Carisbrook: Dear Dave . . .

Received from Rob Hamlin
Saturday, 16 February 2013 10:05 p.m.

Dear Dave

I see that in the ODT today you signed off with the following statement:

“A valuation is not a promise.”

Is it not indeed, Dave. Well if it not a promise, then what is it? A registered valuation costs money, a lot of money and they registered valuers are members of a professional association – that’s why they are called REGISTERED valuers. A registered valuation may not be promise to get a value right to within the dollar, but I would say that such a valuation a professional service on which serious decisions are routinely based and as such it IS a promise to get the value right to within a reasonable margin of error. 100% plus is not a reasonable margin of error – Nossir!

I note however that the ‘registered’ bit is missing off your statement above. This raises a number of interesting possibilities. Let’s deal with them one at a time:

1) —You simply forget to put the ‘registered’ bit into the statement above and you really do hold a registered valuation that is in line with the price that the DCC paid the ORFU for Carisbrook and the adjoining properties. If that’s the case, then I think that you really do need to have a serious word with this individual, and that you may have to get in line with the Valuers Registration Board who deal with complaints. The following is lifted from their website at http://www.linz.govt.nz/valuation/valuers-registration-board#apply

Complaints about a registered valuer
The VRB may discipline registered valuers who do not meet its standards and requirements in carrying out their work. If you are not satisfied with the valuation done by a registered valuer on a property, you can formally apply to the VRB to have your complaint investigated.

Contact
Valuers Registration Board
PO Box 5501
Wellington
Phone +64 4 460 0110 FREE +64 4 460 0110
Fax +64 4 498 9699

If you hold a registered valuation that is for this amount then the registered individual who provided it may be culpable to a major degree in the loss of $3 million plus of ratepayers’ money and a formal complaint is not only recommended, but actually forms a public duty that you MUST perform. If they did indeed tender this valuation to you as a registered valuation, then either this individual was misled in their brief, in which case the nature of the misleading should be clear from their valuation report, or their professional services would appear to fall very far short of reasonable expectations, and they need to be publicly identified and dealt with pronto before they do any more damage of this scale and nature. As I have said previously, a Barbary Ape can value a property to within 20% in a stable market – I think it is very unlikely that the board would have much basis to seriously argue the point if you get the ball rolling now.

2) —You mean what you say and the valuation was not supplied by a registered valuer. Valuers have to undertake a good deal of training before they can become registered valuers. There is a reason for this, as I stated above major decisions are routinely made upon the basis of the valuations that they provide, and for this reason they must be accurate to within an acceptable margin, and many would think that 20% is the outer limits of this.

If for whatever reason a registered valuer was not the source of this information, then this is a serious matter. Paying this much for a property on the basis of a non-registered valuation would appear to be at the least grossly negligent and at worst reckless. The latter would be a perfectly reasonable charge given that the value is grossly out of line with not only the CV of the properties concerned, but also with other professional reports that assessed the value of the properties when budgets for the finding of the Forsyth Barr Stadium were being presented as a justification for approving the project. Incidentally, these valuations (acquired by stripping blacking off censored documents released by the DCC – see What if? Dunedin for details) appear to have been pretty much exactly in line with the price that you have been offered by Calder Stewart. They were presumably supplied by a registered valuer and it might serve you well to attempt to obtain a copy for the purposes of comparison.

Recklessness, of course, also opens up any elected member who voted for the purchase at this price or was in any way implicated in it to personal liability under the Local Government Act. A strong case for personal liability could be made with regard to this purchase if this is the valuation did not come from a registered valuer. If it did, then a Feltex-type defence on the basis of accepting professional advice in good faith may be made – but only if the source of the valuation was a registered valuer – a professional in the eyes of the law.

3) —You may have been misinformed and no valuation of any type was acquired at all before Carisbrook and adjoining properties were purchased for the amount of $7 million.

If this is the case, then all of the comments relating to Option Two above apply, plus it may be possible to add deliberate deceit to the list. The problem with deceit as with perjury is proving intent. However, in this case it is hard to see how an assertion that a registered valuation formed a basis of the decision to purchase could be made inadvertently in the absence of the valuation that is being cited. I seem to recall that a valuation has been cited on multiple occasions as a justification for paying this price.

All in all, Dave, it’s a messy situation that looks likely to get a lot messier. Both you and the ODT are on the back foot here – information is leaking out of the DCC like a sieve, and the wider public who have been largely snoozing through the events of the last four years finally seem to be waking up in numbers to just exactly what has been going on.

So, if you value your political neck and your mayoral chain, I recommend that you release this valuation document forthwith. It is now a historical document and has no current commercial value, so forget about that line of defence if it is offered to you. Ignore privacy claims for the valuer. If it is a registered valuation, then it is a professional document provided for money, and it’s yours to do with as you please. You can post A1 sized copies of it in all the public loos in the City if that’s your fancy – although you may be wise not to comment on its merits, subsequent events will do that more eloquently than anything you or I could produce. If it’s not a registered valuation, then I would be pretty confident that the same rules apply if a fee was charged for it.

If you can produce a registered valuation for $7 million, then I cannot see that either you or any of your colleagues have any sort of a problem. All the problems will be at the door of the valuer and their professional body – which is why I am mystified as to why you have not yet produced it – if you have it.

If it was a verbal valuation, and you can establish that it does not exist, then I suggest you come clean about it, and identify those responsible for making the decision to purchase Carisbrook at this price without it right now. I do not think that you were involved, so why should you sacrifice your political career in an attempt to protect those who are?

If the document has been ‘lost’ then I would suggest that you make vigorous attempts to find it. Failing this, you may wish to establish who provided the valuation – the possibilities within this community are manageable. You may find that the identity of the valuer has been ‘forgotten’ by all involved. OK, these people keep records. Get copies of the Yellow Pages back to 2009 and go through every registered valuer in the region, call them and see if any of them can recall issuing this valuation. Enlist the help of Valuers Registration Board. I am sure that they will be interested if their members’ reputation is being collectively put on the line by a bunch of amnesics.

You may both end up drawing a blank, but at least it will be a decisive one that you can report to the community and allow them to draw their own conclusions.

Think it over Dave, but don’t think too long. This time I don’t think that you have the luxury of leisure.

Rob Hamlin

[ends]

Posted by Elizabeth Kerr

37 Comments

Filed under Business, DCC, Economics, Name, People, Politics, Project management, Property, Site, Sport, Stadiums

37 responses to “Carisbrook: Dear Dave . . .

  1. chirpbird

    Terrific! Wonderful! At last. What looks like evidence which can’t be wriggled out of.

  2. What chirpbird said. But we want some kind of action from it, not what we nromally get.

  3. Phil

    I harboured a small thought at the time that the “valuation” could well have come out of the City Property office. That is a regular occurence, despite City Property having no registered, or even slightly formally qualified, property valuers. They did at one stage employ a registered valuer in their staff. However, he left shortly after arriving, having been continually excluded by his then manager from all valuation requests given to City Property. Some managers seem to struggle with staff who know more than they do.

  4. Anonymous

    Dilemma:
    a) produce the valuation and someone goes to jail
    b) don’t produce the valuation and don’t get re-elected

    I note the $60K payment back to the vendor immediately after purchase is exactly in line with the 56 Parry St shenaningans. City Property Manager should be stood down immediately pending a criminal investigation.

    • Links supplied (featured on other threads when first released). A reminder.

      Dunedin City Council
      Media Release

      Council Acquires Carisbrook

      This item was published on 18 Aug 2009.

      The DCC has completed negotiations with the Otago Rugby Football Union that sees the Council assume ownership of Carisbrook.

      The all up price of the purchase is $7 million which includes three packages made up from Carisbrook, the adjacent car park site and a block of rental housing in Burns Street.

      The ORFU has repaid the $2 million DCC loan from the proceeds of this transaction.

      However, the purchase of the three packages will be neutral to the Council for the next three years during which time the ORFU will be responsible for the operational expenditure and maintenance.

      As a result, the Council has also agreed to guarantee the interest on the ORFU’s seasonal debt for three years from the settlement date of 11 August 2009. The maximum seasonal debt covered by this agreement is up to $1.2 million.

      Under the terms of the agreement Carisbrook will be leased back to the ORFU for a three year period on a set lease basis which is neutral to the DCC.

      Unless any future use of the assets meets overheads associated with the properties the Council will incur additional debt servicing costs.

      The Council recognises the importance of this site to the future of South Dunedin and the city as a whole, and the future use of Carisbrook will be determined by Council only after analysis of the sites’ potential, alternative uses, and discussions with the community and stakeholders.

      Mayor Peter Chin has responded enthusiastically to the acquisition of Carisbrook. “This is good news for the ratepayers and for the ORFU. It represents a sound investment based on a rigorous independent valuation of the current and future values across a range of land uses, all of which makes this a canny investment.”

      The details of the purchase price will remain confidential for reasons of on-going commercial sensitivity.

      Contact DCC on 477 4000.

      DCC Link

      Dunedin City Council
      Media Release

      Valuation Figures For Carisbrook Purchase

      This item was published on 27 Aug 2009.

      There has been a high level of media interest in the Council’s purchase of Carisbrook announced recently.
      In that announcement Mayor, Peter Chin, referred to the ‘rigorous independent valuation’ advice upon which the Council had relied in arriving at a purchase price of $7 million.

      In that announcement Mayor, Peter Chin, referred to the ‘rigorous independent valuation’ advice upon which the Council had relied in arriving at a purchase price of $7 million.

      For the avoidance of doubt, and to avoid further speculation, Mayor Chin has decided to release the details of that valuation process.

      The Council was guided in its deliberations by the advice of John Dunkley, from DTZ New Zealand Ltd, whose professional assessment was a figure of between $7.1 and $7.5 million for the three property packages – Carisbrook, the adjacent car park and a block of rental housing in Burns Street.

      Contact DCC on 477 4000.

      DCC Link

      ### ODT Online Fri, 28 Aug 2009
      Value based on splitting Carisbrook
      By David Loughrey
      A Dunedin valuer’s assessment of Carisbrook, which the Dunedin City Council says guided its thinking when it bought the stadium, valued the property at between $7.1 and $7.5 million, Mayor Peter Chin said yesterday. The valuer, John Dunkley of DTZ New Zealand Ltd, said he based his valuation on splitting the properties into blocks and selling them separately, and that the newer building housing corporate boxes could be re-used for offices. Otago Regional Council chairman Stephen Cairns also worked for DTZ, though is now part of Colliers International, and regional councillors Bryan Scott and Gerry Eckhoff recently attacked the appropriateness of his carrying out both chairmanship and real estate roles. But Mr Cairns said yesterday he had “not a bloody inch” of a role in the valuation. “John Dunkley doesn’t even work in the same office,” he said. “I can’t even get access to John’s files, not that I want to.”
      Read more

  5. Calvin Oaten

    Why do I get the feeling that our long prophesied “chickens coming home to roost”, is now being manifested? Dave Cull’s tap dancing will be a delight to watch over the next eight months. He will find out that in the nature of things everything which gets out of kilter eventually reverts to the mean. It just takes the exposure of one flagrant deception and the flood gates will open. It has happened and he must know it.

  6. Hype O'Thermia

    Rat, sinking ship: “Mr Cairns said yesterday he had “not a bloody inch” of a role in the valuation.”
    Rock, hard place eh Dave & stadium councillors?
    Build it and they will come……. according to latest figures, to Queenstown and all over the region, excluding Dunedin. What could possibly have gone wrong? How come nobody predicted this, eh?

      • Information supplied.

        We note:
        “CAPI” stands for Crighton Anderson Property & Infrastructure Ltd, an independent New Zealand capital asset valuation and advisory firm. http://capi.co.nz/

        http://capi.co.nz/people/sector-directors/john-dunckley/

        John Dunckley
        Director – Valuation & Advisory B.Com (Ag) Dip Prof Urb FNZPI FNZIV Registered Valuer

        John has been actively involved in the property industry as a valuer for more than 35 years. Most recently he has held senior valuation positions with Darroch and DTZ.
        John’s experience covers a wide variety of property types in both the public and private sectors. His specialised asset valuation assignments have encompassed airports, tertiary institutions, energy generation infrastructure, crown research campuses, hotels, hospitals, rest homes, retail malls, wineries, meat processing plants, court and prison buildings, ski-fields and major stadia. His agri-sector experience is equally wide ranging and includes large-scale corporate farming operations, crown research farms, large-scale vineyard operations, forestry land, pastoral leases and high country stations. John’s assignments have been completed for a variety of purposes including; financial reporting, insurance, going concern valuation, market value, portfolio asset values, retrospective value, methodology development, arbitration, litigation support, expert witness and Treaty of Waitangi settlement.

        John is regarded as a leading valuation practitioner in New Zealand by business leaders and his peers. He has been a member of the New Zealand Institute of Valuers (now PINZ) for over 30 years and was a Harcourt prize recipient in 2004. He has served the profession as National President (1997/98), Chairman of the Valuation and Property Standards Board (1996-2009), New Zealand representative on the International Valuation Standards Committee (10 years) and Chairman of the International Valuation Standards Board (7 years).

        John is based in Dunedin and operates nationally. He plays a leading role within a number of our specialist valuation practice areas including infrastructure, viticulture, dairy, pastoral and forestry. A brief bio can be downloaded via this link.

        T +64 467-9792 M +64 21 326-189 E john.dunckley@capi.co.nz

  7. Hype O'Thermia

    Can’t think of a better or fairer idea than charging the Dunedin accommodation and hospitality sectors extra on top of their rates for the benefits they get from the stadium. Well, some of them. There are 2 businesses that claim to have done well out of it, others that say they didn’t. Can we rely on honest self-reporting, and charge extra to the ones whose profits increased because of the Great Fubar?

    Well, why on earth not, for are they not all honourable men and women?

  8. chirpbird

    Looking through 2008 DCC Minutes, I came across a resolution that Carisbrook Stadium Trust would buy ORFU property assets. (17 March 2008 Council Meeting).
    Also, the Council meeting on 15 Dec 2008 has Extraordinary Property Subcommittee minutes and land purchase proposal in the public excluded part.
    Questions
    1): Why can’t all the non-public 2008 minutes be released as commercial sensitivity no longer exists?
    2) Did the CST buy Carisbrook and then the DCC buy it off CST?
    If not, what did the minutes mean? (I thought DCC bought it directly from ORFU.)

    At the Council Meeting on 29 Sept 2008, Cr Cull, Staynes and Wilson made a notice of motion which also referred to a resolution including the following wording:The sighting and approval of agreements negotiated by the Carisbrook Stadium Charitable Trust and the Otago Rugby Football Union for the sale and purchase of the Union’s property assets, in time for consideration by the Finance and Strategy Committee at its meeting on 1 December 2008.”

    It’s so hard to follow this with so much being non-public. All these minutes need to made public now.

    Re the valuation, it looks as if it was valid in a sense but misrepresented the situation to the councillors. If a valuer had estimated the value of Carisbrook land subdivided into residential lots, I suppose it would have been higher still. Question is: was the valuation done fit for the purpose it was needed? But valuer can’t be blamed if he followed a particular brief as directed, can he?

    What if? Dunedin supplies the following links. Note, meeting records at the DCC website have been uploaded from January 2009 onwards. A new rule applies for release of information from non-public meetings, this was made plain through the media. -Eds

    17 March 2008 Dunedin City Council
    Minutes – Council – 17/03/2008 (PDF, 80.3 KB)
    Non-Public Section of the Minutes released under Local Government Official Information and Meetings Act

    17 March 2008 Dunedin City Council
    Minutes – FSC – 17/03/2008 (PDF, 253.0 KB)
    Non-Public Section of the Minutes released under Local Government Official Information and Meetings Act

  9. Mike

    hmm as the ODT itself notes the ‘trust’ doesn’t seem to be a legally registered entity

  10. More like it is a private trust that is not required to disclose anything.

    Also, with reference to the valuation-sale discrepancy, my crystal ball suggests the following two ‘outs’ will come into play:
    * The valuation is stale, and the property market has changed in the 3+ years since it was given.
    * The valuation related to the land being sold as X, but the land was sold as Y.

  11. Mike

    Also those minutes are weird – did the city really give the ORFU $72k to allow them to build the stadium somewhere other than Carisbrook? what was that about

    And what were these “development expenses” the ORFU was incurring that were being written off against the interest on the $2m loan? Remember it was a 4% sweetheart loan (documented in the ORFU accounts) at a time when mortgages were at the 9% level, probably secured as a 2nd mortgage against Carisbrook (after the BNZ)

  12. Anonymous

    So what the valuer has done is to base the valuation on what a PURCHASER could be expected to realise from the sale (reuse of corporate boxes, sale of individual properties etc). I’m surprised that he didn’t include the profit from demolition and 10% contingency for the increase in property values for 3 years.

    In fact, you can factor in an additional $1-1.5 million opportunity cost as one would have expected property values to increase by 5-7% or so in each of the 3 years since 2009.

  13. Mike

    James: if it’s a private trust then it’s owned by someone – if not the ORFU (it doesn’t show up on their books as an asset) then who was gifted that million dollars?

  14. Mike

    Some need to be registered though – Charitable trusts for example – presumeably the “Property Holdings Charitable Trust” is not actually a charitable trust despite its name – I don’t think the person fiction applies in NZ – a trust always has to have trustees and be for the benefit of some other entity – which is a great way to keep your house, or your million dollars away from the creditors should you be headed towards bankruptcy.

    Presumeably of you knew bankruptcy was on its way and you squirreled assets away to keep them away from your debtors the trust could be broken in the bankruptcy proceedings – of course it’s still mysterious that the million dollars didn’t pass through the ORFU’s books on its way to the trust, after all the trust’s name wasn’t on any of the deeds the DCC bought

    • At bottom of the food chain, Wiki says:
      In common law legal systems, a trust is a relationship whereby property (real or personal, tangible or intangible) is held by one party for the benefit of another. A trust conventionally arises when property is transferred by one party to be held by another party for the benefit of a third party, although it is also possible for a legal owner to create a trust of property without transferring it to anyone else, simply by declaring that the property will henceforth be held for the benefit of the beneficiary.
      http://en.wikipedia.org/wiki/Trust_law

      According to judgements read, the ‘legal personality’ does apply in New Zealand (although Mike and I may be typing at cross purposes). Trustees are liable and may be bankrupted.

      Leaving aside charitable trusts:

      For most purposes, a trust is treated like a separate legal person. [Income and assets owned by a family trust are not owned outright by either the trustees or the beneficiaries. Trust assets only become the property of the beneficiaries when trustees transfer the assets from the trust to the beneficiaries personally.]

      Click to access family-trusts.pdf

      Setting up a Trust | Community Law Wellington and Hutt Valley [private trusts and family trusts]

      Click to access Setting-Up-A-Trust.pdf

  15. JimmyJones

    Mike, Elizabeth: the existence of the Property Holdings Charitable Trust is doubtful, as is the existence of any trust that received $1 million of the people’s money. There is no evidence of a trust, only a claim by the ODT. Remember that Allied Press is a business associate of the DCC because it provides paid-for ads as well as spindoctoring in partnership with the DCC McKerracher group.
    The trust could exist, but we would be unwise to believe it just because the ODT said so. The $1 million is still missing as far as I am concerned.

    • JimmyJones, yep I know….. fully agree one million dollars is missing. Known that since the million was first observed to be missing…
      Only pointing out by indirect means that if a trust exists (easy to create) or once existed (if at all), it may not be registered or easily discoverable. On the other hand, other means ORFU used to launder money have been easy enough to trace (not all revealed at What if?).

  16. Anonymous

    That makes two of us.

  17. Phil

    John Dunkley is the brother of Nick Dunkley, who was the former chief surveyor for City Property, the DCC department being since sold. John is also a former business partner of Ah-Lek Tay, who was involved in valuation work surrounding the stadium land purchases. Small town.

  18. JimmyJones

    Also, Phil, John Dunkley was responsible for the fake valuation of the DCC’s new stadium. He chose a valuation method that gave an extremely high value ($225 million). The real value is about the value of the land: $15 million (or such-like). The DCC preferred the high valuation because it would have been embarrassing if people knew that they had just spent $225m to build something that was only worth $15m.
    Wouldn’t it be a funny thing if Dunky was the one that did the original valuation of Carisbrook for $3 million, and then soon after, valued it at $7 million? That would confirm how flexible and accommodating he was.

  19. Robert Hamlin

    Given that property can be valued one of three ways, market value, historical cost (minus depreciation) and replacement cost, it would be interesting to know how Dunckley (if he was responsible) came up with a figure of $225 million for the Foobar. It clearly bears no relation to market value, and is higher than the historical cost of the property on the DCC’s own books ($216 million). This leaves replacement value, but this would not include the land I would presume – which leaves a value for replacing improvements only recently installed of c.$170 odd million – and anyway – who the hell would want to replace it?

    It’s all very odd. This inflated valuation did of course give the DCC the opportunity to ‘sell’ the Stadium to DVL and then announce a $9 million dollar ‘profit’ for themselves (presumably funded by money borrowed by DCTL for DVL via interest rate swap derivative based loan packages – which are almost certainly guaranteed in some way by the DCC, and therefore by you and me).

    This ‘profit’ was then used to distort last year’s income statement for the the DCC and to mask a requirement to fund a $9 million shortfall (= an extra 9% on the rates). Who knows what the machinations will be this year to make it all work for them in an election year?

    It’s the $9 million that is pivotal. While it doesn’t seem a lot when one is travelling through the feverish realms of Foobar World, it is a mountain of cash – more than was shelled out for Carisbrook in toto. So how can it be justified?

  20. Anonymous

    “What’s the valuation of this property?”
    “What would you like it to be?”

  21. Robert Hamlin

    IF I HAD BOUGHT CARISBROOK?

    While there is a lot of shouting going on about how much the DCC has lost on the Carisbrook sale this deal, it is worth pointing out that this figure $3-3.5 million is a great deal higher than most of the real estate bods that I have spoken to valued it at for either commercial or residential redevelopment. These calculations relied upon establishing the value of the subdivided (if necessary) cleared and serviced land for commercial or residential, and then subtracting the cost of achieving this and a required profit margin (developers are not in the game for public service, and fair enough too). The residual was consistently around the $2 million mark.

    So, if I was a businessman who had bought Carisbrook for 75% above what most others would have bought it for, then I would be looking at getting my money back somehow, and plus some more if I am a competent operator.

    One avenue to achieving this may be realising additional residual value within the structures that are on the site – ie by NOT demolishing the Stadium, but by finding a use/tenant for it via contacts/arrangements that are unique to me. Here’s how I might proceed:

    1) Keep the stadium and playing surface ‘pristine’.

    2) Wait for an unfortunate contractual double booking event – for example a double booking at another stadium in the town that involved a series of professional rugby fixtures and an international youth soccer tournament with non-delivery penalty clauses all round. This may not involve a very long wait.

    3) Leverage these penalty clauses in order to lease Carisbrook to the venue management company concerned for a lavish return on capital to cater for the pro-rugby fixtures on a short term lease. Agree to improvements being made to the Stadium eg new pitch lights, baths of warm asses milk for the pro–rugger players, new bars for supporters clubs etc but require that all improvements are at the expense of the lessee and that all improvements revert to the lessor without charge on termination of the lease.

    4) Use this potential reversion of hugely expensive lessee funded improvements to the lessor to support the justification by the extension a shot-term arrangement into a medium-term and highly lucrative lease of Carisbrook by the venue hire company to house pro-rugby (probably rent free) to ensure its ECONOMIC IMPACT is continued.

    5) Stand by and watch happily while the natural grass surface at the other venue is replaced by a non pro-rugby usable astro-turf alternative. The proverbial short and curlies are now in my hands.

    6) Wait until the medium term lease is nearly due to expire and then announce an intention to terminate the lease and demolish the Carisbrook structure (and its reasonably new and very expensive lessee installed improvements) and leave pro-rugby homeless, unless the site is purchased for a substantial sum (let’s say $15 million) by ‘someone’ (I would be looking very hard at the venue management company at this point) before the lease expires. I would claim that the $15 million is what my MYSTERY OVERSEAS BUYER was offering me for the site in order to develop a luxury 39-storey hotel and apartment complex (it needs to be this tall for the luxury penthouses to get a sea view over the top of the existing structure in the Harbour Basin).

    7) Receive the money, as of course protecting the ECONOMIC IMPACT of pro-rugby justifies any expenditure of (public) money.

    8) Build a monstrous and cheesy mansion in Wanaka with the proceeds and retire.

    How plausible is this scenario? Well the longer that the playing surface at Carisbrook remains ‘pristine’ from now on, now that neither party have any reason to maintain the site in pro-rugby ready condition other than for this reason, or something very similar to it, then the more plausible it becomes.

    So watch that turf!

  22. Calvin Oaten

    We’ve been “grassed up!”

  23. JimmyJones

    Robert, Dunky the valuer valued the FB Stadium at $225m using the Depreciated Replacement Cost method which turns out to be exactly the same as the construction cost in this case (see valuation page 14). You can understand why his customer didn’t want him to use the more appropriate DCF/NPV method: an asset that costs the owner $20m/year for its 50 year life has a very large negative net present value. No-one smarter than a cucumber would own such an asset unless the land could be put to an alternative profitable use, and so the value of the FB Stadium is the value of the land, in my view.

    It is interesting that the construction cost was accurately known at the time of the valuation (late 2011). The valuation was $225m and the PWC review of costs was $224.4m in May 2012. Even in early 2009 the estimated construction cost was very accurately known – $223.5m. All the other estimates were lies intended to hide the true construction cost. The true construction cost is still not known because of various hidden costs like SH88 re-routing. I hope someone has kept track of these extra costs.

  24. Robert Hamlin

    Yes indeed Jimmy. Section 5.1 of this is almost required reading – although the rest is informative. I love the statement on page 10:

    “The budgeted returns [of the Foobar] fall well short of what would be considered a market return on an investment exceeding $200 million. This indicates the project is largely justified by wider economic benefits to the region.”

    I don’t recall any such broader justification being the centrepeice of any of Big Malc’s pre-approval effusions – Do you?

    The extra $9 million is is therefore presumably included (hidden) in the ‘fitout’ figure – all those optional but nessary bolt-ons – like the pitch…

    As this extra $9 million of fitout funding presumably came from the DCC in the first place, how can they have made a profit on it then when they sold it on to DVML. Presumably they ‘forgot’ to include it in their ‘costs of goods sold’. I’m not surprised the auditors jibbed at their 2012 figures.

  25. Hype O'Thermia

    Broader justifications – build it and they will come. Jobs during construction, jobs in service and hospitality industries when “they” come. “Cargo cults are typically created by individual leaders, or strong men in the Melanesian culture, and it is not at all clear if these leaders were sincere, or were simply running scams on gullible populations. The leaders typically held cult rituals well away from established towns and colonial authorities, thus making reliable information about these practices very difficult to acquire.” http://en.wikipedia.org/wiki/Cargo_cult

  26. Calvin Oaten

    Of much more interest than the ‘faux’ valuation, to me is ‘the money go round’ outlined in the report to the Finance and Strategy Committee 28/11/2011. It is a result of the Deloitte, Anderson Lloyd and DCTL gnomes cobbling up a game of ‘hide the thimble,’ and of course, the F&S committee would have to pass it. They could do nothing but sit with eyes glazed over. Result, the debt stays precisely where it always has. On the ratepayers, except a few more directors are invited to suck on the ‘hind teat’.
    Another interesting note is that it would seem the total contribution from the University of Otago is not the $10 million originally promoted by our Mr Farry, but rather just $730,000 as a share of the Plaza, plus some nebulous figure relating to a shared wall between the Uni’s building and the stadium. Half share of a few concrete slabs. Any advance on about $500,000?
    SHEEESHHH!!!

  27. ### ch9.co.nz February 19, 2013 – 6:59pm
    Nightly interview: Dave Cull
    The Carisbrook Stadium hit the news last week, when it emerged building company Calder Stewart had put in an offer of $3.3 million for land. All sorts of figures have been bandied about in the media in relation to the sale of the ground, which was bought by the Dunedin City Council as it developed Forsyth Barr Stadium. Mayor Dave Cull joins us to shed some light on the issue.
    Video

  28. Phil

    Jimmy, there was a discussion here a while back with regard to the valuing of a stadium. A stadium is, in reality, worthless. People don’t buy stadia and something doesn’t have a monetary value unless it has a sale price. You can’t sell a stadium unless it’s to someone looking specifically to buy a stadium. Merely selling it to yourself isn’t creating a market value, sorry DCC. You could value it as a potential shopping mall, but then you have to take the value of the site as a shopping mall and then deduct the costs for converting it as a shopping mall. Here again, you have to adjust the projected value to factor in the low numbers of buyers looking to buy a new shopping mall in Dunedin. Ditto for a value as an industrial property. The upshot is that, as a stadium, its true value is limited to the value of the land plus the sale of salvaged material, minus the salvaging costs.

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