The Front Page: How Chateau Tongariro became a mess no one wants to deal with

The Chateau Tongariro was closed in February. The building is owned by Malaysian company KAH New Zealand but sits on leased land owned by the Crown. Photo / Supplied

Chateau Tongariro finds itself in a financial mess to which there are no easy answers.

The iconic building, which has stood in Tongariro National Park for almost a century, faces an enormous repair bill to bring it up to modern standards.

The problem is that it’s unclear exactly who will pay to ensure the building remains part of the architectural landscape.

“It’s in a pretty sorry state,” NZ Herald senior business reporter Kate MacNamara tells The Front Page podcast.

“There’s a need for seismic strengthening, it needs a new roof and there have been some water ingress issues, it badly needs redecoration. It’s got a manky swimming pool in the basement and nobody seems to be quite sure what state the structural steel is in ... It’s shabby inside and out.”

On the seismic integrity scale for New Zealand, this is an E-grade building, which essentially means it poses a massive risk to occupants in the event of a significant earthquake.

MacNamara says the cost of these repairs will be tens of millions of dollars, with some estimates exceeding $100 million.

The building and the land on which it sits have a complicated ownership structure, which makes it tricky to determine who will cover the costs.

“Essentially, it’s owned by KAH New Zealand, which is the Malaysian company that ran the hotel for the last 30-odd years,” says MacNamara.

“But this is a very convoluted structure in that the land, of course, is national parkland that’s owned by the Crown and managed by the Department of Conservation [DOC]. So the land was leased, but the Chateau building itself was subject to a sale and purchase agreement in 1991. KAH bought the chateau and leased the land.”

That lease expired in March of this year, which in turn means that the maintenance of the land and the buildings, including the main Chateau, reverted to DOC, but the Chateau remains under the ownership of KAH.

Now, should DOC want to bring in a new lessee, it would have to buy the building from KAH as part of that agreement.

DOC, KAH and the new lessee would have to come to an agreement not only on the lease terms but also on the sale of the building.

“It’s very unlikely that a new lessee will just come in and pay for all these repairs,” says MacNamara.

“That would obviously be very tidy, but you would want a lot of certainty from the Crown to come in and lay out the kind of money that this building needs. And so, what is the Crown willing to do, if anything, to make this a better business bet?”

This leaves the future of the Chateau incredibly vulnerable because it’s a question of whether the Crown or any businesspeople have the appetite to take on the risk of remediating the building and trying to create a viable business.

So are there any potential takers? And how much is the Crown willing to fork out at a time when so many Kiwis are concerned about the cost of living?

Listen to the full episode of The Front Page podcast to hear MacNamara dig deeper into this complex issue.

The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. It is presented by Damien Venuto, an Auckland-based journalist with a background in business reporting who joined the Herald in 2017.

You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.