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The long, sorry saga of Shelly Bay

Controversy over Wellington's Shelly Bay has ensnared iwi, the council and politicians for years. Investigative journalist Nicky Hager uses official documents to lay out the roles of money, power and wheels-within-wheels on this most contentious of developments.

Any time I am asked whether we have corruption in New Zealand, I say we are very lucky. We live in a country where we will never be pulled over by a police officer or taken aside by an immigration officer and expected to give them a bribe. But our luck in living here can make us complacent about the kinds of compromised and non-transparent processes that we do have.

The classic area where this occurs is local government (e.g. city councils) which has the dangerous combination of not many people watching closely what goes on but decisions worth massive sums of money to contractors, property developers and others.

We have one such issue in Wellington right now. It’s over the fate of an old seaside military base at Shelly Bay, on the Miramar peninsula. While the issue is often in the news, it has become so complex that many struggle to follow the sorry tale.

In simple terms, the issue revolves around three players: local iwi who owned land in Shelly Bay, a property developer who wants to build 350 expensive apartments there and Wellington City Council, which owns a key piece of Shelly Bay land and also would need to fund infrastructure necessary for the development.

Wellington City Council has backed the project and in 2017 agreed in principle to sell public land and lease a building at Shelly Bay that — along with the iwi land — is needed for the high-density housing plan. The Council’s final decision on selling that land is coming up quite soon.

But the issue is not as it seems. Things that seem like facts turn out not to be. There is great unhappiness and division within iwi, some of whom feel manipulated by the property developer. The claimed “partnership” and “joint venture” appear to be little more than public relations. Wellington City Council staff have seemed far too keen to push through the development. The Wellington mayor who backed the Shelly Bay development lost his position in last year’s local elections, replaced by a new mayor who opposes the development; but still the project rolls on.

This article will try to spell out what is going on, based largely on some official information requests I sent to the Wellington City Council.

1. The setting: property developers who befriend iwi

The first piece of the puzzle is an unhealthy practice that has developed around Wellington. As part of the Treaty of Waitangi settlement process, the government has pledged to help Maori by offering iwi the right to buy up areas of surplus public land that they can use for economic and social development. It’s known as “Right of First Refusal” and is a good policy. But what has happened around Wellington (and maybe elsewhere) is that property developers have realised that they can buddy up with iwi organisations and then themselves have first dibs on the public land that becomes available — and to get it cheaper than if it had gone to open market.

Thus we have cases like 18 months ago when the iwi trust — the Port Nicholson Block Settlement Trust (PNBST) — bought a significant piece of Wellington central city public land at 2.18pm on a Tuesday (20 November 2018) for $1.4 million, then sold it straight on at 2.18pm the same day for $1.6 million to Wellington property developers (Commercial Properties Limited), who had a buyer already because they on-sold it at the same 2.18pm to the US Embassy for $5 million. PNBST made a $200,000 on-paper profit and the property developers made $3.4 million.

This has happened repeatedly, for instance in 2017, when PNBST bought surplus public land in Jackson St, Petone for $2 million and sold it on to property developer Ian Cassels' The Wellington Company  (TWC) for $3 million. Ian Cassels is a director and shareholder of TWC, with Patricia Taylor. The Jackson St sale was a bargain for TWC, who had space for 54 units on the land. The point here is that it has become profitable for property developers to become best buddies with iwi and use them as a means to get cheap public land. The iwi groups don’t make enough money from these deals to achieve economic independence — just enough to struggle on, while the property developer makes a healthy profit. Surely this isn’t what the architects of the treaty-settlement process had in mind?

Ian Cassels' TWC and PNBST are the developer and iwi trust involved in Shelly Bay. The Wellington Company name is disturbingly reminiscent of the 1840s New Zealand Company, which fleeced Maori (primarily Te Atiawa) of their land around Wellington Harbour and led to the treaty settlements today.

Shelly Bay is an old military facility.  Photo: Lynn Grieveson

2. Iwi voted “no sale” of Shelly Bay

The next piece of the picture is that there are strongly competing views within the iwi on land sales. It’s not a surprising dispute considering their history. One side, opposing the Shelly Bay land sale, says they should never sell their land, preferring joint ventures and other types of economic development where they retain the land. A significant group of iwi members of the PNBST trust have been fighting to stop the sale of Shelly Bay land to the property developer TWC. They call themselves Mau Whenua, meaning land holders (as opposed to land sellers).

This is where the plot starts to thicken. PNBST’s constitution says that it is only permitted to sell over 50 percent of the trust’s assets if the sale has been approved by a “yes” vote of more than 75 percent of the members that voted. Shelly Bay was over 50 percent of the PNBST's assets at the time.

TWC had been getting close to one faction in PNBST for several years (those willing to sell land) and, by early 2016,  was ready to buy the land at Shelly Bay. PNBST put this to a members vote on  February 12, 2016, with agreed sale prices “subject only to the approval of 75 percent” of the members who voted. But PNBST failed to get enough support and the sale proposal was resoundingly defeated.

The Mau Whenua members grew suspicious that the land sale might still happen. So later in 2016 at the PNBST annual general meeting they moved a resolution directing the trust board to “immediately cease all negotiations with Ian Cassels and The Wellington Company.” A majority of members supported the resolution.

That should have been the end of the housing development. But it wasn’t.

3. Sale happens despite no-sale vote

Months after these “no sale” votes, on July 7 2017, the PNBST board defied its members and sold the land at Shelly Bay anyway.

It did this in secret, without informing the members, on the basis of an artificially low valuation and massaged figures (more on this below). The secrecy was not surprising since they were going against the members' vote and apparently also against their own constitution.

In a letter to trust members before the crucial members vote on February 12 2016, the board said they had a deal of $11.4 million for three out of four parcels of land owned by iwi. But in the quiet sale of July 2017 TWC paid only $2 million, a pitiful sum, and got the option to buy a final fourth block of land. There was also a vague “profit sharing” agreement.

When the $2 million price eventually reached the news, embarrassingly, The Wellington Company bought the fourth parcel of land too (on 22 March 2019), dropping the profit sharing arrangement but raising the total sale price to $12 million for enough land for 350 apartments.

PNBST had paid $13.3 million of their treaty settlement money to acquire Shelly Bay in 2009. Eight years later, the TWC deal for $12m was not even recouping the $13.3m that PNSTB had paid to acquire the land. The land should have been worth far more than in 2009 since it had been approved as a Special Housing Area.

PNBST sold land at Shelly Bay despite a membership vote against doing so. Photo: Lynn Grieveson

Mau Whenua continue to oppose the sale, which they say is unlawful since the PNBST board did not have permission from the members to make such a major sale. They also believe the property developer TWC should not have bought the land when it knew the PNSTB's board was not authorised to sell it. Last year Mau Whenua filed papers in the High Court to have the sale declared void and the land returned to iwi ownership.

Film maker and Miramar peninsula resident Peter Jackson has also strongly opposed the housing development, sending detailed statements on the issue to his numerous Facebook followers and donating money to the election campaign of the now current Wellington mayor who opposes the Shelly Bay housing development (Jackson’s earlier interest in the site for a film museum, however, appears to have gone).

4. Council staff too open to developer's needs, part one: ignoring the no-sale vote

The next issue is the role of Wellington City Council (WCC).

WCC is involved in various ways:

- it is being asked to sell public land for the luxury housing enclave (it’s not clear that the project could go ahead without the public land)

- it is being asked to pay large sums of public money for roading, water and other services for the private development, and

- it gave planning permission for the project.

And it seems that some of the WCC staff and councillors have been far too close to the developer.

This is seen, first, in WCC staff’s lack of concern about the flimsy legal foundation of the Shelly Bay development.

In February 2016, when the PNBST trust board failed to win the vote to sell Shelly Bay, the Shelly Bay plan should have been dead; or at the very least it should have been dealt with very cautiously. WCC staff knew about the “no sale” vote because the PNBST's CEO Jason Fox immediately sent a joint email to Cassels and the Council CEO Kevin Lavery advising them.

The proper approach for Wellington City Council staff would have been to keep right out of the project when the sale didn’t have the proper approval from PNBST. WCC should have told the parties they would not join in discussions about selling public land and subsidising the services unless PNBST had permission to sell. But TWC was working to a deadline of September that year to get a Special Housing Area application filed and Council staff appear to have enthusiastically assisted to get the deal done.

Internal emails show that soon after the no-sale vote the PNBST and TWC started trying to find a work-around to keep the project going anyway. This primarily seems to have involved massaging the figures. PNBST arranged a new valuation of Shelly Bay by Colliers (“as agreed within our meeting with WCC”) that halved the previous valuation of its Shelly Bay land; and then inflated the value of its other assets, “a balance sheet lift”, which had the effect of making Shelly Bay only a small part of the trust assets that wouldn’t need 75 percent membership approval for the sale.

Senior council officers including Lavery were copied into the email setting out this plan (also cc’ed to Cassels of TWC). Yet none of them appear to have protested at the dubious process being undertaken.

And what were WCC staff doing at a meeting about revaluing the iwi land? Wise heads should surely have realised something was wrong. A June 7, 2016 internal WCC Powerpoint had declared the no-sale vote was a “fundamental obstacle”. Why did the council staff continue full steam ahead to advance the project?

5. Council staff too open to developer's needs, part two: bending the roading rules to suit the developer

One of the main obstacles still facing the property developer TWC was that Shelly Bay can only be reached by a narrow windy road, not suitable for years of heavy construction and not nearly enough to support a new housing development.

WCC knew this: an internal council email from a city planner noted on 16 August 2016 that “Council traffic engineers have to date stated that the road to the site is too narrow to accommodate a development of that size.” The problem was that it would cost many millions to widen the road and the property developer didn’t want to pay.

WCC had paid for a private consultant named Andrew MacLeod to work inside WCC as their project manager for the Shelly Bay development. MacLeod replied to the “too narrow” email calling the idea of road widening a “nice to have” and said “we are expecting a narrower rather than wider requirement.”

Two weeks later WCC's transport manager wrote to his staff that “Andrew and Kevin” (presumably project manager Andrew MacLeod and Council CEP Kevin Lavery) had persuaded the Town Planner to “soften” his views on the necessary road width. He was now recommending the bare minimum width, “accepting that in the longer term this is not going to be adequate” — i.e. that at a later stage ratepayers of Wellington would have to pay for the road widening.

During the time when the roading decisions were being made, Cassels held a private and apparently undocumented meeting with Lavery at a nearby cafe. 

TWC had by then only one month to go to get its Special Housing Area application completed (which would allow it to avoid normal planning rules and squeeze far more houses on the land) and it seems the senior council officers were helping it meet that deadline.

The transport manager was frustrated that his staff’s expert advice had been overruled: “Like you all I am disappointed at the inconsistency of direction over this issue. I am also frustrated that the notion of “free and frank” advice is yet again compromised.”

6. Council staff too open to developer’s needs part three: trying to stop community input

Other emails from that month, likewise released in response to an official information request, show more of the same. The PNBST CEO Jason Fox got an email from an existing business owner at Shelly Bay asking to meet about a “complimentary master plan” for Shelly Bay and saying that the mayor Justin Lester had proposed a community meeting to discuss Shelly Bay.

Fox immediately forwarded the competing proposal to TWC's Cassels. “Kia ora Ian — see below — looks like these guys are starting to fire up again. Let me know how you want to handle that.” A colleague of Cassels sent this email on to Andrew MacLeod, the Wellington City Council Shelly Bay project manager: “Andrew, For your eyes only! Can we discuss urgently.”

MacLeod leaped into action to try to stop the Mayor arranging a community meeting about Shelly Bay. He phoned the Council CEO Lavery and then sent him a long email enclosing the Shelly Bay business owner’s email to Jason Fox (“supplied by The Wellington Company and in confidence …. we need to protect our source.”)

MacLeod told Lavery “I think you should tell [the mayor] that the proposed ‘community meeting’ can only serve to inflate the expectation of community influence at Shelly Bay.” He said his concern was that any such meeting at that time would “destabilise” TWC's resource consent application and “any future development agreement between The Wellington Company and WCC — remembering that they want us to sell land to them and fund bulk infrastructure.”

In summary, the council officers appeared to ignore that the project went against the wishes of the Maori owners, helped overcome the obstacle of the road and helped to avoid community input before The Wellington Company had secured special housing approval (which required the land, roading and infrastructure to be sorted). The Council project manager and CEO had been pushing the other council officers to back the project.

Mayor Justin Lester, whose election campaign had been financially supported by Cassels, also strongly backed TWC’s plan and urged other councillors to do the same.

Shelly Bay could yet be home to a big housing development.  Photo: Lynn Grieveson

7. Misinformed councillors support “iwi” development

The most concerning part of this story is over the council’s in-principle decision whether to sell and lease publicly-owned Shelly Bay land and buildings to TWC for the development (councillors were asked to approve council staff “consulting” on the sale, although in later council documents it was called “approval for the sale”). The decision was made at a council meeting on September 27, 2017, which luckily is preserved on You Tube and shows the councillors debating the issue. The discussion sounds fair, even noble, but as we’ll see it was sad and false.

Each speaker in favour of selling and leasing the land to TWC used the same argument: that this was a marvellous way for the council to show its partnership with iwi. Councillor Paul Eagle led the way on this. “The biggest issue is the partnership with iwi,” he said. “For me that’s one of the biggest overriding ticks for this.” He said: “In the seven [years] I’ve been around this table, this presents the most significant demonstration of our relationship with them. And iwi have been clear, they want to develop this site.”

However iwi weren't going to develop the site. PNBST had already sold three pieces of land for the miserable cut-price $2 million and had already given an option to TWC to buy the final fourth block. It wouldn’t be iwi developing the site. It seems the councillors had not been told this.

One of the councillors, Chris Calvi-Freeman, declared: “Who owns the land? Well, we know that 99% of the land for development, of the housing, hotel etc, is owned by the iwi, and the council owns the waterfront. So there should be no mistake in anyone’s mind over who owns the land.”

PNBST's chair and board members in the room did not correct Calvi-Freeman. Nor did the TWC staff present. Nor the council officers. It wasn’t iwi who would get the primary benefit of WCC selling and leasing the public land and building at Shelly Bay. It was one private property developer.

A Powerpoint prepared by council staff fully backed the sale, declaring “The Wellington Company/Iwi joint venture — now a safe and secure partnership.” But it was a caricature of genuine partnership.

There’s a good reason why TWC was working so hard to get the council land. There are two halves to Shelly Bay: North Bay and South Bay. The public, through the city council, owns most of the flat land in South Bay. TWC wants to buy some of this and have a 125-year lease on more of it, including a large existing building. If TWC can’t get the WCC land, it will stop or drastically reduce that half of the project. It is quite possible the whole project would fall over. Decisions the council makes on selling and leasing that land are critical to the future of that part of the city.

PNBST members, who were part of the group supporting the sale, appear to have attended the council meeting in order to help TWC. They have done this often since then too, releasing statements, signing letters to councillors and speaking on a TWC video about Shelly Bay.

PNBST chair Wayne Mulligan spoke during the council meeting. Glancing down often at his notes, he said he was focused “on the single concept of the one hectare of Council owned land and the decision to sell or lease it to us.” However, as we’ve seen, it wasn’t primarily about “us”. He said “this is a just cause, this is 177 years of talk about partnership…. we are going to develop our land.” His speech was peppered with the words “us”, “we” and “our”, for a project in which iwi had minimal, and eventually no, stake or share of the profits.

The councillors voted 7 votes to 5 in favour of the selling and leasing the public land to The Wellington Company.

8. Not Māori economic development

The news eventually leaked out about the sale of the iwi land. So TWC and its PR advisors changed their tune. They still claim at every opportunity that the Shelly Bay development is a partnership between the PNBST trust and TWC, but they now argue that the iwi benefits from a wider collaboration with TWC, rather than a direct stake in Shelly Bay.

The main example given for this is the 54-apartment development in Jackson St, Petone, the one where PNBST bought the surplus public land for $2 million and sold it to TWC for $3 million. The story goes that TWC gave PNBST members a “pre-market offer” to some of the properties “on favourable terms” (ie a little below market value). The idea was that teaming up with TWC would lead to opportunities for affordable housing for PNBST's members, of which there are 19,000.

Property records show that one of the PNBST members who bought an apartment was the PNBST chair Wayne Mulligan. A member of Mulligan’s family bought another of the apartments, selling it in less than a year for a $110,000 profit. Another associate of Mullligan bought two of the apartments, through his investment company. A handful of apartments appear to have gone to ordinary Hutt Valley members of the trust.

But this is not Māori economic development.

Buildings from a bygone era.  Photo: Lynn Grieveson

9. It could be different

Right now, in 2020, there is a fight going on in Wellington over the future of Shelly Bay and the surrounding park land of the peninsula. There are two court cases challenging the project: the one by local iwi members, including Mau Whenua, trying to undo the sale of the Shelly Bay land; and another by Miramar businesses challenging TWC’s resource consent.

The sale of the Shelly Bay public land to TWC is also in dispute. Although councillors were only asked in 2017 to approve “consultation” on the sale and lease of council land, and were told by council staff “consultation does not commit Council to the broader deal”, council staff are now said to be arguing that there is no need for a further council decision on selling the public land. At some stage a showdown over this question is coming.

Meanwhile the lobbying of councillors has continued in recent weeks, when the current city councillors received a letter purporting to be jointly from two PNBST leaders and TWC. It was signed first by the chairs of two iwi organisations and, modestly in third place, Ian Cassels. It said: “All we ask is that Council honours what was confirmed by elected members in 2017.” It was lobbying today’s councillors to confirm the questionable 2017 decision, described above, to sell and lease the public assets at Shelly Bay to The Wellington Company. The letter said the Shelly Bay project would be “an authentic and mana-enhancing partnership”.

The Wellington Company, increasingly desperate to get the hundreds of million dollar project across the line, had come up with a new initiative to support the concept of an iwi partnership, announcing the company would sponsor a Maori artist in residence at Shelly Bay.

When the PNBST trust board members learned that their chair, Kim Skelton, had signed the letter without asking or even telling them, there was much unhappiness. The feeling that the PNBST board was being used by TWC has been causing increasing strain and heartache. Wayne Mulligan had had to stand down as PNBST chair a few months earlier. Then, a few weeks after signing the lobbying letter, Skelton also resigned as PNBST chair because, her resignation letter said, of the “toxic boardroom environment.” 

Whether you support this land going to million-dollar housing or not, what seems certain is that the future of an important piece of the capital city should not be determined by decisions made like this. The whole Shelly Bay issue has a bad smell.

(Nicky Hager is a Wellington author and investigative journalist. He has taken an interest in the fate of Shelly Bay since many years before the current events.)

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