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From Heritage New Zealand, Autumn 2006

Value Added

by Miles Erwin

Red Tape and restrictions are many people's image of the downside of heritage-listed properties. They couldn't be more wrong.

Public Trust Office Building, Mayoral Drive, Auckland. Photo: NZHPT / Martin Jones

Many people think a heritage listing dooms a property to low economic returns. It may be pretty, but, for a good investment, look elsewhere. However, this couldn't be further from the truth. Overseas studies have shown that property prices can actually improve with heritage listing. And examples in New Zealand show that heritage-listed properties can be natural money-spinners as the country's cultural cringe wears off and a new interest in our history blossoms.

Heritage-listed properties are making money in a variety of ways. They are in demand as film locations, for instance. A heritage building has huge potential as a café or bar. Smaller residential homes are attractive to quality tenants and are great for hosting small functions. There are even developers who specialise in heritage buildings, seeing their inherent longevity in strength and style as far better than that of a new building - red tape and restrictions don't even come into it.

One of the best examples of turning an "old dunger" into a money-spinner is Auckland's Civic Theatre on Queen Street. The $41.8 million put into the theatre's upgrade was well spent on intelligent design and use of space, while keeping the building's intrinsic appeal.

George Farrant, city heritage manager at Auckland City, says the Civic is now a huge success. "It's hard to find a time when the building hasn't got somebody or something packing in or packing out in sessions, which is tremendous," says Farrant. "This is despite the fact that big touring shows have taken a dive worldwide."

Auckland's Civic Theatre on a wet night. Photo: Photo New Zealand /Nick Servian

The key was ensuring the large space could be adapted to lots of different uses so that an economic event, like the decline in touring shows, would not have a negative affect.

"We gave the Civic a lot of strings to its bow," says Farrant. "We converted spaces that had been cabarets into other venues so it has a whole spectrum of used while still retaining its cinema capability. But sundry little spaces are now separate bars, separate hire spaces. They do everything from weddings to corporate bashes to product launches to all sorts of social things. The building now is pretty much humming, and people love it because of its ornate, atmospheric riches."

The success of the building provides considerable revenue to the council, through rentals and ticket sales managed by The Edge management company.

But it isn't just large-scale public works that give money back to their owners. Heritage-listed property can be an extremely good investment for large-scale developers as well as mum- and-dad investors.

International studies have shown that heritage listings can often provide a real economic benefit to the owner in the form of property prices. An Australian paper that collated international research showed that the impact of heritage listing on property prices is minimal at worst and can often be positive. This is especially so in residential areas where the potential for high-rise office development is less.

Robert Orr House, Lower Hutt. Photo: June Orr

Rosemary Bradford, a real estate agent for Colliers Wellington who specialises in heritage properties, says heritage buildings have great investment potential, primarily by attracting high-paying, and high-quality, tenants.

"I think that some buyers like to own them," says Bradford. "Also, tenants increasingly like to be in them, which makes them a sound investment."

But that does depend on how well a building is done up. "You can attract good rentals if they're done well and sympathetically but, if people do botch renovations, they're pouring money down the drain, because ultimately that's not going to appeal to tenants," says Bradford.

One great advantage of historic buildings is the variety of uses to which they can be put. Ross Healy, a property developer in Phillimore Properties, specialises in historic and character buildings.

"There's more flexibility in use with these older buildings," says Healy. "I believe any of these buildings could be residential because people love character, space, high stud and an interesting feel. You've also got quality office-space potential. "

There are plenty of opportunities for smaller heritage buildings to make money as well. Annabel Lush, manager of Auckland City events promotion, says the council's smaller historic places are popular with advertising companies wanting different locations. The Lion, the Witch and the Wardrobe used a number of heritage settings to imitate 1940s England, including Monte Cecilia House in Hillsborough.

"There is a lot of potential in screen production," says Lush. "We are constantly asked for a location that looks a bit different. "If you want a Victorian villa, we have that. If you want a Gothic cathedral, we can provide you with that, and if you need an English garden, we've got those as well," says Lush. "That's where they [heritage buildings] really do come into their own."

Logan Brown Restaurant, Wellington. Photo: Logan Brown

The trick to making money on a heritage property is to make use of its natural appeal - its history and its beauty. June Orr, the owner of Robert Orr House in Lower Hutt, says heritage homes have huge economic potential.

Orr uses the homestead for functions, weddings and tours by cruise ship passengers. She doesn't charge much for charities, but she can earn $100 a head for corporate functions. Included in the events is Orr's exhaustive knowledge of the house's history, something she says that differentiates her house from others. With a tour from the owner, someone involved in the history of the house, people get a wonderful experience.

"It depends on the operator, doesn't it?" says Orr. "I enjoy people and I get on with them well. They love the stories and the history. They enjoy heritage."

The events are hard work, as Orr does 90 per cent of the job herself, so she doesn't host many. However, she says the house could be a successful full-time business.

"I've got a good product," says Orr. "If I was younger, I could make a fortune out of it."

An increasing phenomenon is that many companies are moving into heritage buildings. Farrant says it's about image.

"In the 1980s, an awful lot of tacky, speculative commercial buildings were constructed. There is a strong feeling now that certain types of business - lawyers, accountants and others - are moving away from that and would much rather be seen in a character, quality old building that evokes permanence and quality," says Farrant. "It's very much a business image thing."

Paradoxically, heritage buildings are often better suited to the modern-day business environment. Buildings built in the 1970s and 1980s weren't designed for the modern, open-plan computer space that most offices now favour. Bradford says heritage buildings tend to have higher ceilings, which are much better for open plans than buildings of 20 years ago. As such, there isn't much need for wholesale structural renovations, so any caveats from a heritage listing would have negligible effect on a developer.

Heritage buildings are also often in good locations, as they were generally built where the city began. And there are developers who specialise in heritage and character buildings. Ross Healy has restored a number and rented them to companies. He says that in 20 years of business he has never encountered problems with a heritage listing.

"We found that if you do them up well, there's probably more demand for them," says Healy. "I would feel more comfortable doing an older building up and trying to lease it than I would a 1980s building for instance."

And the demand comes from a wide range of companies.

"We tend to get the barristers, finance companies,asset-management type people, PR and personnel consultants," says Healy. "Financial broking companies like the look that they've been there for 50 years or so. We've also had advertising agencies, because often the look is quite funky. People appreciate being in something different from a glass tower."

Healy says a lot of developers get the impression historic buildings aren't worth the hassle. It's true they can require more investment, because a poor restoration will look awful, but the end product will make money.

"Some people say it's a labour of love, and maybe we're slightly different in that we don't mind spending the money and we do like the buildings," says Healy. "But we've also found that we tenant them well if we do them well.

"I can understand if a developer buys a building and you're not able to change the toilets and you're only allowed this or that. Clearly, if there's a building like that, that's not going to be usable for a tenant, then you're wasting your time."

The trick is to think innovatively. In the Blacketts Building in Auckland's CBD, Healy converted the old safes into toilets, and in the Public Trust Building, also in Auckland, the large safes were turned into meeting rooms. Healy likes the idea that historic buildings can be enjoyed as living buildings, and thinks that is the key to heritage preservation.

"I really believe that the way to preserve them is to make sure they're also commercial," says Healy. "There's no point in being obsessive about restoring them exactly under some guise that makes it uncommercial or unusable. If you can combine quality restoration with making sure the space is usable, then developers like me and owners like me will continue to buy them."

Alister Brown, of top Wellington restaurant Logan Brown, is a strong advocate of the use of heritage buildings for cafés, restaurants and bars. While the focus of his restaurant is obviously on providing quality food, Brown says the building is essential in providing a great atmosphere and wowing first-timers.

"We do top-end food in a relaxed environment in a very beautiful building," says Brown. "People are gobsmacked by the building. I think, if you asked someone what they thought of Logan Brown on their first time, they would hopefully say the food was amazing, the service fantastic but the building was just absolutely beautiful. It certainly gets talked about."

In developing the restaurant, Brown worked closely with the Historic Places Trust to ensure the building was restored to its best. Brown says they had no trouble with the heritage listing.

"We worked with the powers-that-be to put our signage on there. We built signage that we hoped would complement the building. The last thing you want is a smoking cowboy neon sign on a building like this. We worked with heritage and got the plans passed," says Brown.

New Zealand's renewed interest in its colonial history, and the increasing tourist trade have ensured there is a ready market for buildings with historic listings and plenty of opportunity to make money off them. But it all comes down to a new focus on New Zealand history that makes people want to eat in, live in or work in these buildings. As June Orr says "A few years ago, nobody gave a stuff about heritage. Nowadays, people are definitely thinking about it more - there's a much bigger interest."

And with that interest comes the genuine economic incentive for developers, restaurateurs and other owners to keep the buildings protected.