCT’s approach to management and maintenance of the new Marine Heritage Centre

(ii) Subject to approval of this proposal by Waterfront Auckland Board and Council, that the Chief Executive is delegated the authority to implement this project on the basis that progress is regularly reported, appropriate consultation is completed and the Board is notified if any material issues arise.

1 Council require 8% return on investment on commercial property activities and marina operations, only (SOI – 2015)

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2. Introduction

Introduction

31. This Business Case is written from a Waterfront Auckland point of view, although there are multiple parties involved in the proposed development of the Vos site. This is to allow the Waterfront Auckland Board to consider facilitation of the development by applying to Council to change the site designation from commercial to public; not expecting an 8% commercial return. The foregone commercial return is offset by the heritage value of the Vos Yard and its associated benefits, which is the last remaining wooden boat yard on the Auckland Waterfront and in New Zealand.

32. This purpose of this proposal is to facilitate the conservation and development of the Vos Yard site and waterspace to continue the legacy of Percy Vos; Lot 3, Hamer Street, Wynyard Quarter. The 1,115m2 site has 2,043m2 waterspace and includes the historic Vos wooden boat building shed. This Council funded development will result in an integrated, broad-based heritage and maritime themed experience for the public, visitors and boating community. The main focus of the development will be conservation of the Vos shed; converting the shed into a “Marine Heritage Centre” to engage a diverse range of users in the heritage and commercial activity of a living and working harbour edge.

33. The dominant benefit of the proposal is the heritage conservation of the Vos boatbuilding shed, the last wooden boatbuilding shed in New Zealand. A BCR has been calculated at 1.8:1.5 (refer Attachment 10) showing a positive result. It is estimated that the BCR could be higher given there a number of smaller benefits identified that were not monetised. This is a positive outcome for a public project that conserves a building of heritage nature. The cost is the NPV of the foregone commercial market income to Waterfront Auckland, to 2042.

34. The Options analysis for the Vos site was performed in the July 2011 Vos and Brijs Development Study (refer paragraph 55 and Attachment 5 for Waterfront Auckland Board resolution minutes). The recommended Option A was confirmed and agreed by the Waterfront Auckland Board (13/8/2011) to retain the heritage part of the Sanford site (“the optimum character solution”) and allow future redevelopment of the remaining site and waterspace. The subdivision of the Sanford site has now been completed (March 2013) to allow for the conservation and development of the heritage component to proceed i.e.: Vos Yard (refer to Attachment 7 for subdivision plan).

35. LTP budget (FY 2013) for the Sanford subdivision is $1m. This budget has allowed completion of Waterfront Auckland’s Annual Business Plan 2012 / 13 initiative Stage 1: Subdivision and new lease with Sanfords. This proposal progresses Stage 2: “Finalise agreement to facilitate the development of a Marine Heritage Centre.”

36. To progress the Vos Yard and waterspace development, the remaining actions required (dependent on the site designation change to Public) are the development of the Vos Yard and waterspace via the proposed partnership with the PVCT and the proposed funding and leasehold arrangement (refer paragraph 39 below and Figure 3). A key part of PVCT’s management of the facility, is a Business Plan (Attachment 9). A Conservation Plan is also required to inform the Business Plan and set out determined and required standards for the long term maintenance of the Vos building / s.

37. The Draft Concept Design (Fearonhay, March 2013, refer Attachment 1), includes restoration and retention of the 1937 Percy Vos Ltd Boatyards and boat building shed also creating a Timber Store, dinghy shed, jetty and shelter, two slipways, public amenities, café and office.

38. The 1937 boat building shed is utilitarian in its character with the interior of the shed remaining as well as its timber roof structure, stairs and original office and rails. The Vos and Brijs property is run down and in a deteriorated condition with the slipways and foreshore structures built to old standards and aged.

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39. Preserving and restoring the historic component of what was part of the Sanford site (t/a Vos & Brijs), recognises the heritage character and legacy established originally by Percy Vos. The boat building yard was responsible for the construction of many of New Zealand’s finest examples of locally built vessels including some of Sanfords early fishing fleet. The real value of Vos’s boatyard is that it is the last remaining wooden boat yard on the Auckland Waterfront, and indeed believed to be in New Zealand, to maintain the craft of wooden boat building. The development also provides a home for the continued restoration of classic wooden boats and the art and craft of wooden boatbuilding.

40. The Vos site is designated marine industrial (District Plan). The site is not scheduled or registered as a historic place nor is it identified as a character building in the Wynyard Quarter Plan Change. The site was identified as having value in the heritage study for Wynyard Point (Salmond Reed Architects, May 2006). The Waterfront Plan identifies that while no Wynyard Quarter buildings have New Zealand Historic Places Trust heritage status, the survival of some former industrial buildings will be important in maintaining waterfront character by providing variation in building types and heights.

41. The Vos & Brijs Development Study (between ARH and Sanford Ltd), in addition to recommending the optimum character and commercial solution, also outlined the establishment of a Trust comprised of interested groups that could see the Vos Yard developed as a Marine Heritage Centre. The Percy Vos Charitable Trust (PCVT) was formally established in November 2011 and gained charitable status 19 March 2013. The Chairman is Peter Walker. Waterfront Auckland will work in partnership with the PVCT who will construct, manage and maintain the Vos Yard to Waterfront Auckland standards (including a Business Plan informed by a Conservation Plan).

42. The proposed lease and funding structure to enable development of the Vos Yard and waterspace is outlined in Section 3. Waterfront Auckland retains ownership of the land, ground leasing the Vos site to the BHAF (Council) at $0 rental. BHAF sub-lease the site to the PVCT, acquiring the new heritage asset but requiring PVCT to buy back the asset in 4 - 5 years (payback terms to be agreed). The BHAF provides total conservation funding requirements ($4.7m) to the PVCT to complete the development. PVCT will sub-lease space in the new Marine Heritage Centre to a café operator, the CYA, boat owners, boat building schools, public and school groups and a range of other tourist and interest groups.

43. Although it is not a plausible option to demolish the Vos shed due to its heritage value, the market ground rental that could be achieved from the Vos Yard site was calculated at Waterfront Auckland commercial market rates (for ground lease and waterspace license). Total achievable rental income (ground and waterspace) is $130k pa + future rent reviews and escalations which equates to total rental income foregone to Waterfront Auckland, of $5.3m to 2042. The $5.3m rental income has an opportunity cost NPV of $1.58m (8.25% discount rate 2014 – 2042. Excludes rent currently received from Sanford for FY13 on the Vos Heritage site).

44. Auckland Council’s opportunity cost of doing this proposal is the loss of rates (assuming they do not charge rates on a public site). This is conservatively estimated at a minimum of $620k to 2042. The rates loss would be higher if the site was developed as a new commercial property.

45. The development and restoration of this historical maritime site is aligned with the mixed use development of Wynyard Quarter and is a specific initiative identified in the Waterfront Plan (“Vos & Brijs Heritage Slipway”). The consultation report from Waterfront Plan includes feedback on; making the waterfront more attractive and appealing for visitors and residents, making it more of a focal point / feature, and celebrating its identity / character. There was also a feeling that Auckland’s history is inextricably linked to the waterfront. A key feature of the Vos development is that it provides another connection for the public to the harbours edge.

46. The proposal has tourism and social benefits in making future links via ‘classic water taxi’ with other heritage and tourism sites on a waterfront and harbour trail ie: Voyager Museum, Torpedo Bay, Chelsea Sugar Works, Kelly Tarltons and the Cruise Ship Terminal / Shed 10.

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47. The key partners in this proposal are Waterfront Auckland and PVCT and Voyager New Zealand Maritime Museum. The CYA, ATBBS and other yacht trusts will be key participants in the proposal. Formal endorsement is being sought from other key stakeholders including ATEED, POAL, Ngati Whatua, Waitemata Local Board, NZMIA and the RNZYS.

48. PVCT are aiming to present their application to the BHAF for the proposal by 22 April 2013 (due date for the Council Parks, Recreation and Heritage Forum meeting is 14 May). Subject to Waterfront Auckland Board, BHAF and Auckland Council approvals, the project is programmed to commence in May 2013 with project completion January 2015.

Background

49. The Vos boatyards are located at 38 Hamer Street, Wynyard Quarter. The entire Hamer St site comprises 5 lots and a waterspace subject to a Ground Lease and License held by Sanford on approximately 35 hectares of land reclaimed between 1920 and 1940. The neighbouring sites to the now subdivided Vos Yard site (Lot 3) are Marine Steel, Sanfords and further north Firth Industries (Fletchers).

50. Boat building was an important industry in NZ in the nineteenth century when water transport was a primary means of transportation and communication. Growth in population in Auckland meant the Waitemata Harbour became the main boat building centre.

51. The Percy Vos boat building shed was originally built in 1935 and relocated on the existing site in 1937 with the addition of a lean-to. The original slipways date from the same time. Additions were made to the building in 1942 and in 1970.

52. Percy Vos started an apprenticeship as a boat builder in the 1910s with Harvey and Lang at the then Poore St yard north of Fanshawe Street. In 1922, aged 24, Percy took the business over. The business relocated to the existing site in the 1930s and successfully constructed a wide range of wooden boats. Percy’s son-in law Bill Olstic continued the business upon his retirement. The company merged with Len Brijs and produced steel fishing boats. In addition to knowing the wooden boat building industry well Percy Vos is documented as being a well- rounded Auckland businessman who was honest and fair and had a diverse client base with a collection of focussed and dedicated people, requiring a range of skills, work boats and pleasure craft and carpentry work.

53. A group of historical boat enthusiasts at Auckland have combined since mid 2011 to form a strong and passionate group known as the CYA, dedicated to Auckland’s boating heritage. Members of the group have restored many of Aucklands traditional wooden boats and established a very impressive fleet of character yachts and launches that are an asset to the city. CYA along with Voyager Maritime Museum and NZ Marine have been the key group in development of the Vos Yard concept. This group forms the basis of the PVCT who will lead the development and management of the Vos yard and waterspace development.

54. The PVCT have been meeting monthly, firstly as the Vos volunteers since May last year and as a Trust since November 2012. The 6 Trustees are:

Table 1: The PVCT Trustees

PVCT Trustees Comment Peter Walker Chairman PVCT: Company Director: Walker Projects Ltd

John Street Chairman: Harken NZ, A Foster & Co Ltd, Chairman: The Classic Yacht Trust John Bukowski Architect Baden Pascoe Company Director, Marine Historian

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PVCT Trustees Comment Paul Walbran Company Director, ex ARC Councillor

Murray Reade CEO, Voyager Maritime Museum

55. Combining the fact that the Vos boatyard is the last remaining wooden boat yard on the Auckland Waterfront, and in New Zealand, with ready access to the fleet of original (not replica) vessels (the largest fleet in the world); makes this proposal, the Auckland Waterfront and maritime industry, internationally unique. The Wooden ship and boat building industry that was once a common feature in Auckland City is now thought to be a rare example of this type of marine-related industrial activity.

56. In November 2010 a Heritage Character Assessment was completed for the Vos & Brijs site (Matthews & Matthews Architects, refer Vos & Brijs Development Study, July 2011). The assessment states that the heritage of the site is best represented by the 1937 building at the south of the site along with its adjoining slipway (separated by bluestone walls) timber jetty and wharf. The assessment recommends that part of the site be spared from demolition and redevelopment. The assessment also prescribes procedures and controls for future restoration and redevelopment of the sites heritage.

57. The entire site has historically been leased by Sanford Ltd. During 2009 and 2010 ARH (through Sea+City) and Sanford undertook a number of negotiations around Sanford’s objections to proposed Plan Change 4. Directors of Sea+City felt the site offered considerable potential as part of a true mixed use environment at Wynyard Quarter and was the last part of Marine heritage to be found in this area. As a result, Waterfront Auckland has now agreed a solution to secure the history of the site whilst enabling future development of the marine and fishing industry. Refer the Vos and Brijs Development Study, July 2011.

58. The Vos and Brijs Development Study, July 2011 reviewed 5 development options in order to determine the optimum character solution through the development of the Vos and Brijs site including, if necessary, adjoining sites to the north and south. This has then allowed Waterfront Auckland (as landowner) and Sanford (as leaseholder) to establish leasehold terms where Sanfords long term commercial objectives that exist on the site, remain neutral:

Plan A – divide site with commercial development on Northern and Heritage / visitor attraction on Southern i.e: separate the Vos boat building shed including slipway and open space on the northern side. Sanfords ground lease reduces to match commercial area with reduced ground lease area by 292m2 (increase in waterspace 210m2). This was the simplest solution with a loss of commercial potential to Sanford. The subdivision budget of $1m includes compensation to Sanford ($647k), calculated in the Development Study as reasonable, for the potential commercial loss.

59. An Investment Proposal (IP #7) submitted to Council in November 2011 was rejected in part: “Vos Yard Development and Waterspace.” Waterfront Auckland sought Council funding for $6 million to fund the initiative in 2012. This included facilitation costs of $647k compensation to Sanford, $200k for reconfiguring the neighbouring Firth site, and $150k in related costs. $1m was approved with the remaining $5 million not approved (relating to the design and refurbishment costs of the Vos Yard itself). The IP proposed the recovery of project costs be sought in the form of grants, commercial revenue and potential fundraising, that will be the responsibility of a newly established Trust, also responsible for operations.

60. Overall, Auckland Council’s aim, as set out in the Auckland Plan, is to protect and conserve Auckland's heritage for the benefit and enjoyment of present and future generations. A 2011 survey of a cross-section of the Auckland population showed that 88% of respondents believed that protection of historic heritage is important, 78% have visited a historic heritage site in the last six months, and 54% think historic heritage is not well understood in their area. Council aim

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to maintain this level of public appreciation and enjoyment of our heritage, and look for new opportunities to improve understanding of Auckland’s heritage values.

61. This proposal will be funded by Council’s Built Heritage Acquisition Fund (BHAF); one of a number of measures Council has taken designed to strengthen its approach to heritage management. The fund operates on a revolving basis of borrowed funds and is managed by Auckland Council Parks, Recreation and Heritage Forum. The Fund “acquire” a heritage asset for restoration or conservation and pay for all required work. In this proposal PVCT are required to buy the asset back and the fund have offered as long as 4 - 5 years to do this. The Parks, Recreation and Heritage Forum is the Council committee that would first consider the Vos Yard proposal (followed by the Strategy and Finance Committee). Membership of the Forum is below: Sandra Coney (Chairperson) Dick Quax Alf Filipiana Noelene Rafills Christine Fletcher John Walker Michael Goudie Wayne Walker (Deputy Chair) Ann Hartley Penny Webster Mike Lee

Independent Maori Statutory Board Members: Anahera Morehu James Brown 62. The criteria the BHAF will consider PVCT’s application against are included at Attachment 6. Objectives of the BHAF include: To save at risk buildings and or other built features that have heritage merit from destruction by neglect, by purchase, short term hold and on sale To be the catalyst for restoration of other built heritage To be the catalyst for revitalisation of heritage buildings in areas identified in Council plans for urban intensification To demonstrate the economic benefits of heritage building conservation in the market place To complement the conservation and protection activity of local groups

63. Refer to Figures 4 – 5 in Section 3 for the Draft Concept Design of the Vos Yard and waterspace development.

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Figure 1: Current State: Vos Yard, Hamer St, Wynyard Quarter

Figure 2: Aerial picture of Vos Site

Jetty

Slipway 1

Slipway 2

Vos Shed

Former Port Incinerator building (Marine Steel)

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3. Summary of Recommended Option

Facilitation / Subdivision

64. As outlined in the Introduction and Background sections, facilitation of the Vos Yard restoration and development is an initiative (Stage 1 and 2) in the Waterfront Auckland Annual Business Plan 2012 / 13 and in the Waterfront Plan. An Investment Proposal (#7) was submitted to Council in November 2011 with subdivisional funding of $1m approved and in the current LTP budget FY 2013 (public funding).

65. As also outlined in the Introduction and Background sections, a Vos and Brijs Development Study was presented to the Waterfront Auckland Board in August 2011 concluding Option A; separation of the heritage component from the Vos and Brijs site, was the optimum character and commercial solution for development. The study recommended subdivision of the site accordingly, and the establishment of the PVCT to lead the development in a structure to be approved by the Waterfront Auckland Board.

66. A subdivision of the 5 sites has been completed (March 2013) (refer Attachment 7 for subdivision plan). The newly created Lot 3 of 1,115m2 land and 2,043m2 waterspace, comprises the new Vos Yard site for development. New lease arrangements are being finalised with Sanfords in line with the subdivision.

67. As part of the subdivision (and Development Study) in relation to the leasehold interests of Firth Industries a few changes are also to be made at a budgeted cost of $200k (payable to Firth): Realignment of the Firth Industries boundary to allow better access to Sanfords on the Northern side (creation of a shared “Right of Way” and water spaces critical for retention of the Vos Yard, a further lease over land to the north and currently owned by Waterfront Auckland, for storage to compensate for lost operational efficiencies along the Sanford boundary).

68. Waterfront Auckland has been working closely with members of the PVCT and will continue working as a partnership to progress this proposal via the recommended structure outlined in Figure 3 below.

Site designation transfer

69. Lot 3 (Vos Yard site) is currently a commercial asset in Waterfront Auckland’s commercial property investment portfolio. Underpinning this proposal is the recommended application to Council to transfer the current site designation of commercial property to public property.

70. The likely process to change the site designation will be a Business Case to the Strategy and Finance Committee of Council preceded with an introduction to the Vos yard Development and waterspace proposal to the Mayor and / or Councillors. (The Vos Yard Investment Proposal requesting $6m that went to Council November 2011, was rejected).

71. Note that the BHAF will be required to present the Vos proposal to the Council Parks, Recreation and Heritage Forum and finally onto the Strategy and Finance Committee.

Proposed funding and leasehold structure

72. The proposed structure to progress development of the Vos Yard site and waterspace is summarised in Figure 3 below. Refer to Background section for detail on the PVCT and BHAF.

73. The main features of the structure are:

Vos site is public property (not requiring 8% ROI from Auckland Council) Waterfront Auckland $0 Groundlease to BHAF BHAF sub-lease the site to the PVCT and fund the development requiring a 4 – 5 year payback from the PVCT for a sum equivalent to the development cost. PVCT are required to own the building at the end of the payback term

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PVCT raise sponsorship and funding for payback to BHAF. Operating revenue is forecast to cover operating costs via PVCT management of the facility (refer Section 7). PVCTs capital funding plan is at Attachment 3. The majority of capital funding for refurbishment will come from a fixed number of identified High Net Worth individuals. PVCT sub-lease the new facility to tenants / users (refer Figure 3 below)

74. The terms and conditions of the funding arrangement between BHAF and PVCT will be negotiated as part of the development process.

Figure 3: Recommended development structure

Waterfront Auckland

Land Owner

Vos & Brijs Site - $0 Groundlease / Public Site

BHAF (Auckland Council)

Lessee

PVCT Payback $4.7m to BHAF / Vos & Brijs Site – Sublease and fund $4.7m Final building owner development

PVCT Fsdfsd

Sub-Lessee

Café Boat Classic

Operator Building Yacht School Association

Sub-sub lessee’s (operating revenue)

Fsdfsd

Vos Yard Development and water space Concept Design

75. The Draft Concept Design for the Vos Yard Development and waterspace (Fearonhay, March 2013) are shown in Figure 4 and 5 below and the full concept design is contained in Attachment 1.

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Figure 4: Draft Concept Design (March 2013) – Floor Plan

Figure 5: Draft Concept Design (March 2013) – Street View

Draft Concept Proposition

76. The Vos Yard will be developed as an integrated and sustainable Maritime Heritage Centre focused on engaging Aucklanders in the heritage and ongoing commercial activity of a living, working harbour edge. It will incorporate:

Traditional boat building & repair and heritage vessels Immersive experiences of the stories of those who go to sea A behind the scenes experience of a commercial shipyard Themed Café & Retail A launch pad for new boats and marine products Functions, parties and events A wharf/pontoon drop-off point for Voyager-based excursions

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Draft Concept Design Summary

77. The Concept Design will be subject to TAG and Planning and Design Committee review and is programmed as a key milestone in June / July 2013 (refer Section 8).

78. Early endorsements have been received from Auckland Council’s Conservation Architect, Environmental Strategy & Policy, who sees a number of positives with the new scheme with it looking to be a creditable adaptive reuse of the Vos boatshop.

79. The design for the Vos Yard seeks to open the shed and the site to the street, providing access through to the harbour edge, the wharf, slipways and berthage. This “passage” starts at the “Hole in the Wall” café / reception area and connects to the main shed and work area where classic timber boat restoration will take place. The main boatbuilding shed has varying heights; at its highest is 5.1m and the lowest point is 3.2m. The length of the shed uninterrupted is 33m with an average width of 9, 80. The “Dinghy Locker” (3.4m high, length 16.3m, width 5.1m) provides space for Traditional Boatbuilding School activity as well as display of smaller craft. The “Timber Store” and “Shelter” provide for various activities including the traditional process of air-drying sawn timber (preparation for use in the boats). 81. Both slipways will be active with the main slip used to haul boats into the shed for restoration and maintenance and the smaller slip used on a day to day basis for bottom cleaning, antifouling and short term work. The slipways are approximately 21m long and 6.8m wide with a Reduced Level of 2.200 (varies). The restored jetty will be approximately 70m long and 4m wide with a Reduced Level of 3.200m (varies).

82. The upper level “Classroom” and “Crow’s Nest” provide space for meetings, lectures, demonstrations and also access to the deck level of boats in the main shed. Sustainability

83. Waterfront Auckland’s approach to sustainability to achieve the goals of the Waterfront Plan includes:

Visionary leadership Community engagement Embracing the importance and philosophy of kaitiakitanga Prudent management of limited resources Taking a long-term lifecycle view Being smart, innovative, collaborative, creative and responsible Adopting systems thinking and looking for integrated solutions Improving outcomes across the four well-beings – social, economic, environmental and cultural Understanding risk and building resiliency of community, business, infrastructure and environment

84. The construction estimate of the Vos Yard development considers restoration of existing heritage features of the Vos boatshed and replaces materials where appropriate like for like. Aside from reuse, sustainability is addressed in the design as follows:

Passive ventilation and heating strategies with the absence of HVAC equipment

Additional natural lighting strategies to the boat building shed

Emphasis is placed on the use of stairs as the main vertical circulation by means of a prominent location

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4. The Strategic Case – Making the Case for Investment

Strategic Context

85. The 2012 Waterfront Plan specifically refers to the Vos & Brijs Heritage Slipway as a key initiative in the Wynyard Quarter. The Waterfront Plan refers to the project as a “preservation of the historic boatyard and slipway as part of a broader redevelopment project.” This proposal is also included in the Waterfront Plan as a project to support the marine and fishing industries. The projects and actions to support the marine and 86. Waterfront Auckland’s Statement of Intent (SoI) to 2015 includes the Vos Yard Development and waterspace Stage 1 as a “Confirmed Strategic Project / Public Project” with Capex budget (public) LTP 2012 – 2022 $1m. The SoI has Stage 2 of the project as an “Unconfirmed Strategic Project.”

87. The SoI includes this proposal contributing to Council objectives as follows: Auckland Plan Outcomes – Strategic Direction: Protect and preserve Auckland’s historic heritage for benefit and enjoyment of present and future generations. Waterfront Auckland “Lead and Deliver” by preservation of historic heritage at the waterfront for example; Vos and Brijs project

88. As outlined in the Introduction, this proposal is in Waterfront Auckland’s current Annual Business Plan 2012 / 13: An “Agreed project” in Section 5 is the Vos Yard and waterspace development, Stage 1 and Stage 2. The subdivision and new lease with Sanfords concludes Stage 1 and this proposal progresses Stage 2; “finalise agreement to facilitate the development of a Marine Heritage Centre.”

89. The Waterfront Plan Implementation Strategy (WPIS) includes the Vos Yard Development as a private property investment / “lessor’s interest.” In order to progress the Vos development the project has now progressed recommending the site change from commercial to public.

90. The Westhaven Plan identifies the Sanford development adjacent in the Western waterspace: “a component of which is the Vos & Brijs heritage yard and slipway project. This will be a Placemaking project supporting the maintenance and restoration of original classic yachts and open to the public”. The Westhaven Plan was approved by the Waterfront Auckland Board in February 2013.

Alignment with Existing Strategies

Waterfront Plan

91. This project is aligned with the overall Waterfront Plan vision:

“A world-class destination that excites the senses and celebrates our sea-loving Pacific culture and maritime history. It supports commercially successful and innovative businesses and is a place for all people, an area rich in character and activities that link people to the city and the sea.”

92. The project is also significantly aligned with the following Waterfront Plan goals:

Public Waterfront – development of a new broad-based and heritage themed public facility and space; continuing the mixed use development of Wynyard Quarter and providing further connection to the harbour edge:

o Culture & Heritage – the marine and fishing industries provide significant character to the waterfront, and the retention and celebration of these ‘gritty’ industrial activities was strongly supported in public consultation.

o “A place where we protect and express our cultural heritage and history and celebrate our great achievements as a city and nation”

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o “….facilities and events…”

o “Enhanced public access to the water and people friendly public spaces. Specific and frequent locations along the waterfront where people can access and engage actively with the water.”

o “A public waterfront for all Aucklander’s and visitors to Auckland with public spaces, recreational opportunities and facilities.”

Smart-Working Waterfront – preserves and revitalises a unique boat building history of the Waitemata with restoration of the last wooden boat building shed in New Zealand. By restoring this heritage aspect of Auckland’s history the project provides a public facility for education, recreation, a point of interest for visitors and residents and a working facility for the boat building community / industry. With future potential to link the Vos site via ‘classic water taxi’ boats between Voyager Museum and Torpedo Bay for example, a harbour heritage trail would be created that is accessible and heritage themed:

“A place for authentic and gritty waterfront activities”

“Marine and fishing Industries”

“Water transport and port activities”

93. The proposal also contributes to the Waterfront Plan goal of “Blue Green Waterfront” with the development designs’ reuse of existing structure and materials and the innovative approach taken in creating a “Marine Heritage Centre” which has a broad based audience. The design is also innovative connecting the public with the harbours edge.

94. The creation of the Marine Heritage Centre is part of sustainable urban transformation and renewal in Auckland as well as the new Centre attracting a vibrant mix of visitors, residents, workers and activities. Contribution is therefore made to the Waterfront Plan goal of “A Liveable Waterfront.”

Auckland Plan

95. This project is consistent with the delivery of the Auckland Plan and the Council’s vision for “the world’s most liveable city.” One of the key project outcomes is preserving the maritime heritage of the Vos Yard site which contributes to the Auckland Plan’s Strategic Direction 4: “Protect and Conserve Auckland’s Historic Heritage for the benefit and enjoyment of present and future generations.” The public facility has a cultural history to share with visitors, Aucklanders and the broader boating community; contributing to Strategic Direction 3: “Integrate Arts and Culture into our everyday lives.”

96. This proposal is fully aligned with directives under Strategic Direction 4, Priority 2 of the Auckland Plan: “Invest in our Heritage:”

The heritage sector can provide jobs, experience, and knowledge within our communities. Engaging volunteers on heritage projects and involving people in their local heritage can build pride in the community and help foster civic responsibility. Heritage is also an educational resource, which can inspire learning in our children and young people, as well as opportunities for life-long learning:

i. Directive 4.4 – Ensure that our historic heritage appropriately informs new development and redevelopment, and inspires high quality, sympathetic design

ii. Directive 4.5 – Promote economic development through heritage-led regeneration, leisure and tourism and the appropriate use of existing heritage places

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iii. Directive 4.6 – Recognise and reinforce the contribution of historic heritage to the character and quality of Auckland’s urban and rural places

97. A more minor contribution is also made to Strategic Direction 12: “Plan, deliver and maintain quality infrastructure to make Auckland liveable and resilient” with regard to provision of social and cultural infrastructure and facilities.

Local Board Plans

98. This proposal is aligned with the Waitemata Local Board Plan goal to “ensure we have a high quality built environment that recognises and enhances the distinctive characteristics and heritage of our area.” This goal centres on protecting and promoting our local heritage with a priority also to “develop places for people.”

Maori Outcomes

99. While there are no direct contributions to Maori Outcomes several meetings between PVCT and Ngati Whatua (over waka restoration) have confirmed that there is nothing adverse in the Vos Yard proposal. PVCT and Voyager Museum have agreed with Ngati Whatua in discussion, to continue to work together on Heritage and Cultural issues and activities.

Investment Objectives

100. A facilitated Investment Logic Mapping (ILM) workshop for Vos Yard Development and waterspace was held on 21 March 2013. The ILM is at Attachment 8.

Table 2: Investment Objectives for Vos Yard Development and waterspace

Investment Objectives

A site of national maritime heritage is conserved and restored for all to benefit (last wooden boat building shed) PVCT repays development cost on a fully utilised and operationally efficient public facility

Vos Yard and waterspace is a recognised public destination that is visited regularly

Vos Yard (via PVCT) becomes an exemplar heritage organisation (facility design, financial efficiency, management and maintenance, outputs, outcomes and supporters)

Key Benefits

Key benefits associated with the proposed development are set out in the table below.

Table 3: Investment Benefits

Description and Benefits Beneficiary Impact Possible Measures

Conservation of Public Direct New public and heritage facility of historic Vos Yard – a well significance / authentic experience available to utilised public facility with debt public repaid Improved connection to waters edge Educational facility re wooden boat building craft % utilisation Vos facility / Operating revenue Positive user feedback Increased number Wynyard Quarter visitors

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Description and Benefits Beneficiary Impact Possible Measures Social benefits of historic understanding Visitors to Direct New public and heritage facility connecting to Auckland waters edge / historic significance made accessible Increased number Wynyard Quarter visitors Local economy Indirect Supports economic growth Increased tourism GDP contribution Boat building Direct Facility to continue with boat building craft, nurture community classic yacht fleet, and educate (heritage and Positive user feedback other) Number Vos Yard visitors / users

Auckland Indirect Cost neutral heritage investment Council Successful Trust in operation Conservation of historic site / contribution to Auckland Plan SD4 Public destination is Public Direct New public and heritage facility of historic visited regularly significance / authentic experience available to public Improved connection to waters edge Educational facility re wooden boat building craft % utilisation Vos facility / Operating revenue Positive user feedback Increased number Wynyard Quarter visitors Social benefits of historic understanding Visitors to Direct New public and heritage facility connecting to Auckland waters edge / historic significance made accessible Increased number Wynyard Quarter visitors Number Vos visitors / users Diversity of users / visitors Local Economy Indirect Supports economic growth Increase tourism GDP contribution Waterfront Indirect Improved customer satisfaction Auckland Increased number Wynyard Quarter visitors Number Vos visitors / users SoI / Business Plan and Waterfront Plan objectives met Vos Yard becomes Waterfront Indirect National recognition of waterfront development that exemplar heritage Auckland includes heritage conservation organisation SoI / Business Plan and Waterfront Plan objectives met Conservation Plan (and Business Plan) objectives met Increased number Wynyard Quarter visitors

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Description and Benefits Beneficiary Impact Possible Measures Auckland Indirect Positive feedback in enabling conservation of Council heritage building / industry Meets heritage objectives Number visitors / users to Vos yard % utilisation Vos Yard (PCVT ability to repay BHAF) # supporters and funders including industry

Public / Visitors Direct New public and heritage facility connecting to to Auckland waters edge / historic significance made accessible Increased number Wynyard Quarter visitors Number visitors / users to Vos yard Traditional boats and wood working skills conserved

PVCT and boat Direct New public facility enabling preservation and building enhancement of industry trade and expertise community Traditional boats and wood working skills conserved Successful Trust in Operation % utlisation Vos Yard (ability to repay BHAF) # supporters and funders including industry # volunteer base

Key Risks

101. Risks result from uncertain events that either improve or undermine the achievement of benefits. Identified risks for the project along with strategies to manage these risks are detailed in Section 8, Table 11.

102. There is one inherent risk assessed in the “High” category: Consenting risk. Normal business processes will apply in the course of the project programme.

Assessment of Materiality and Scale

2 103. Using the Assessment of Materiality of Scale Matrix this Business Case falls into the “Low Materiality / Small Scale” category. The Matrix then determines that for the Vos Yard Development and waterspace, a Single Stage Business Case, CE approval, is required (given that whole of life costs are less than $5m).

104. However, this business case requires Board approval given it is recommended Waterfront Auckland applies to Council to change the current Vos site from a commercial property asset to a public property.

2 Waterfront Auckland: “A New Approach to Business Cases,” Carl Gosbee and Chris Money, 9 October 2012

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Assessment of Public or Commercial Driver

105. The Vos Yard Development and waterspace proposal is assessed as being a public project (refer previous paragraph).

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5. The Economic Case – Determining Best Value for Money

Decision Making Framework

106. Waterfront Auckland’s Decision Making Framework, which analyses the various options available alongside the recommended course of action, is used for significant decisions where there is a need to demonstrate that a rigorous and rational process was applied in reaching a decision. This proposal does not constitute a significant decision as:

It does not attract greater than normal interest from public or other stakeholders in the decision

It does not proceed on a limited contestability or no contestability basis

It does not carry a material risk

It is fully aligned with Waterfront Auckland’s objectives

107. Waterfront Auckland has therefore applied a multi-criteria analysis to select the preferred option, which takes account of:

Critical success factors

Benefits and costs (both tangible and intangible)

Risks and uncertainties

Critical Success Factors

108. The following critical success factors are attributes essential to successful delivery of the proposal, against which identified options have been assessed.

Table 4: Critical Success Factors

Critical success factors Identified critical success factors (CSFs) Strategic fit and Vos development is in line with objectives of the Auckland Plan, business needs Waterfront Plan, Waterfront Auckland Annual Plan and SoI Create new tourism / educational / industry facility for broad public use and visitation, providing further activation of Wynyard Quarter and the waterfront Preserve heritage and cultural significance of last wooden boat building facility of its kind on Auckland’s waterfront (and in New Zealand) and continue Percy Vos legacy Potential value for Create exemplar heritage organisation / model (via PVCT) that is money financially efficient and sustainable Invest in a heritage development that is cost neutral Create economic support (through contribution to tourism GDP, waterfront visitation and support to the wooden boat building industry) Potential achievability Council approval of commercial property asset to public Fully publicly notified consent granted by Council Approval to forego commercial rental return of Vos site: $130k p.a + rent reviews ($5.3m to 2042; NPV of $1.58m)

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Critical success factors Identified critical success factors (CSFs) BHAF grant development funding to PVCT PVCT Business Plan achieved / implemented Robust RFT process to ensure successful delivery Effective stakeholder consultation Service provider Supplier with proven capability to ensure optimal design and capacity and capability construction of quality, heritage infrastructure Delivery on schedule and within budget PVCT maintain building to Conservation Plan (and Business Plan) targets Potential affordability BHAF grant development funding ($4.7m) to PVCT PVCT success in securing funding via Pyramid of funding ($4.7m + required levels of operating revenue, over term to be agreed) Efficient and sustainable operational management of facility (PVCT) Approval to forego commercial rental return of Vos site: $130k p.a + rent reviews ($5.3m to 2042; NPV of $1.58m) Council approval to loose rateable income (minimum $620k to 2042)

Demand Assessment

109. Refer Attachment 11 for a summary of demand factors for this proposal.

Options Assessment

110. As noted in the Introduction sections, the options analysis for the Vos Yard was done under the Vos & Brijs Development Study, July 2011, of which the Waterfront Auckland Board agreed and confirmed adoption of Option A (refer Attachment 5). Context for the study is provided in the Background section.

111. For the purposes of this business case the “Status Quo” comparator option is to do nothing with the now subdivided site, achieving a peppercorn rental. Waterfront Auckland would continue paying rates on the site (for a commercial property).

112. The Development Study options reviewed were:

Baseline Plan – develop a bulk and location plan for the Vos and Brijs site showing maximum commercial development potential and ignoring the character value.

Plan A (confirmed and agreed option) – divide the commercial potential from the heritage character on the existing Vos and Brijs site (subdivision now completed)

Plan B – overlay the heritage character value over the commercial potential (Baseline Plan)

Plan C – relocate the commercial potential to land to the south and leave the Vos and Brijs site for redevelopment of its full heritage character potential

Plan D – relocate the commercial potential of the existing site to land to the north and leave all or part of the Vos and Brijs site for unfettered development of its heritage potential as determined by the Heritage Character Assessment (Matthews & Matthews Architects, November 2010)

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113. Plan A was chosen as the most pragmatic and simple solution as it did not require acquisition of other ground leases and provides separation of the commercial potential (of Sanford) from the heritage character. The compensation for the loss of commercial potential to Sanford (for separation of the Vos site) was calculated in the study as $646,772 (included in the LTP budget of $1m.

114. The other options were discounted as follows:

Baseline Plan - this was discounted due to the Vos shed and its recognised historical significance, its support via PVCT and following agreement with Sanfords on separation of the Vos site.

Plan B – combining the important heritage character is physically combined with the commercial potential provided an expensive development option and was not considered an attractive proposition in the Heritage Character Assessment

Plan C – discounted as it would require Waterfront Auckland to recapture the leasehold interest over a neighbouring site from an existing ground leaseholder and active marine servicing business making the cost prohibitive.

Plan D – has a significant impact on the proposed public amenity (Headland Park) reducing the area of the potential public space but also obstruct an important proposed view shaft. This option also requires recapture of part of an existing ground lease at a high expense.

Estimating Monetary Benefits

115. Refer to Section 7 for a summary of the financials for the preferred option (applicable to PVCT).

116. A high level Cost Benefit Analysis (CBA) was appraised for the proposal (refer Attachment 10 for assumptions) based on the SGS Economics and Planning (Melbourne) framework. Note the assessment is yet to be reviewed by SGS Economics and Planning as part of the peer review process for adoption of this framework.

117. The cost used in the BCR is the foregone commercial return to Waterfront Auckland of NPV $1.58m (to 2042 at discount rate of 8.25%).

118. The benefits monetised (refer Attachment 10) are:

Provision of a quality and new public facility - the value of new visitation to the facility was monetised using the travel costs (out of pocket expense and time) borne by these visitors resulting in a NPV of $35k (100 visitors per week). The facility also provides 3 new jobs / FTE’s contributing to GDP of NPV $1.1m

Tourism attractor / activation of Wynyard Quarter – the new facility will activate the site itself and the broader Wynyard Quarter (visitors to Vos will spend money elsewhere on the waterfront): NPV $21.6k

Marine industry development – may provide an uplift in productivity (measured by an increase the number of industry apprenticeships per year): NPV $648k.

119. The BCR is 1.8:1.5

120. A number of other smaller benefits were identified but not deemed significant enough to monetise:

Non-user benefits (the “option and existence” of the facility)

Improved social cohesion and volunteerism from the facility

Improved land value from conservation of the asset (designated fishing and marine)

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121. The current residual land value of the Vos site is $1.03m; waterspace $0.93m. This is based on achievable rental and waterspace license rates.

122. The key monetary costs for this project to PVCT are:

The capital cost of $4.7m (refer Section 7 and PVCT funding plan Attachment 3)

Annual operating costs $344,500 pa (refer Section 7) (offset by operating revenue)

Intangible Benefits and Costs

123. The intangible benefits for each short-listed option were assessed using multi-criteria analysis, shown in the Waterfront Auckland Objectives Spiderweb charts below.

124. ROI in Figure 6 (do nothing) would potentially become a larger negative ROI given the pending transitional rates increase proposed by Council. Note there is no ROI in Figure 7 given the proposal is a public project (assess as neutral).

Figure 6: Option 1 Status Quo (do nothing)

Figure 7: Option 2 – Vos Yard Development and Waterspace (Proposal)

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125. The preferred option (Option 2) positively contributes to all Waterfront Auckland objectives in particular “Public Waterfront” and “Smart Working Waterfront.”

Testing the robustness of the options analysis

126. The most material benefits assessed in the BCR are the 3 new FTE’s contribution to GDP on the waterfront and the increase in industry productivity from new apprenticeships (assumption is 2 per year). If no new apprenticeships arose stimulating an uplift in industry productivity, the BCR would reduce to 1.1:1.5.

127. Note that the 3 FTE’s are required to manage and operate the facility successfully and to full utilisation. Given there are additional smaller benefits from the project not monetised, this ratio is still positive. The conservation of this heritage site also outweighs the foregone rental (cost).

The preferred option

128. The preferred option is: Vos Yard and waterspace development,” because it:

Progresses the conservation of the last remaining wooden boat building shed in New Zealand

Best supports Waterfront Auckland, Auckland Council, Waterfront Plan and Auckland Plan objectives by creating a new public facility that conserves a significant piece of Aucklands maritime history.

Has a positive BCR of 1.8:1.5 (with smaller un-monetised benefits)

Delivers strongly against Waterfront Plan objectives of “A Public Waterfront,” “Smart Working Waterfront,” “Blue Green Waterfront” and “Liveable Waterfront.”

Provides enhanced access and connection to the waters edge

Supports activation of the Wynyard Quarter and its mixed use development

Creates a conserved site of heritage significance preserving a key part of maritime history and facilitating this history being shared and experienced for all Aucklanders and visitors to Auckland

Develops a unique offering that has future potential to link (via the water) with other waterfront / harbour heritage sites

Supports the wooden boat building industry that has the largest fleet of restored original classic yachts in the world and continues the Percy Vos legacy and craft of wooden boatbuilding

Has the potential to create an exemplar Trust organisation and model for heritage conservation and development with a broad use and application

129. Status quo (do nothing, peppercorn rental to Waterfront Auckland) does not achieve Waterfront Plan and Auckland Council objectives focussed on heritage conservation and the intended development of the waterfront.

130. Leaving a building of historic significance to further decline on this prime Wynyard Quarter and waterfront site does not optimise the investment already made in the Wynyard Quarter and that planned for the future.

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6. Commercial Case – Preparing for the Potential Deal

The Procurement Strategy

131. As outlined in the Introduction, Waterfront Auckland will Project Manage the proposal in partnership with the PVCT. PVCT will undertake all procurement in relation to the development project, under guidance through the Waterfront Auckland partnership.

132. The project will be managed by MPM Projects who will use the procurement strategy and approach that is in place for Waterfront Auckland, as outlined in this section.

133. The Procurement strategy adopted will be on a “Lump Sum” basis and the evaluation team will be made of relevant persons from the PVCT, Waterfront Auckland and MPM, in accordance with MPM’s procurement policies.

Procurement Plans – Proposed Implementation Timescales

134. The procurement timetable to be agreed with the service providers is as follows:

Table 5: Procurement Timetable

Procurement Milestone Approximate Date

Consultants engaged May – June 2013

Contract awarded to constructor February 2014

135. The project timetable for implementation of services is set out in Section 8 and Attachment 4.

Consenting

136. MPM will manage the project Resource Consent process. As Lessor, Waterfront Auckland will input into the consenting process.

137. As outlined in Section 3, the proximity of the proposed facility to the Bulk Liquid Industry, and its intended broad, public user audience, poses a consenting risk. For the whole area North of Silo Park the District Plan outlines:

Quarter Area 6 contains several hazardous industry operations which will continue to operate for a period of time while Wynyard Quarter is transitioning into a mixed use environment. To address risk issues associated with these industries, potentially sensitive land uses are classified as a non-complying activity within Quarter Area 6 until all existing hazardous industries within this Quarter discontinue operations.

138. It is anticipated the public and ‘hospitality’ aspects of the proposal will be non-complying activities (industry and marine are compliant). The Sherpa Report states that specifically for Sites 1 – 10 (North of the Gantry) “allowable land uses” these are:

Bulk Liquids risk sources in this area Population intensification not compatible with existing industry Low density industrial only No significant night time populations 139. It is anticipated independent risk support would be required to progress the consent for the proposal. A pre-liminary assessment is estimated at $10 - 15k which would determine if the

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proposal is consentable. If the result is positive for the proposal an independent risk assessor could be engaged to undertake a quantitative risk assessment to satisfy District Plan requirements (estimated at $20 – 25k).

140. Refer Attachment 12 for further Commercial Case components

Accountancy Treatment

141. The Vos site will be included in Waterfront Auckland’s balance sheet at current FHLV Land: $1.0m and waterspace value: $925k (total site value to June 2013 $1.95m). Subject to Council approval the asset will be transferred into the public asset register and subject to standard valuation / re-valuation processes.

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7. Financial Case – Affordability and Funding Requirements

The Financial Costing Model

142. Given this proposal is a public project it has been modelled in Excel over the appraisal period of the project to 2042 (the Auckland Plan period).

Assumptions

143. For the purposes of the analysis the following assumptions have been made:

The capital cost of the project to BHAF / PVCT is $4.7m (refer Attachment 2), including contingencies for risks and uncertainties

Project completion date is programmed for January 2015 (refer Attachment 4)

Council approves designation change from “commercial” to “public” and a $0 Ground lease from WA to BHAF (with potential income loss to Waterfront Auckland of $5.3m to 2042)

Council grants consent for the Vos Yard and waterspace development proposal This is a public project with no projected ground rental revenue payable to Waterfront Auckland or the BHAF (see bullet 3)

Operating revenue is projected by the PVCT at $344,500 p.a Interest costs are excluded in the NPV analysis (from BHAF / Council point of view) on the basis the project is publicly funded

Discount rate used is 8.25% Taxes, Council rates and Building R&M (1.75% of capital cost) are assumed to be re- imbursed by the PVCT

Depreciation (on building and wharves) with a presumed 50 years asset life, is 2% pa (straight line)

Financial Costing Approach

144. MPM Projects have provided a capital cost estimate for the Vos Yard proposal (estimated by Ebert Construction on a “No Obligation” basis, November 2012). The estimate is based on the preliminary design. The cost is $4.7m (excluding GST and consent fees) and the detailed breakdown is at Attachment 4. The estimate assumes:

No resource or building consent fees

Many original features will be retained or replaced for the like (as a heritage classification)

Code will require a form of fire upgrade and protection of the associated boundaries

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Table 6: Capital Cost Summary

Activity Total Cost ($) Building Works Alterations to trusses / structural upgrade 315,000 Recladding of structure 247,500 Precast firewall to boundary 237,600 New Finger Wharf (Gum or similar) 250,000 Construct enclosed ramp to display area 261,000 Fitout to café offices and display areas 432,000 Landscaping works / retaining wall 200,000

Remainder of building works (< $200k, 1,250,080 refer Attachment X) Building Works Sub-Total 3,193,180

Contingency (+ 10%) 3,512,498

Prelims (+ 12%) 3,933,997

Margin (+ 5%) 4,130,697

Professional Fees (+14%) Total 4,708,995 Assumptions: Costs exclude GST No contingency for resource or building consent fees Based on Concept Design Original features retained or replaced like for like

145. Annual operating expenses and revenue have been estimated by the PVCT per Table 9 below. 146. Main Opex sources are; berthage, slipway fees, shed rental, café concession, tenancies, special activities (for example; new product and boat launchings, lectures, rock concerts), retail (for example; special timber products, Vos apparel) 147. Main revenue sources are; slipway / haul out and wharf operations, including berthage revenue from harbour tourist trip operators, onsite workshop charging for smaller items of restoration, venue hireage for functions, Vos specific events, education / skills or night classes and lease for F&B operator. 148. Note that the PVCT have already been approached for a number of restoration projects (refer PVCT Business Plan Attachment 9).

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Table 7: Operating Expenses and Revenue

Operating Expenses

Activity Total Cost ($) Building Expenses 100,000 Staffing & Programming 100,000 Marketing / Development 75,000 Free cash 69,500 TOTAL 344,500

Operating Revenue

Activity Revenue ($) Marine Side 105,500 F&B Tenant 104,000 Retail 10,000 Events & Programming 60,000 Venue Hire / Meeting space 15,000 Sponsorship 50,000 TOTAL 344,500 Refer also Attachment 9 PVCT Business Plan for further detail on potential projects and management plan

Funding and Overall affordability

149. PVCT will apply to BHAF for establishment public funding of $4.7m per the proposed structure in Figure 3.

150. In addition to forecast operating revenue, PVCT has the following funding source plan (still being finalised) from a variety of sources (presented in Attachment 3):

Pyramid of funding approach: At the top, high net worth individuals (4 primary targets + others), supported by a “family / Club” layer (Vos related parties, RNZYS, CYA members, Marine Industry companies, for example). The bottom layer comprises smaller funding sources, for example membership and sponsors.

The PVCT are approaching a 12 selected High Net Worth individuals (surety of funding yet to be finalised)

Funds from organisations such as Lion Foundation, ASB Community Trust, Sir John Logan Campbell Residuary Estate, Sky City Community Trust, Chas Whitney Trust and the Glen Foundation. Warwick Lovell, PVCT’s administration manager has had preliminary discussions with a number of the Trusts.

Work is underway with the NZMIA to build on their endorsement of the project and explore how the industry might support the project. John Street and Chairman of PVCT are due to meet the Commodore of RNZYS to also further their involvement and seek assistance in gaining membership support / benefaction.

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151. As outlined in the Introduction, Waterfront Auckland has $1m of public funding in the current LTP to FY 2013. This is for the facilitation of the proposal per the Vos & Brijs Development Study (July 2011) for subdivisional costs to Sanford and Firth Industries.

Financial Impacts (to PVCT)

152. The financial impacts of the project over the 30 year period to 2042 are shown below:

Table 8: Summary of Financial Impacts

$000s by year

Total Preferred Option: Calculation 13/14 14/15 15/16 16/17 to 2042 Capital -1 Expenditure 4,709 Operating Expenditure: Operating Expenditure -2 167 335 335 9,199 Rates (Assume $0) -3

Depreciation (2%) -4 94 94 94 2,538 Interest (N/A) -5 Total Operating Expenditure (6)=(2)+(3)+(4)+(5) - 261 429 429 11,737

-8 Revenue 167 335 335 9,199

Capital funding required -1 4,709 $0 $0 $0 4,709 Cash operating funding required (6)-(8)-(4) - - - - - PVCT forecast operating expenses are offset by forecast operating revenue (refer Table 8). The Capital funding required for the main refurbishment is sought from a fixed number of High Net Worth individuals over a period of three years (refer Attachment 3)

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8. Management Case – Planning for Successful Delivery

Project Management Arrangements

153. As outlined in the previous section, under the Waterfront Auckland / PVCT partnership, MPM Projects will project manage the procurement and construction of the Vos Yard Development. In the event that this proposal receives formal approval and funding, the project will be managed by MPM using their project management methodology which is aligned with the Council PMO methodology.

PVCT Management Plan for Vos Yard (refer also Attachment 9)

154. With two working slipways, the boatbuilding shed and the ancillary elements of the proposed development, the yard will be operated as a working facility. Further detail on management and maintenance of the proposal is included in a PVCT Business Plan at Attachment 9. Management will be provided by: A qualified Slip Master who will organise and oversee all berthage and slipway operations A General Manager Boat Building and maintenance who will supervise all work on boats on site and coordinate all contractors in attendance A Building Manager will monitor and control public access to the yard who it is anticipated will operate the “Hole in the Wall” Café at the entrance and be fully versed in all aspects of the facility; boatbuilding, history and heritage. 155. It is envisaged the Slip Master and General Manager Boat Building will also ensure the buildings, slipways and equipment are maintained to the required Health & Safety standards and that all regulations and environmental standards are adhered to. 156. The managers will report to the PVCT on a regular basis so that the Trust can ensure that all needs are resourced and acted on in timely fashion. Note that The Trust has already identified people who can fill these roles. 157. The Trust and its volunteers have already invested ~ 2,000 hours of time in the Vos Project and are confident this level of support will continue and grow with the conservation of the Vos Yard. The Trust and its associates have also obtained, been offered or provided with valuable equipment and resources which will be integrated into the development.

Proposed Governance Arrangements

158. Refer Figure 3, Section 3.

Project Roles and Responsibilities

Table 9: Project Roles and Responsibilities

Name Role

Project Sponsor John Dalzell, Chief Executive

Project Partner Richard Aitken, General Manager Property and Assets

Project Partner Peter Walker, PVCT Chairman

Project Manager Daniel Khong, Project Director

Consents Matthew Twose, Manager Statutory Compliance

Project Resource Matt Comer, Strategic Analyst

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Project Plan and Milestones

159. The project timetable is summarised in the table below. This project is expected to take up to 18 months to complete. The detailed Development Programme is attached at Attachment 4.

Table 10: Project Plan Timetable (Combined Waterfront Auckland / PVCT / MPM Projects)

Key Project Milestones Approximate Date

Submission to BHAF for inclusion in May Board Agenda 22 April 2013 (PVCT)

Waterfront Auckland Board approval 24 April 2013

Presentation to Council Parks, Recreation and Heritage Forum 14 May 2013

Waterfront Auckland presentation to Strategy & Finance May 2013 Committee

Ownership Transfer May – August 2013

Design presentation to TAG and Planning and Design June / July 2013 Committee

Detailed Design October 2013

Consenting complete December 2013

Construction commencement February 2014

Construction Completed November 2014

CCC Issued January 2015

Risk Management Planning

The strategy, framework and plan for dealing with the management of risk are in accordance with Waterfront Auckland’s Enterprise Risk Management (ERM) Framework and Risk Policy, September 2012. The ERM Framework guides the application of risk management within Waterfront Auckland (supporting the Risk Policy). The risk assessment process has three stages; risk identification, risk analysis and risk evaluation and follows the AS / NZ ISO 31000:2009, principles and guidelines.

Risk Register

160. The following project level risks have been identified and assessed at a high level using the ERM Framework and risk register.

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Table 11: Risk Register

Risk Category Conseq Likeli Risk Risk Existing Description uence1 hood2 Rating Treatment Controls

1 Site Economic / 4 2 Moderate Business Case to Last wooden boat designation Processes / Strategy & Finance building shed in NZ / change not Delivery of Committee. heritage value. IP approved Commitment Introduction to submitted to Council s Mayor / Councillors 2011. Alignment with Auckland Plan and Waterfront Plan.

2 PVCT unable to Operating / 3 3 High Robust PVCT Diverse funding achieve funding Customers / Business Plan; incl. sources. Broad levels (to repay Legal and Funding plan, based design of BHAF and Regulatory Conservation Plan. facility for multi uses. maintain compliance Wide range of Strong stakeholder building) channels to target support. Proposed broad audience development model maximising revenue

3 Cost overrun Processes 3 3 Moderate Robust PMO Evaluation team / methodology. PCG

4 Consenting risk Processes 4 3 High Independent Experienced consent preliminary risk team and track assessment and record.Strong support. Robust technical support for consent process to nature, location and be undertaken size of development

5 Sustainable Economic / 3 2 Moderate Approved design Waterfront Auckland approach to Processes consultant and / PVCT approval development is approved final process. TAG and not adopted design. Planning and Design Committee review

6 Design and Processes 3 2 Moderate Construction TAG and Planning construction awarded to and Design issues experienced Committee review. In suppliers. house expertise and experience and appointed Project Managers

7 Stakeholder Processes 3 2 Moderate Further Formal endorsement complaints1 consultation with sought from wider key stakeholders stakeholder group. as part of the Extensive implementation consultation process. undertaken.

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1. Key stakeholders are outlined in Section 2 2. Consequence rankings are 1 = Insignificant, 2 = Minor, 3 = Moderate, 4 = Major, 5 = Catastrophic 3. Likelihood rankings are 1 = Rare, 2 = Unlikely, 3 = Moderate, 4 = Likely, 5 = Almost Certain

Table 13: Risk Profile Assessment

5 Moderate Moderate High Extreme Extreme Catastrophic

4 Moderate High Moderate Extreme Extreme Major

1 4

3 Moderate Moderate High Low High 3

Moderate 3,5,6, 2 sequences

Co 7 2 Low Low Moderate Moderate High Minor

1 Low Low Low Moderate Moderate Insignificant

1 2 3 4 5

Rare Unlikely Moderate Likely Almost Certain

Likelihood

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9. Recommendations Decisions required

(iii) That this Business Case to progress the Vos Yard and waterspace development as a heritage, maritime-themed experience (a “Marine Heritage Centre”), is formally approved by the Waterfront Auckland Board. The key components underpinning approval and requiring Board agreement in relation to this proposal are:

a. That Waterfront Auckland apply to Auckland Council to transfer Lot 3 (the Vos Yard site) from a commercial private property asset to a public asset (foregoing the otherwise required 8% ROI3);

b. That the proposed funding and leasehold structure to proceed with the Vos Yard development is approved as follows:

i. Waterfront Auckland ground lease Lot 3, Vos Yard, 38 Hamer Street to the Built Heritage Acquisition Fund (BHAF) of Auckland Council at $0

ii. BHAF sub-lease the site to the PVCT (as asset owner) and fund PVCT $4.7m for construction of the development

iii. The PVCT in partnership with Waterfront Auckland construct the Marine Heritage Centre

iv. The PVCT manage and operate the Marine Heritage Centre on the site and payback the $4.7m to the BHAF (at terms yet to be agreed), becoming final owner of the Vos Yard asset

c. In ground leasing the Vos Yard site to the BHAF, the Board approves the partnership between Waterfront Auckland and PVCT, including the PVCT’s approach to management and maintenance of the new Marine Heritage Centre

(iv) Subject to approval of this proposal by Waterfront Auckland Board and Council, that the Chief Executive is delegated the authority to implement this project on the basis that progress is regularly reported, appropriate consultation is completed and the Board is notified if any material issues arise.

3 Council require 8% return on investment on commercial property activities and marina operations, only (SOI – 2015)

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Attachment 1

Draft Concept Design (Fearonhay, March 2013)

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Attachment 2

Ebert Construction estimate (December 2012)

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Attachment 3

Vos Pyramid of Funding / Capital Funding Plan

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Attachment 4

Programme of work

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Attachment 5

Waterfront Auckland Board minutes (Vos and Brijs Development Study, August 2011)

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Attachment 6

Built Heritage Acquisition Fund Criteria

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Attachment 7

Subdivision Plan (Site 01A)

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Attachment 8

Investment Logic Map (ILM, March 2013)

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Attachment 9

Percy Vos Charitable Trust Business Plan (Management and Maintenance)

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Attachment 10

Cost Benefit Analysis (Yet to be peer reviewed)

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Attachment 11

Demand Assessment

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Attachment 12

Commercial Case components

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