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VOLUME 3 NO.7

HIGH-SPEED RAIL

CONRAD HILTON

PROPERTY EDUCATION

A boon for property prices?

The man behind the Hilton brand

Global forces creating local change

AUSTRALIA AND NEW ZEALAND JOURNAL

PROPERTY AUSTRALIA AND NEW ZEALAND PROPERTY JOURNAL SEPTEMBER 2012

Print Post Approved PP246764/00006 A.R.B.N. 007 505 866 ABN 49007 505 866 ISSN 1836-6635 PINZ ISN 100 1330

September 2012 Vol 3/No. 7 $12.95 (incl GST)

CARBON TAX

PITFALLS AND OPPORTUNITIES FOR THE PROPERTY INDUSTRY

THE OFFICIAL JOURNAL OF THE AUSTRALIAN PROPERTY INSTITUTE AND THE PROPERTY INSTITUTE OF NEW ZEALAND


th

26 Pan MELBOURNE CONVENTION CENTRE RE E 1 – 4 OCTOBER, 2012 Join your peers at the Pan PaciďŹ c congress in October and exchange information, gain insight into the culture and Australian real estate market. Speakers from around the world will present on Global Cities, Global Challenges, Global Thinking with topics including the international economy, property recovery following natural disasters, business valuations, green property development, property management, funds and asset management.

www.2012panpac.api.org.au


Pacific Congress of Real Estate Valuers, Appraisers and Counsellors TOP REASONS TO ATTEND: PARTICIPATE in an engaging programme that will provide cutting edge industry updates

GAIN insights from industry experts and real-world experience through the varied program showcase NETWORK with your peers, compare notes, seek advice, make connections

FEATURED KEYNOTES: JEFFREY KENNETT AC, Premier of Victoria 1992-1999 DAVID REES, Jones Lang LaSalle STEVE SHERMAN, International Valuation Standards Council MARK BURGESS, General Manager, Future Fund DREW GINN OAM, 4 time Olympian


CONTENTS SEPTEMBER 2012

510

COVER STORY: CARBON TAX Will a carbon price change private farm forestry in Australia?

REGULARS

FEATURES

506

494 API PRESIDENT’S REPORT 496 PINZ PRESIDENT’S REPORT 498 API CEO Q&A

HOUSING

A barometer for change

502 TRAINING Valuers in Training OPINION

for the 505 Optimism property industry?

518

QUALIFICATIONS Certified Property Practitioner

LEGAL NOTEBOOK

cases, headline 538 Recent issues and new legislation

MEMBER PROFILE

Lang LaSalle’s 550 Jones Jackie Vosloo

490 ANZPJ SEPTEMBER 2012

544

INFRASTRUCTURE Will high-speed rail help the affordability crisis in Sydney?


531 552 578 CONRAD HILTON

INFRASTRUCTURE

The man behind the Hilton Hotels brand

Challenges and opportunities in infrastructure in 2012 and beyond

516

CARBON TAX

520

EDUCATION

528

Pitfalls and opportunities for the property industry Property education – global forces creating local change

FPP PROGRAM The importance of the Future Property Professionals (FPP) program

PRIVATE PROPERTY RIGHTS The battle of the Commonwealth versus Newcrest Mining

560

PAN PACIFIC CONGRESS 2012

562

HOUSING FINANCE

569

VALUER PROFILE

Raising the bar for the valuation profession

The dynamics of holding costs

RHAS’ Rodney Hyman 491


PUBLISHER PANEL

NATIONAL OFFICE

Australia Property Institute 6 Campion St, Deakin, ACT 2600

CEO David Haythorn

Financial Accountant Zainab Mwamtenda

CFO Andrew Tregenza

Financial Accountant David Lucchetti

Property Institute of New Zealand Level 5, 181 Willis Street, Wellington, New Zealand

CIO Joel Leslie

Administrative Assistant: Barbara Channell

Executive Assistant!Jill Lewis

Online Content Officer: Zoe Wolfendale

Editor: Stephanie McDonald

Technology Manager Iain Smith

Professional Standards Manager: Tony McNamara

Production Manager: Rohan Pearce

Education & Training Manager Tracy Kriesel

Professional Indemnity & Compliance Manager: Betty Warner-Lehman

API

PINZ

API National President Philip Western

PINZ National President Phil Hinton

API Senior Vice-President Chris Plant

PINZ Immediate Past President Ian Campbell

EDITORIAL COMMITTEE

API Junior Vice-President Tony Gorman

Managing Editor: Joel Leslie

API Immediate Past President Nick McDonald Crowley

PINZ National Board I Campbell, G Barton, G Munroe, B Hancock, P Hinton, I Mitchell, M Dow, P Merfield (Independent)

Sub Editor: Rebecca Merrett Creative: Fletcher Guinness President and Publisher: Barbara Simon

• Professor Richard Reed

• Sean Ventris

API National Council N McDonald Crowley (ACT), J Eager (NSW), C Plant (VIC), C Harris (QLD), J Pledge (SA), P Western (NSW), J Forsyth (VIC), A Cubbin (TAS), D Moore (WA)

• Ian Flynn

National Director David Haythorn

• Amy Guy

PRODUCED BY

• Michelle Glastris • Professor Chris Eves

• Gail Sanders • Tracy Kriesel

IDG Communications for the Australian Property Institute.

MARKETING AND COMMUNICATIONS Joel Leslie, API National Office

Level 22, 8-20 Napier Street North Sydney, NSW 2060 Ph: +61 2 9902 2700

Chief Executive Officer David Clark

Editorial: stephanie_mcdonald@idg.com.au Advertising: kerry_frances@idg.com.au Ph: + 61 2 9902 2706 Subscriptions Journal@api.org.au Ph: +61 2 6282 2411

CONTRIBUTORS Rita Avdiev, James Berg, Ian Clarkson, Stephen Cooper, Gary Garner, Alan A Hyam, Phil Hinton, Alan A Hyam, Jonathan Kennedy, Tim Lohman, Stephanie McDonald, James Morse, Steven Sherman, Adrienne Thomas, Andrew Tregenza, Phil Western.

The Australia and New Zealand Property Journal is published by the Australian Property Institute (API) and the Property Institute of New Zealand (PINZ) for the members. The Publishers invite authors to submit articles of interest that further professional practice in the property industry. Articles of 500 to 5000 words will be considered. Guidelines for authors are available from the publishers. The Publishers reserve the right to alter or omit any article or advertisement submitted. Authors and advertisers indemnify the Publishers and publishers’ agents against damages and liabilities that may arise from the published material. Advertisers, advertiser agents and representatives lodging material with the Publishers indemnify the Publishers, its servants, staff and agents against all claims of liability or proceedings in relation to defamation, trademark infringement, breeches of copyright, licences and royalty,

slander, unfair competition, trade practices and any violation of the rights of privacy. Authors, contributors and advertisers warrant that the material supplied complies with all laws and regulations and that publication of the supplied material will not give right to claims of liability or are being capable of being misleading or deceptive or in breach of respective laws in all States and Territories of Australia and New Zealand. At times, the Australia and New Zealand Property Journal publishes technical material to assist professional practice as supplied by authors and 3rd party sources. The Editor accepts no responsibility for the expressions, opinions, outcomes or effectiveness of formulas or calculations contained in those articles. Readers should seek independent, specialist advice on matters concerning business practice, financial outcomes and legal implications.


here have been indications that the property market is beginning to warm up, with some optimism in the latest commentary. I was buoyed to hear Reserve Bank Governor Glenn Stevens say that housing affordability, in the RBA’s view, is the best it has been in a decade. Nationally, he said housing prices were about where they were in 2002. Just a few years ago we were supposedly in a housing affordability crisis – now the consumer view is that housing is becoming more affordable. I also recently read that the head of one of Australia’s largest private construction and development companies believes the NSW economy (Australia’s largest economy by population), and Sydney in particular, is poised for a lift. Other commentary is signalling that Sydney’s commercial rents are set to rise over the next two years as market tightening continues. Other analysts say that commercial property loan foreclosures are declining, though this is tempered by other views that there are further forced sales yet to come in 2012 as lenders consider refinancing options for existing loans looking at lower LVRs. API’s National Director/CEO, David Haythorn, reiterated in several recent presentations that we shouldn’t lose sight of the fact that property is one of the largest industries in the national economy, estimated to have contributed about $600 billion to total GDP in 2009-10. It accounted for 12.6% of GDP and was 1.5 times higher than the contribution of traditional economic powerhouses of manufacturing (8.5%) and mining (8.4%). Overall, this bodes well for property professionals as our services will increasingly be sought

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PHIL WESTERN, FAPI NATIONAL PRESIDENT AUSTRALIAN PROPERTY INSTITUTE

494 ANZPJ SEPTEMBER 2012


API NATIONAL PRESIDENT’S REPORT

API PRESIDENT’S REPORT

to provide expert advice on property market opportunities, especially risk identification and mitigation remedies. We need to continually celebrate our expertise and not undersell ourselves. Importantly, API members can provide service and advice knowing they are backed by the standards, guidance principles and a national network of one of Australia’s leading property professional membership organisations – the API.

THE LATEST IN THE API So what’s been happening at the API since our last publication of the Australia and New Zealand Property Journal?

YOUNG PROPERTY PROFESSIONALS (YPP) As API’s future, YPP held an exciting national forum in August. This brought together YPP representatives from across Australia. News of the forum has been positively received and I am sure it will create excellent outcomes that you will be able to read about in the next issue of the Australia and New Zealand Property Journal.

COMMUNICATION AND TECHNOLOGY There has been a high take-up of the ‘Find a Property Professional’ online directory. This free member service is also gaining media exposure. In a recent Money Magazine article it was listed as the ‘go to’ place to find Australian valuers and property professionals. The API is directing all requests for property professionals to the online directory, so ensure your details are registered. The API Events website is also being developed, which will allow for full registration and payment for API events. It will also allow members to manage CPD points and personal details.

The Young Property Professionals groups of API will soon also have a new national website. The specification of the new website has been developed and is currently in counsel with YPP chairs.

EDUCATION Two major educational programs were launched by the API 1 July, 2012. The Future Property Professionals (FPP) program became compulsory for all members seeking Provisional Membership (PMAPI) with Residential Property Valuer (RPV) and Associate Membership (AAPI) with Certified Practising Valuer (CPV) designation. The program contextualises knowledge gained during tertiary studies into the practical skills required to be an effective property professional. We are receiving positive feedback to this industry-demanded initiative. The API’s Risk Management Module (RMM) 2012 has also been launched for all practising valuers. RMM is being delivered by Divisions as both a face-to-face module and online through the API’s e-learning platform. Several modules have been developed to meet the individual practice needs of members.

APIV LIMITED LIABILITY SCHEME The first half of 2012 saw more than 1700 members join the Scheme. A series of face-to-face road shows are being planned from August through to October 2012 and all members are encouraged to attend. We remain aware that some types of valuations are causing issues by elevating members into higher categories. We have been working with the Professional Standards Council (PSC) on a solution that will require the Scheme to be amended and approved by the PSC. This will require it to go through each state/territory approval and Government Gazettal processes.

By December 2012, implementation of the Scheme will come to an end. Members are reminded that under the API by-laws, participation is compulsory, unless exempt. The APIV Exemption Policy, information and forms can be found on our website under ‘Limitations Liability Scheme’ at www.api.org.au.

INSURANCE MARKET In the past nine months several new insurers have entered the valuer PI insurance market. It is essential that your broker has the skills to assist and advise you in the renewal process. They also need to understand your business, be familiar with the insurance market for valuers and understand the implications and requirements of the Limitation of Liability Scheme.

THE PAN PACIFIC CONGRESS OF REAL ESTATE APPRAISERS, VALUERS AND COUNSELLORS The 2012 Pan Pacific Congress of Real Estate Appraisers, Valuers and Counsellors will be held in Melbourne, 1-4 October. Have you registered for this conference? If not, do so quickly. It is a unique opportunity to join with property professionals from more than 15 overseas property organisations from the Pacific region. The API is pleased to be hosting this event, featuring a diverse four-day program of educational and social events in one of the world’s most liveable cities. The congress provides the opportunity for members of property professional associations from around the region to meet, exchange information and provide insight into the culture and real estate market of the host country. For more information visit the congress website: www.2012panpac.api.org.au. „ 495


PINZ PRESIDENT’S REPORT

496 ANZPJ SEPTEMBER 2012

ecently, there have been signs of a recovery in the residential market – with Auckland showing the way. Homeowners are seeing the opportunity to move forward with planned purchases, encouraged by consistency in low lending rates. Whether this leads to a further round of residential price inflation in the long-term remains to be seen, but there are strong signs of significant house price growth in Auckland. The commercial and rural markets are more subdued, with the investment cycles for these being based on a different set of drivers. However, there are some signs of improved demand for better quality assets with low downside risk. The New Zealand Institute annual conference was held in Auckland 15-17 June. Around 300 people attended workshops and seminars on a variety of topics, including on the technically challenging aspects around property advice following the Christchurch earthquakes and aspects of the rebuild. At the AGM at the conference, we had the privilege to grant the status of Fellow on several outstanding members. John Schellekens, Brian Paul, Peter Wright and Evan Bowis were conferred fellowships in both the Property Institute and the NZ Institute of Valuers, while Graham Bailey, Roger Soulsby and Bryce Barnett became fellows of the Property Institute and Tim Truebridge a fellow of the NZIV. We also welcomed a new Property Institute and NZIV life member, Professor Bob Hargreaves, and a new Property Institute Honorary Fellow, John Greenwood. On the education front, new education manager, Marilyn Fitzpatrick, is assisting the Education Committee instigate a number of initiatives based around liaison and

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PINZ PRESIDENT’S REPORT

consultation with members. It is reviewing the current CPD policy in light of the implementation of the Professional Pathways Program and looking at how the Institute interacts with the valuers’ registration board and the various degree programmes at universities. At a recent meeting the Education Committee also planned to revitalise the webinar program with a number of topical events designed to focus on issues that we believe our members should know about. In addition, there have been a large number of events from Branches, including responses to the impacts of the Christchurch earthquake, Quality Assurance seminars and workshops conducted at the recent conference. The 2012-2013 Education Plan has an eye on industry sustainability, focusing on the needs of our graduates, members and their continuing development. At the same time, it is designed to cater to more senior members as well, broadening their skills and further refining performance. Further to our core education offerings, Property Education and Training Limited continues to offer online education services for real estate services. It is also developing modules for government-related entities in property. Progress continues on the development of education modules for the Professional Pathways Program, including leasing; feasibility studies and property development; an overview of crown land; property information (data collection, analysis and interpretation); RMA and Planning Issues; Property Marketing; Disaster and Risk Management; and Corporate Real Estate. The significant contribution by members in terms of time and expertise to develop these modules

is much appreciated, including input from the API. The Quality Assurance Accreditation Scheme is picking up pace in 2012. Six firms have become fully accredited since the initial Accreditation and Risk Management (ARM) Committee meeting in April. Uptake of the scheme is extremely encouraging, with a further 18 firms currently being processed and applications for accreditation rapidly increasing. Applications are being received across a range of firms, from sole practitioners to multinationals in New Zealand and Australia. While some firms have found the process of accreditation challenging because of the time and careful consideration needed to construct a robust quality system, the results we are seeing already indicate this is paying good dividends. Many firms in the accreditation process are also taking the opportunity to confirm all staff understand business service standards and are complying with professional standards. In addition to looking at valuation processes, the ARM committee also review recent valuation reports from each firm. Feedback from this process indicates that firms are finding that this adds value to the way they operate and provides an opportunity for constructive independent analysis of their reporting templates. After an initial launch with valuers, the scheme has now been opened in the property advisory community area and in October property and facilities management community members will also be welcomed to the scheme. The Institute’s website provides information for firms interested in applying for accreditation, including documentation on quality system

templates and the terms of the participation agreement. The Institute itself is walking the talk by developing its own quality system and will apply for accreditation later this year with the International Organisation for Standardization (ISO). Jo Parry, QAAS Manager, has been developing this system and is supported by National Office staff who have rallied behind the initiative and are contributing to the development of the policies and processes for each of the Institute’s work areas. On the international valuation standards front, we are continuing to work with API and IVSC to make the international standards available to all members. We hope to have completed this in the coming months. The China study tour 20–31 October, 2012 is a joint initiative between PINZ and the Property Council of New Zealand. It includes functions with the Hong Kong Institute of Surveyors, the China BOMA, the government of the People’s Republic of China and a number of corporate events. There are 25 confirmed travellers split equally between the Property Institute and the Property Council. For the balance of the year there remain a number of key activities that National Office will be pursing. These will include continuing discussions with key industry sectors, a face-to-face meeting of branch chairs in Wellington and ongoing guidance from members on associated property legislation, such as the Real Estate Agents Act and how it affects members operating in the wide number of fields they cover. „

PHIL HINTON PRESIDENT | PROPERTY INSTITUTE OF NEW ZEALAND 497


CEOQ&A

“SERVICE STARTS WITH GETTING THE LITTLE THINGS RIGHT, SUCH AS THE TIME IT TAKES TO ANSWER MEMBERS’ CALLS OR ASSESS A PROSPECTIVE MEMBER’S QUALIFICATIONS” DAVID HAYTHORN

498 ANZPJ SEPTEMBER 2012


API CEO Q&A

API Chief Executive Officer, David Haythorn, sits down with the Australia and New Zealand Property Journal to discuss the push for uniform licensing legislation and the upcoming API Strategic and Governance Review. He also talks about current issues for members, upcoming improvements to API services and how members can make the most of their membership.

NOT-FOR-PROFIT ASSOCIATIONS NEED TO THINK MORE LIKE COMPANIES THE API IS A NOT-FOR-PROFIT (NFP) ORGANISATION. WHAT ARE YOUR THOUGHTS ON NFP ORGANISATIONS IN BUSINESS? The term not-for-profit can inhibit organisations, causing them to excessively distinguish themselves from the corporate sector. Not-forprofits need to treat their organisations like a company while remaining true to their organisation’s mission. NFPs need to aim to run a surplus, engage competent staff, elect leaders who care and above all invest wisely. The successful operation ultimately comes down to attitude. When making decisions, we must ask ourselves, ‘would I do this with my own money?’ If the answer is ‘no’, don’t do it.

CAN YOU PROVIDE AN UPDATE ON UNIFORM LICENSING LEGISLATION? Significant progress has already been made in preparing for the reforms. Six out of eight COAG jurisdictions have already passed the Occupational

Licensing National Law Act (2010), giving the legislative mandate for the National Occupational Licensing Authority (NOLA). Work will now proceed on developing a clear formal statement on the benefits and costs of the reforms for consideration by the states and territories. The statement will also be used for a formal consultation period, including public meetings, which will be conducted in late 2012. The NOLA Board is moving quickly to establish the new Authority, which will be based in Sydney. Work is also progressing on the development of a new national licensing register that will allow anyone to check whether a person holds the licence that they say they do. This new system will greatly assist individuals and businesses who work across state boundaries. The Australian economy will benefit from national licensing as greater labour mobility and increased efficiency increases overall output and competitiveness.

WHAT IS ON THE API’S AGENDA LEADING UP TO 2013? By 2013 we look forward to having started our Structure and Governance Review. This review will be all encompassing, looking at our constitution, our finances and the needs of all key stakeholders. It will start with a full survey of our membership, our volunteers at all levels and, of course, importantly, all our staff. Recent key strategic initiatives include building a service culture across all divisions, broadening our audience with the release of the new-look journal and supporting education with Future Property Professionals (FPP) and Risk Management Module (RMM) programs. These initiatives are attracting people who aspire to a career built on professional property skills. More efficient processing of applications and assessments is also on the agenda, as well as 499


API CEO Q&A

“LET’S GO BACK TO BASICS. FIRSTLY, REMEMBER WHY YOU CHOSE A PROFESSION IN PROPERTY ... [AND] RETAIN A FOCUS ON THE FUNDAMENTALS OF BEST PRACTICE AS A PROPERTY PROFESSIONAL” DAVID HAYTHORN

further enhancements to member communications to ensure they are even more appropriately targeted. And, of course, we will be striving to provide even better service to our members, as well as finalising our new core business systems through our online enterprise system. We would also like to have full integration of the API technology platform with our content management system program. To this end we are determined to engage the right people to ensure our goals are met. 500 ANZPJ SEPTEMBER 2012

HOW CAN API MEMBERS MAKE THE MOST OF THEIR MEMBERSHIP BY VOLUNTEERING? I’m keen for the API to get back to the original intent of why the Institute was started, which was to set professional standards across the property industry. There’s a great opportunity for people to volunteer, starting with our Young Property Professionals program, and there are valuable opportunities to work on our


API CEO Q&A

education, property standards and valuation standards boards and taskforces. By doing this, members can advocate for change, as most of the boards and committees are set up to make industry improvements and/ or change.

CAN YOU PROVIDE MORE INFORMATION ON THE MEMBER CHANNELS NOW AVAILABLE? We also now have multiple channels open to members, including: • your local API offices • the ANZ Property Journal in print and online • the API national website • the Find a Property Professional online directory • e-news and member alerts

Service starts with getting the little things right, such as the time it takes to answer members’ calls or assess a prospective member’s qualifications. Many members also join up for networking opportunities, as networking can extend from meeting people at events to volunteering or meeting a senior member of the organisation and having them mentor or provide advice or direction.

DO YOU HAVE ANY OTHER MESSAGES FOR MEMBERS? While we retain our helicopter view of the industry as a professional body, we are also acutely aware that our members and their clients continue to endure tough times. With now over four years since the global financial crisis, when

Australian markets plummeted by more than 49%, markets will undoubtedly continue to be volatile and unpredictable. Our message to members is let’s go back to basics. Firstly, remember why you chose a profession in property. Secondly, revert to the Code of Professional Practice that you signed up to as an API member to retain a focus on the fundamentals of best practice as a property professional. It’s also the perfect time to reflect on how you can make the most of your professional standing as an API member. If you are not already a member of the elite group of more than 5,200 CPV® or CPP® professionals in Australia, consider making a commitment to attain a recognised professional certification and stand apart from your peers. „

Wholesale Investment Property

www.qpex.com.au


TRAINING

VALUERS IN TRAINING ANZPJ takes a look at the Australian Valuation Office Valuer in Training (VIT) program and examines what valuers can learn from it.

oung valuers are the key to the future of the valuation industry. Not only do they offer a fresh take on an old industry, but they can also learn valuable lessons from those more experienced in the industry. This is where programs such as Valuer in Training (VIT) come in. In May last year, the Australian Valuation Office (AVO), which provides valuation and valuationrelated services to the government sector and is a fee-for-service business line within the Australian Taxation Office (ATO), began to work on reinvigorating the VIT program. Helena Eason, Senior Valuer at the AVO, project managed the VIT program renewal. Working with universities across the nation, internal stakeholders and the API, Mrs Eason developed a program filled with the content and practical experience needed to guide participants starting out in their valuation career. In July this year Mrs Eason was recognised for this major body of work, being awarded the prestigious ATO Commissioner’s Award. “Developing staff and investing in training is an important strategy set by our General Manager, Brett Martin, and the AVO Executive,” said Jack Quaid, Senior Director Valuation Services and the current program sponsor. “This strategy ensures staff development, knowledge transfer and allows our organisation to apply the highest level of corporate expertise to our client’s portfolios.”

Y I ENJOY BEING ABLE TO SPEND PART OF EACH WORKING WEEK OUT IN THE FIELD AND NOT STUCK BEHIND A DESK

502 ANZPJ SEPTEMBER 2012


TRAINING

While the program aims to develop young valuations professionals to lead the industry into the future, it also aims to change the team dynamics in the organisation through mentoring and development. “In many ways, the VIT program acknowledges the importance of a two-way street. The young VITs bring a fresh outlook to our organisation and an understanding in relation to the implementation of technology and our more experienced valuers offer the VITs their mentoring and experienced guidance,” Mr Quaid said. Current VITs are a quarter of the way through a two-year supervised program to become Certified Practising Valuers and Associates of the API. “Mentoring from experienced valuers is a major benefit, combined with participants in the VIT program gaining exposure and experience across a broad range of valuation types, including statutory valuation, plant and equipment, financial reporting and commercial valuations,” Mr Quaid said. “With exposure to such a large spectrum of valuation types, at the end of the program our aim is to produce well rounded valuers that are trained in approaching even the more unusual valuation requests.” The VIT course is carried out over two years and broken into three components, with VITs given training and experience to be able to undertake the API and CPV application process. This can help them in preparing reports, gives them time and exposure to properties and also gives them mock training in professional interviews (viva voce).

EVERY PROPERTY IS DIFFERENT AND I FACE THE CHALLENGE OF MAINTAINING A PARAMOUNT UNDERSTANDING OF THE VALUE OF EACH PROPERTY IN EVER-CHANGING PROPERTY MARKETS

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TRAINING

COMPONENT ONE This component is corporate knowledge of the AVO/ATO environment and includes: • completion of a Certificate IV in Government • project management exercise that that can take up to six months to complete • mentoring – each trainee is matched with experienced staff members to act as their mentor for the period of the VIT program

COMPONENT TWO This component is technical knowledge and includes the API Future Property Professionals Program, including: • 12 modules, comprising six compulsory, three prescribed and three elective modules • approved professional experience and on-the-job training • professional work diary maintenance for future API production • membership application process • professional viva voce interview and mock interview prior

COMPONENT THREE This component includes work placements and rotations. Additional to the project work is a comprehensive and varied rotation through different areas of valuation across the AVO, including: • Commercial • Rental Assessments • Industrial • Residential • Rural • Project Management • in-field group inspections and workshops The selection process for the course is undertaken each year. Advertising for the next intake of students for the VIT program will begin in September 2012. „ 504 ANZPJ SEPTEMBER 2012

I THINK THE ‘ART’ OF PROPERTY VALUATION IS A GREAT TOOL AND A GREAT ENTRY POINT INTO A CAREER IN THE GENERAL PROPERTY INDUSTRY AS YOU HAVE THE SKILLS TO IDENTIFY POSITIVE/NEGATIVE ATTRIBUTES OF A PROPERTY, IDENTIFY MARKET MOVEMENTS AND ASSESS THE TRUE VALUE OF A PROPERTY


OPINION

OPINION OPTIMISM FOR THE PROPERTY INDUSTRY? There’s nothing like a visit to Rwanda to put the current Australian malaise into perspective, Rita Avdiev writes.

ighteen years after the 1994 genocide, which killed nearly 1 million people in 100 days, Rwanda has just celebrated 50 years of independence from Belgian colonial rule. Rwanda is now focused on the future while remembering the horrors of the past, rebuilding the country, its institutions and people. The government has also put great emphasis on improving the current standard of education, which has left many graduates now working in academia, bureaucracy and construction unprepared for the pace and intellectual demands of 21st century work. Construction standards in Rwanda are very poor. Some four-storey hotels have no lifts. Major government buildings have sloping floors, stair risers of different heights and shoddy finishes. Anything that was uneven in base construction gets tiled over. One wonders how long such buildings can withstand Rwanda’s vigorous weather. As part of its rebuilding program, Kigali, the capital of Rwanda, has a 50-year master plan. A wonderful vision of the future created by urban designers from Singapore and the US, it is described in detail on the Kigali City official website. Among a plethora of information, there is a list of frequently asked questions (FAQ). It identifies the government departments responsible

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for various aspects of the masterplan and lists the FAQs about habitat, safety, socio-economic affairs, infrastructure, environmental initiatives and tourism. But there are no answers to the questions. This could be an oversight or the lack of strategic thinking at work. Closer to home, the Australian property community is bemoaning the lack of business activity in the eastern states and the Reserve Bank is waiting for economic signals from abroad. Our master plans, created a long time ago, have been bogged down in bureaucracy.

Urban planning in the eastern states is entering a period of change. For example, Victorian planning zones have been reformed – an attempt to remove and simplify excessive regulation and restrictive policies which have stood in the way of rational development in commercial, industrial, retail and residential areas. In New South Wales the government has consulted widely and released a green paper proposing key elements of a new planning system and a cultural change from bureaucracy to facilitation. The changes focus on community participation, strategic planning, streamlined approval and the provision of infrastructure. Among other planning initiatives, the new Queensland government is backing a controversial new $600 million resort development on Great Keppel Island which may create 1,200 new jobs and is fiercely resisted by pressure groups. We wait to see how these changes play out. Let’s hope that our bureaucrats are able to provide rational answers to the many FAQs which will be asked along the way and can adapt to the proposed cultural changes encouraging a positive attitude to development which the Australian property industry is desperately hoping for. „ Rita Avdiev is Managing Director at property industry management consultancy The Avdiev Group and Fellow of the API (FAPI). 505


HOUSING

HOUSING MARKET A BAROMETER FOR AUSTRALIA’S CHANGE The Commonwealth Bank’s Centenary Report into Home Ownership reveals a lot about the changing shape of Australian homes and society, Tim Lohman writes.

506 ANZPJ SEPTEMBER 2012


HOUSING ohnny Cash may have once sung that ‘time changes every thing’, and in the passage of the more than 60 years from 1950 until now, Australia certainly has changed. The full extent of that change, at least where the property sector is concerned, has been recently documented by the Commonwealth Bank’s Centenary Report into Home Ownership. The report, carried out by KPMG and drawing upon Commonwealth Bank and Australian Bureau of Statistics (ABS) data, finds that vast social and demographic change since

The report finds that as at 1984 Australians were spending 13% of their household expenditure on housing costs. That percentage plateaued at 14% between 1988 and 1999, but then shot up to 18% as at 2009-10. So, while many households may be feeling the pain of higher housing costs, the report also finds that it’s a pain largely of Australians’ own making. That’s because the average first home bought today is much superior to the average 1950s weatherboard two- to three-bedroom home of just 12-13 sq. m. “By the 1980s a typical first home was in the 17-18 squares range, brick veneer, three bedrooms and had a carport,” the report explains. “Nowadays it is common for “BY THE 1980s A TYPICAL FIRST homes marketed to HOME WAS IN THE 17-18 SQUARES first home buyers RANGE, BRICK VENEER, THREE to be over 30 BEDROOMS AND HAD A CARPORT” squares, have four bedrooms, a theatre room and a brick double garage.” 1950 has had a profound effect on The large increase in home size has, housing affordability, expectations unsurprisingly, driven an increase in the about the quality and size of homes and size of loans. As at 1949-50 the average the shape of housing in Australia. loan approved by the Commonwealth One of the areas where social Bank was £1,300. Relative to the annual change and its link to property can most household income of the time of about clearly be seen is in salary. According £525. That represents a loan-to-income to the report, in 1951 the average ratio of 2.47 years. As at 2011 the bank’s household annual income was £525 average loan was $298,000 for an and was brought in by a single male annual household income of $126,984, breadwinner to support a non-working representing a ratio of 2.34 years. Now, wife (often by law) and between three while those ratios a very similar, it now and four children. Through the removal takes one-and-a-half to two full-time of barriers to women both entering breadwinners to support that loan and remaining in the work force, the where it used to take just one. average annual household as at 2009/10 brought in $126,984 and supports fewer CHANGING EXPECTATIONS children — typically one or two — and In large part this increase in home and a larger mortgage. loan size has been driven by expectation While complaints about the and aspiration, the report argues. cost of living seem to occur with Whereas new housing developments increasing frequency, and the report in the 1950s commonly lacked sealed does suggest that — at least since 1984 roads and sewerage, now the expectation — the proportion of total household among home buyers is that new expenditure being spent on housing developments feature landscaped parks, costs is indeed increasing, and hence schools and libraries. In other words, the cost of living rising relative to Australians aren’t just buying a house, household expenditure. but a home in a ready-built community.

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HOUSING

Between 1980 and 1989 some 2.9 million loan applications were approved by the bank. That compares with 6.4 million for the decade from 2000 to 2009. The report also notes that some of this is attributable to the increase in population over the period from 14 million to 22.3 million. However, the peculiarly Australian obsession with home ownership has also been a spur to growth. “There is a powerful home buying culture in Australia. Australians want security of tenure: that’s why they buy their own home,” the report reads. In line with this culture, the rate of home ownership has also changed over time, but so too have all forms of tenure, driven by increased access to financing and cultural differences such as the Baby Boomers’ willingness to pay down loans and Gen Y’s unwillingness to commit to a home loan. The report states that as at 1947, 47% of households owned a house without a mortgage, 45% of households were tenants, and 8% were owners with a mortgage. In 2006, some 35% of households were without a mortgage, 30% were tenants and 35% were owners with mortgages.

THE REPORT STATES THAT AS AT 1947, 47% OF HOUSEHOLDS OWNED A HOUSE WITHOUT A MORTGAGE, 45% OF HOUSEHOLDS WERE TENANTS AND 8% WERE OWNERS WITH A MORTGAGE. Aspiration, as Stockland’s Managing Director, Matthew Quinn, pointed out in the June edition of the ANZPJ, is also another major driver of change. Supported by dual, rather than single incomes as in the 1950s, the report argues that home buyers now expect luxuries such as granite benchtops, European appliances, walk-in wardrobes and ducted heating and cooling. Detailing changes in home loans, the report notes that the number of home loans approved have doubled between the decades of the 1980s and the 2000s.

508 ANZPJ SEPTEMBER 2012

CHANGING SHAPES With more women in the workforce, fertility rates have also fallen over the years, from a peak of 3.5 in 1961 to just below 2.0 in 2010. As a result, declines in the average household size have also been recorded — from 3.8 people in 1954 to 2.7 as at 2006. However, contrary to expectations, the number of detached dwellings with four bedrooms has actually increased since the 1970s. As at 1971, just 13% of Australian detached homes were four-bedrooms.

In contrast, as at 2007/08, 36% of detached homes were four-bedrooms. “Home owners may still demand bedrooms but for use other than sleeping, such as study, home theatre rooms or gym,” the report states. “Families may be looking to ‘future proof’ by purchasing as large a home as possible. Australians are increasingly viewing their home as a vehicle of investment … so Australians may be buying homes larger than they need with the attitude it will benefit them at resale time.” With fewer kids, and through shifts in the lifestyles of both adults and children, there has also been dramatic changes to the size and shape of Australian homes over time. The size of lots have fluctuated across the decades since 1950, and so too have the average back yards. In the 1950s the average backyard for outer-suburban estates was 220 sq. m — down from a peak 311 sq. m in the 1930s. In the 1980s, yards dropped further to 169 sq. m, to 74 sq. m in the 1990s and to just 46 sq. m in the 2000s. Similarly, the percentage of space reserved for back yards in outersuburban estates has shrunk from a peak of 43% in the 1940s to just 8% in the 2000s. “The decrease in backyard area can be attributed to the changing function of a backyard in society today. Traditionally a backyard was used for young children to play in. However in more recent times, children are more likely to undertake indoor activities…” the report reads. “This has led to the backyard being used as an alternative entertainment/dining area in the form of al fresco areas and outdoor patios which do not require much land.” These changes in the Australian housing market may not come as much of a surprise to many property professionals or anyone who has lived through the last 60 years, but the changes do suggest an important message: anyone seeking an oracle for Australia’s future could do worse than look to the property market today. „


DOWNLOAD THE LATEST ISSUE OF AUSTRALIA AND NEW ZEALAND PROPERTY JOURNAL ON YOUR IPAD OR ANDROID TABLET

Download now http://bit.ly/PlLuQf


CARBON TAX

WILL A CARBON PRICE CHANGE PRIVATE FARM FORESTRY IN AUSTRALIA?

510 ANZPJ SEPTEMBER 2012


CARBON TAX

Rural industries will be affected by the Federal Government carbon price, with impacts on input costs. Ian Clarkson FAPI, lecturer in property at Central Queensland University Faculty of Arts, Business, Informatics and Education, examines what the carbon tax could mean for farm forestry.

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u r i ng t he i nter i m before the Emissions Trading Scheme (ETS) is introduced, farms have an opportunity to either earn money through selling carbon credits or at least reduce the impact an ETS will have on their ongoing farming costs when it is introduced if the framework for separating carbon rights to allow sale is completed. John Sheehan (2009) noted that the Kevin Rudd-proposed carbon pollution reduction scheme (CPRS) did not clearly differentiate between property rights and carbon rights and how these may be exchanged. A number of states have adopted profit-à-prendre as a basis for the right to carbon. This enables a person to take part of the soil or produce of land that someone else owns. It is a right to take from the land, as in the mining of minerals, but in this case means carbon credits. However, this action offends the common law notion of land property and is fundamentally flawed (Sheehan, 2009). This raises the point as to how carbon rights may be transferred or paid for in the context of separating the carbon right from the land right. Whilst energy, through power generation and the transport of goods, is the biggest producer of greenhouse gases in Australia, the second highest producer of greenhouse gases is rural industries. Garnaut cites that agricultural emissions are more than six times the Organisation for Economic Cooperation and Development (OECD) average, being the third highest. In Australia, agriculture directly contributes around 15% of the country’s greenhouse gas emissions (Meer, 2009). This is balanced slightly as Australia has the most wooded area of any OECD country with about 28.8 hectares per person (Garnaut, 2011). However, agricultural greenhouse gas emissions fell by 0.6% in the 2011 financial year from the previous year’s output.

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512 ANZPJ SEPTEMBER 2012

BREAKDOWN OF AGRICULTURAL EMISSIONS Agriculture’s GHG emissions by source Agri 65% 6 65 % Enteric Fermentation 65%

4% 17% 13%

4 % Manure Management 4% 0 % Rice Cultivation 0% 17% Agricultural Soils 17 17% 1 3% Prescribed Burning of Savannas 13% 1% Field Burning of Agricultural residues

1%

Total Agricultural emissions = 88 million tonnes 2007

FIGURE 1 AUSTRALIA AGRICULTURE EMISSIONS (MEER, 2009) To reduce g reen house gas emissions in Australia further, Garnaut recommends an almost 30% reduction of the Australian cattle herd down to 18 million, with a 40% reduction in sheep to 45 million head based on the red meat consumption of Australia and the replacement of high methane producers with ‘greener’ chicken and kangaroo. However, sheep are not just used for meat consumption, with the majority (around 67%) used for wool production. This natural product would need to be replaced by alternative fibres if flock reduction occurred, and there appears minimal accounting for this in the report. Another argument has been advanced that the use of wool will diminish as more synthetic fibres are produced, but synthesised polymers are generally produced from petroleumbased chemicals and account for around half of the world’s current fibre use. Textile production is the fifth largest contributor to carbon dioxide emissions in the United States (EIA, 1998). The Stockholm Environment Institute also shows that due to the high energy requirement of extracting oil from underground, there is around 9.52 kgs of carbon emissions per tonne of spun fibre

in creating polyester in the US, compared to 5.89 kgs of carbon dioxide to produce 1 tonne of cotton in the US (SEI, 2005).

CARBON CREDITS IN THE RURAL INDUSTRY There has been no possible commencement date announced for a trading scheme at the time of the preparation of this paper by the Gillard government, just the introduction of the carbon price from 1 July, 2012. Peter O’Brien, Managing Director of Rural Industries Research Development Corporation, said: “Agriculture will be affected by the CPRS both directly and indirectly. Emissions costs in the form of abatement and/or to purchase permits will potentially account for a significant share of production costs for livestock sectors and it is difficult for Australian farmers to pass the costs to their customers because most of their products are exported. Even if agriculture is not included in a CPRS, it will still be impacted by higher input prices and lower demand.” The three options presented for a reduction of agricultural greenhouse gases are changing the Australian meat


CARBON TAX

herds away from methane-producing animals to non-ruminant indigenous sources such as kangaroo; reducing the size of farm operations whilst maintaining the farm size, such as lowering stock rates and less intensive cropping; and creating a form of ‘carbon sink’ by either re-forestation or another source of bio-fixing of carbon such as in-soil sequestration. A sectoral analysis using agricultural commodity models suggests that sectoral output would fall by from half a percentage point to over 4% when the permit price is $25 per CO2 equivalent. This estimate of downturn would mean that a carbon price of $25 per tonne carbon dioxide has the potential to close up to 14% of beef producers, being the smaller farms in the sector (Jiang, 2009). The most progressed thinking to try to offset some of the carbon issues is the re-forestation of degraded land – land close to waterways or strategic land which will form shade or windbreaks for more efficient overall farm production. However, currently the harvesting of trees or their loss in a natural disaster such as bushfire would be treated as an emission under the Kyoto Protocol. As a result of this the owner of the forest would have to surrender the credits unless the trees are replanted immediately after an event as the CPRS has a requirement for tree plantations to be maintained for 100 years.

Carbon Neutral reports on its website: “We currently plant an average of six to seven trees per tonne. In the 350-450 mm rainfall area of WA, we  estimate the number of trees required per tonne of CO2 varies from four to 10 depending on location,

developed by Private Forestry Southern Queensland, which was a trial plot of timber near Kenilworth. The initial data was entered prior to planting and is being updated as the trees grow.  However, 20 tonne was used in calculations as a conservative benchmark.

IT IS THE EXTENT TO WHICH RURAL INDUSTRIES AND HIGH EMITTING INDUSTRIES ARE CAPTURED WITHIN ANY CPRS WHICH WILL INEVITABLY CREATE THE PRICE FOR CARBON AND THE AMOUNT THAT PEOPLE ARE WILLING TO PAY TO AVOID THE COST

species of tree, soil type and type of planting. If we could plant karri trees in 1,000 mm rainfall areas, it could be more than a tonne of CO2 per tree!” (Wilson, 2010) The Austra lian Greenhouse Office (AGO) has also developed a website where information can be put in to calculate how much carbon is sequestered by a hectare of forest. The approximate average allowed within an Australian context is around 600 to 650 tonnes of carbon per hectare during a 25- to 30-year growing cycle for most Australian hardwood species. The AGO has calculated a 30 tonne per annum figure for the scenario

Soil carbon sequestration is also potentially a very large pool, with a global estimate of 2.3 trillion tonnes of available matter, three times that of carbon in the atmosphere. This pool of carbon storage or sequestration is that contained in soil microbes, worms etc; labile carbon of decaying plant matter; and fixed carbon in stable compounds. This is separate to the sequestration in forestry timber and subterranean burial, which was proposed for some power stations with the capture at the top of the stack and then pumping down to great depths in the earth stratum. However, a big hurdle to adopting these practices is how to measure and

Are you managing, selling, leasing or subleasing commercial ofÀce space? The Commercial Building Disclosure Program mandates the disclosure of energy efÀciency in large commercial ofÀce spaces. The Building Energy EfÀciency Disclosure Act 2010 requires that before sale, lease or sublease, most commercial ofÀce buildings with a net lettable area of 2000m² or more, need to disclose an up-to-date energy efÀciency rating in a Building Energy EfÀciency CertiÀcate (BEEC). BEECs are valid for up to 12 months, must be publicly accessible on the online Building Energy EfÀciency Register, and include: • a NABERS Energy star rating for the building • an assessment of tenancy lighting in the area of the building that is being sold or leased and • general energy efÀciency guidance. The NABERS Energy star rating must also be included in any advertisement for the sale, lease or sublease of the ofÀce space. The Commercial Building Disclosure Program creates a well informed property market and stimulates demand and investment in energy efÀcient buildings. For more information about the Commercial Building Disclosure Program visit www.cbd.gov.au or email info@cbd.gov.au. AG65703


CARBON TAX

INDUSTRY

RETURN ON INVESTMENT (inc. capital growth allowances)

RETURN ON INVESTMENT (ex. capital growth allowances)

Beef cattle

-1.3% to 2.5%

-1.5% to 1.7%

Dairy production

-3.2% to 6.2%

-3.9 % to 4.1%

Grain production

2.1% to 3.5%

1.0 % to 1.9 %

Lamb/sheep production

3.7% to 4.2%

0.2% to 2.1%

Private farm forestry calculation (excluding carbon income)

3.46% to 4.56%

1.5% to 2.1%

Private farm forestry calculation (including carbon income)

4.31% to 5.64%

2.2% to 3.5% Source: ABARE 2009 & auther 2011

verify the carbon sequestered/abated in a quick, reliable and cost-effective way. Directly measuring every farm’s sequestration is most accurate but not financially feasible. An indirect practice-based model, combined with soil sampling, carbon modelling and random verification, however, seems like a viable option (Jiang, 2009).

THE RETURN ON PRIVATE FARM FOREST INTEGRATED INTO A FARM The scenario is based upon the South East Queensland sub-tropical wet sclerophyll zone. The amount of carbon which will potentially be sequestered is assessed via the AGO modelling tool website, with the study based upon a

current 100% discount for harvested material will change in the foreseeable future and will allow for carbon stored as either a sawn product or power pole, etc (Ryan, 2010). Based upon average growth rates and a carbon price of $23 per tonne, the farm income shows a return on investment (ROI) of 4.56% for the forest. This return includes a land figure at the current price for accuracy in return analysis. It should be noted that only half of carbon credit needs are sourced from Australia. New Zealand has seen many credits purchased off shore in Mali and similar locations. A lower price for credits would decrease the return by around 1%.

The table above comprises a comparison of rural industry farm returns (ABARE 2009 and author 2011). Whilst there has been a push to pursue the ‘carbon neutral farm’, it is worth noting that Andrew Duffy, a sheep grazier and winner of the 2009 Raising the Baa competition and who has planted forest on around 17% of his property with Melville Forest, was quoted in an article as saying, “Based on present production estimates, Melville Forest emits some 2,250 tonne of CO2 equivalents per year. To offset this [it] would take 580 ha of plantations or 40% of the property (Cuming, 2009).

CONCLUSION THE MOST PROGRESSED THINKING TO TRY AND OFFSET SOME OF THE CARBON ISSUES IS THE RE-FORESTATION OF DEGRADED LAND.

mixed Eucalyptus cloeziana (Gympie Messmate), Eucalyptus punctata (Grey Gum) and Corymbia maculata (Spotted Gum) native hardwood forest. Data was entered into the tool box, along with rainfall, soil information and management regime by Sean Ryan of Private Forestry Service Queensland. The prediction accounts for the total carbon sequestered within the trees, soil and debris. It is expected that the 514 ANZPJ SEPTEMBER 2012

The data was also run for a variation in the analysis accounting for slower growth rates, with a slower growth rate changing the original return to the farm from 4.56% down to 3.46% and pricing for quality also impacting on results. The 2007 to 2009 ABARE data (ABARE, 2011) has been summarised from its Australian farm surveys 2010 industry series in figure 1 (page 512).

While legislation was passed in Federal parliament in late 2011 for a  carbon price of $23 per tonne, the full ETS or other trading scheme is  yet to be  enacted. The most knowledge we have is of re-forestation, so it will  be the primary way for credits to be purchased; for example, the  option of offsetting a Qantas f light  with  the  company purchasing trees for planting. An economic a nd accurate measurement of carbon sequestration projections of stable  carbon humates deeper than 100mm is yet to be completed and internationally recognised so currently re-forestation will progress as the primary option for offsetting carbon emissions.


CARBON TAX

It is the extent to which rural industries and high-emitting industries are captured within any CPRS which will inevitably create the price for carbon and the amount that people are willing to pay to avoid the cost. Plantations established since 1990 and re-forestation will certainly be part of a long-term strategy for rural producers to offset the cost of carbon

emissions from their properties, depending upon what is captured in the legislation and how soon. The full paper for this article can be viewed at http://www.prres.net/papers/ Clarkson_Will_a_Carbon_Price.pdf. Information has been sourced from government bodies, industry interest groups and interviews with peak body representatives. „

REFERENCES ƒ ABARE 2011. Australian Commodities Outlook 2011. In: WRIGHT, A. (ed.). Australian Bureau of Agriculture and Resource Economics and Sciences. ƒ CUMING, M. 2009. Carbon neutral farming a furphy [Online]. Unley, South Australia. Available: http://sj.farmonline.com.au/news/ nationalrural/agribusiness-and-general/general/ carbon-neutral-farming-a-furphy/1466974.aspx [Accessed 18/07/2012 2012]. ƒ EIA. 1998. Changes in Energy Intensity in the Manufacturing Sector 1985-1994 [Online]. Washington D.C.: U.S. Energy Information Administration. Available: http://www.eia.gov/ emeu/mecs/mecs94/ei/ei_2.html [Accessed 2011]. ƒ GARNAUT, R. 2011. Garnaut Review 2011. Canberra. ƒ JIANG, T., HANSLOW, K. AND PEARCE, D 2009. On farm impacts of an Australian ETS Economic Analysis. Canberra: Rural Industries Research and Development Corporation. ƒ MEER, C. 2009. Agriculture & the CPRS. Canberra: Department of Climate Change. ƒ RYAN, S. 2010. RE: Australian Greenhouse Office Data. Type to CLARKSON, I. ƒ SEI. 2005. Ecological Footprint and Water Analysis of Cotton, Hemp & Polyester [Online]. Stockholm: Stockholm Environment Institute. Available: http://www.sei-international.org/ publications?pid=1694 [Accessed 2011]. ƒ SHEEHAN, J. 2009. Carbon and rural property. Australian Property Institute Victorian Division Annual Conference Australian Property Institute Victorian Division. ƒ WILSON, R. R., I AND OTHERS. 2010. Carbon Neutral [Online]. Carbon Neutral. Available: http://www.carbonneutral.com.au/ [Accessed 20/08/2010].

IAN CLARKSON FAPI IS A LECTURER IN PROPERTY AT CENTRAL QUEENSLAND UNIVERSITY FACULTY OF ARTS, BUSINESS, INFORMATICS AND EDUCATION 515


CARBON TAX

CARBON TAX:

PITFALLS AND OPPORTUNITIES FOR THE PROPERTY INDUSTRY ustralia’s 1 July introduction of the carbon tax this year is set to have significant impacts on the property industry. Under the carbon tax, Australia’s top 500 polluters will pay $23 per tonne of carbon dioxide emitted, with funds from the tax to be partially used to compensate households and some businesses. From July 2015, an Emissions Trading Scheme (ETS) will replace the tax. Buildings are responsible for around 23% of Australia’s greenhouse gas emissions, according to the Green Building Council of Australia. Simon Cox, Colliers International’s national director of real estate management, says a carbon price mechanism (CPM) will have significant impacts on the property sector. “[The carbon price mechanism] will increase energy costs,” he says. “The best advice for the market is that prices for electricity could move by 20%. There will also be an overall inflationary impact on other outgoings through passed-on input costs from suppliers and service

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contractors. These costs will flow on and have an inflationary impact on materials and the delivery of services.” However, Mr Cox says it is still too early to know the full impact of a CPM. “Treasury modelling shows that the construction industry is one of the few [sectors] to shrink over the short- and long-term as a result of the CPM. The cost of building or refurbishing properties will increase, thereby impacting on commercial rents and potentially reducing the new development pipeline,” he says. Mr Cox predicts landlords will increase rents in order to recover increased input costs. This will result in market tension as tenants face higher occupancy costs. Ultimately, though, the full impact on property values will depend on the current market cycle in specific locations, he says. John Preece, national director at Knight Frank Australia, agrees that landlords with buildings on gross rents will increase rent to take account of the increase in outgoings. “But ultimately rents are set by the market and not by the cost base. This could lead to a tendency away from gross rents to net rents for many landlords,” he says.

Buildings that are poorly managed will suffer the most, according to Mr Cox, with landlords and tenants looking to focus on increasing building energy efficiency. This also reflects a wider trend towards sustainability. “According to the recently released findings of the Colliers International 2012 Office Tenant Survey, 95% of tenants said they wanted to occupy a ‘green’ building, up from 75% in 2010,” Mr Cox says. “Green has now become the norm. Where is used to be a bonus in a building, it is now expected and it is likely the trend of tenants moving to new more energy efficient buildings will gain further momentum once a CPM is introduced.” In particular, the CPM will place pressure on landlords to upgrade poorly performing buildings, Mr Cox says, as tenants look for buildings with higher environmental ratings as they become more conscious of outgoing costs. He advises landlords to get in early and proactively mitigate the impacts of costs associated with the carbon tax. “If they improve energy efficiency they will get at least the most mitigated impact and at best, uncovered savings,” Mr Cox says. “So yes, there’s going to be an inflation

“ANECDOTALLY, A PROJECT WITH A FIVE-YEAR PAYBACK PERIOD LAST YEAR MAY HAVE A PAYBACK PERIOD OF AROUND THREE YEARS WITH THE ENERGY COST INCREASES” JOHN PREECE 516 AANZ 516 ANZPJ N PJ NZ P SEPTEMBER SEPTEM E BER 2012 EM


CARBON TAX

impact, but is there an opportunity to continue the transformation in the management approach to sustainability? That’s the exciting part.”

INDIRECT IMPACTS Mr Preece believes the carbon tax will have an indirect impact on the property industry, particularly on operational costs such as lighting, heating and cooling. He also predicts electricity costs, which are due to increase around 2c per kWh as a result of the carbon tax – 25-30% – will have a significant impact on the property industry. “Outgoings for tenants will increase as a result. Owners will need to be aware of cases where fixed costs are in place as this could affect whether the price of carbon can be passed on,” a Knight Frank report says. This will result in a requirement for capital expenditure plans to be brought forward in order to achieve better energy ratings, the report states. “In NSW, these additional energy costs are also set to rise, as the network (the physical poles and wires) simply can’t cope with the demand,” Mr Preece says. “Overall, IPART [Independent Pricing and Regulatory Tribunal] tells us that the average total increase in our energy invoices will be 18.1%. Practically speaking, for an average 2.5 star NABERS commercial office building of

10,000 sq. m in Sydney, this means a cost increase of around $46,000 in the first year, increasing in following years as the tax scales upwards.” The carbon tax could also potentially impact on construction costs. Mr Preece says estimates indicate construction costs will increase by around 1.5% due to the carbon tax and the rising cost of emissions-intensive building materials, such as concrete, steel and glass. This will result in a need for rents to increase in order to make new development feasible, the Knight Frank report states. “The flipside is that there will be an increase in building upgrades and retrofits, which can often be more sustainable than building from scratch. With vacancies low, however, it is possible new [non-residential] builds will continue,” the report states. However, Mr Preece says commercial landlords have so far shown indifference to the impact of the carbon tax on the property industry as net leases protect landlords by allowing them to pass through increased energy costs via outgoings. “However, at a time when business is extremely sensitive to cost, simply passing through the increase without taking steps to mitigate the impact will not wash with tenants,” Mr Preece says. For example, a 2,500 sq. m tenant in a 2.5 star office building would face additional costs of around $70,000 in today’s money over a seven-year lease, according to Mr Preece, resulting in an extra $28 per sq. m to the cost of occupation. However, in a 5 star

NABERS building, the cost would be less than half this, Mr Preece says. However, Mr Preece says office buildings will be lightly hit compared to other sectors which are greater energy consumers, such as industrial and manufacturing, and could have more significant impacts. “As business costs escalate, if revenues don’t escalate similarly, the business would need to cut costs and reducing the quantity of occupied space might be an easy first step,” he says.

CARBON TAX POSITIVES Mr Preece believes the carbon tax may ultimately have positive impacts on the property industry. He believes it could provide the encouragement needed for both landlords and tenants to lift their game and work together to improve building energy efficiency as the payback period for sustainability reduces. “Anecdotally, a project with a five-year payback period last year may have a payback period of around three years with the energy cost increases,” he says. Mr Cox agrees and points to the vast number of opportunities in the industry to help improve energy efficiency – but only if good management also goes hand-in-hand with sustainability. He says: “There are opportunities within the market for greater efficiency and if they’re taken up that will offset the cost impost. Great management could entail savings of 10%, so if overall cost is 5%, for example, there’s upside there.” „ Stephanie McDonald

“THE COST OF BUILDING OR REFURBISHING PROPERTIES WILL INCREASE, THEREBY IMPACTING ON COMMERCIAL RENTS AND POTENTIALLY REDUCING THE NEW DEVELOPMENT PIPELINE” SIMON COX 517 1


QUALIFICATIONS

NEW CERTIFICATION PUBLIC SECTOR RECOGNITION – CPP (GOV) recent discussion by the Australian Property Standards Board has included the Australian Property Institute’s ‘certifications’. The Board expressed the view that there is a need to give government property practitioners a form of certification which gave them recognition for the qualifications, expertise and positions held within the public sector. The National Council subsequently agreed to the Board’s recommendation with the following practices now in place.

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CERTIFIED PROPERTY PRACTITIONER

EXISTING AND NEW MEMBERS WISHING TO APPLY CAN DO SO BY DOWNLOADING THE ASSOCIATE APPLICATION FORM AND EXPLANATORY NOTES FROM THE API WEBSITE. 518 ANZPJ SEPTEMBER 2012

A Certified Property Practitioner (CPP) is a person involved in the property fields of sales, leasing and negotiation, research, education, law, consultancy, finance, corporate real estate and government owned or controlled assets. Those members gaining the certification of CPP in the field of Education, Law, Finance or Government will use the certification CPP (Ed), CPP (Law), CPP (Fin) or CPP (Gov). Applicants applying for CPP (Gov) must be an employee working within government. Such applicants, as anticipated, will primarily be involved in but not limited to: • Acquisition and Resumption

• Research and Planning • Policy and Procedures A minimum two years’ experience and minimum Associate Membership is required. Existing and new members wishing to apply can do so by downloading the Associate Application Form and Explanatory Notes from the API website. To ensure that no member is disadvantaged by the introduction of the new certification, the National Council has adopted the following transitional arrangements for current Associate, Fellow or Life Fellow Members of the API: • grandfather, upon application, are all those existing members who can satisfy their respective Membership Committee/Divisional Council that they have two years of full-time professional experience in the last four years in the new certification area • the grandfathering provisions for existing eligible members will be available until 31 March, 2013, after which time they will be required to sit a professional interview unless exempted by the responsible Membership Committee/ Divisional Council • the grandfathering provisions will apply to all existing eligible members as at 1 October, 2012 The Institute wishes to encourage public sector members/applicants to consider this new certification as recognition of your standing as a property professional. „


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CELEBRATING 90 YEARS IN 2013


EDUCATION

PROPERTY EDUCATION –

National and global forces are working to dramatically change the shape of, and relationship between, Australia and New Zealand’s property and education sectors, Tim Lohman writes.

u st ra l ia a nd New Zealand’s property sectors have, in recent decades, undergone radical change, shaped by decades of g loba l a nd nat iona l forc e s . Globalisation, the all-pervasiveness of information technology, demographic and social change, as well as shifts in economic fortune and philosophy, have all worked to transform property students, course content and delivery, academics and educational institutions’ relationship with industry. The Australia and New Zealand Property Journal spoke with some of Australia and New Zealand’s leading property academics to gain an insight into how property education in the two countries has changed, where education may be heading and what some of the consequences of change may be.

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GLOBALISATION University of Auckland Professors of Property, Professor Laurence Murphy and Associate Professor Deborah Levy, say that globalisation — with its opening up of borders and businesses 520 ANZPJ SEPTEMBER 2012

to global competition — has been a major driver of change through increasing the professionalisation of property personnel and creating st r uc t u ra l cha nge w it hi n t he property industry. “A property degree was often previously viewed as optional and a poor substitute for experience,” the professors say. “Increasingly, especially in the light of global property industry practices, a property degree is now viewed as an essential entry requirement into the industry.” The arrival of multinational property firms and the increasing role of real estate investment trusts (REITs) and property trusts — thanks to the opening up of the property industry — have also profoundly altered the character of the industry and the level of professionalism required to succeed, Professors Murphy and Levy say. “The globalisation of property investment flows and the emergence of global players in the market have meant that our programs need to be comparable with other programs around the world,” they say. “Globalisation has promoted greater

market transparency and demanded the adoption of global standards.” Anot her consequence of a globalised property industry is increasing regulation, which in turn has forced property personnel to become accountable for their decisions, not just in New Zealand or Australia, but on a global scale, the professors say. “In response to this, local professional bodies such as the Property Institute of New Zealand (PINZ), the Valuers Registration Board and the recently created Real Estate Agents Authority have worked to increase the level of professionalism within the industry,” Professors Murphy and Levy say. “In addition, global professional bodies, such as RICS, have helped to reshape accepted international practice standards. In combination, these factors have positively affected our curriculum development processes and course content.” Q ue en s l a nd Un iver sit y of Technology (QUT) Professor of Property Economics, Chris Eves, says evidence for the increasing professionalisation of the industry


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can be seen in the type of roles being taken up by property graduates and the required educational levels to enter the industry and progress their career. “Twenty years ago the main career paths chosen by graduates were either property valuation or agency practice,” he says. “Over the past 20 years there has been the emergence of more professional property services such as asset management, corporate real estate, property investment and finance and property consultancy, [which] has required similar changes in property education, both in relation to the standard of the education levels and the areas of study.” Now, entry into the property industry requires an undergraduate degree and progression to senior management in many organisations often requires additional study at the post graduate level, Professor Eves says. “The past 10 years has also seen the property profession begin to value the additional expertise that can be gained by staff undertaking study in research masters degrees and PhD degrees,” he says. “This reflects the more varied nature and increasing professionalism of the property industry.”

SOCIAL CHANGE University of Auckland’s Professors Murphy and Levy say that in many ways, the property industry of two decades

ago was somewhat of a ‘closed shop’ with many property students having familial connections with the property industry. The focus of these students was often on valuation, property development and personal investment goals and making a ‘quick buck’ in the property boom of the 1980s. Demographic and social changes within New Zealand and Australia — such as the removal of barriers to women entering education and the workforce, greater multiculturalism and a larger presence of international students, generational change and an ageing population — have all contributed to dramatic changes in both property education and the industry itself. “In recent years the student cohort in property has become much more diverse and multicultural [and] from a predominantly male preserve, women are now taking [to] propertyy in significant numbers,” the professors say. “In line with national trends, our program attracted considerable numbers of international students during the mid-2000s, and while these numbers have declined, there is still a strong multicultural component.” Offering an Australian perspective, Deakin University Professor off Property and Real Estate, Professor Richard Reed, says that like in New w Zealand, the typical Australian property student of 20 years ago was

male, studied full-time via on-campus delivery and wanted to be a property valuer upon graduation. “In today’s courses most property students are female and all students — with few exceptions — work part-time during their study,” he says. “Many students are also mature-age and seeking to gain a qualification or a university degree, where demand for education can occur in a financial downturn — i.e. an opportunity to study — or strong economy — i.e. this is a good time to study for a good job. Rather than wanting to be a valuer, most students today also want to be involved in property development.” Generational change is also driving academic change, Professor Reed says. Whereas baby boomers, and a to a lesser extent generation X, were expected to stay and grow in a role, today today’ss generation

“THERE HAS BEEN THE EMERGENCE OF MORE PROFESSIONAL PROPERTY SERVICES SUCH AS ASSET MANAGEMENT, CORPORATE REAL ESTATE, PROPERTY INVESTMENT AND FINANCE AND PROPERTY CONSULTANCY, WHICH HAS REQUIRED SIMILAR CHANGES IN PROPERTY EDUCATION, BOTH IN RELATION TO THE STANDARD OF THE EDUCATION LEVELS AND THE AREAS OF STUDY” PROFESSOR OF PROPERTY ECONOMICS, QUEENSLAND UNIVERSITY OF TECHNOLOGY, CHRIS EVES 5 21


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Y and generation Z students are expected to move jobs many times during their career. “They want a flexible broad career which is also portable throughout Australia and overseas,” he says. “Most importantly, today’s property student is seeking an interesting career which can pay for their lifestyle, rather than a job for life. Property is seen as an interesting inside/outside career which is partly driven by the media’s increasing interest in property investment and the market in general.” Professor Reed says the property industry has also changed with the demand for core valuers decreasing. Now, there is demand for a wide range of property-related occupations, he says, including property analysts, developers and asset or property managers. University of Western Sydney Professor of Property Investment, Graeme Newell, says that demographics also play an important role when the ageing of the academic workforce is considered. With baby boomers retiring in increasing numbers, he says a major challenge in the years ahead will be the ability of educational institutions to staff property programs. “University requirements now see staff needing PhDs for appointments even in professional areas. This reflects universities’ increasing their focus on research,” he says. “Future staff will often have no industry experience. This will present a major challenge for programs to meet their professional requirements for accreditation and reinforce their industry focus.” This will specifically be an issue in the valuation area and will force universities to review how they deliver these essential areas. “An increased focus on [the] use of industry for guest lectures will become important to reinforce the industry content,” Professor Newell says. Deakin’s Professor Reed echoes these statements, saying the issue of retiring baby boomers will drive a need for professional bodies, such as the API, to form closer relationships

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with universities and work in a partnership model. “This has benefits for both parties, but with the increasing amount of free education available on the Internet, professional bodies and accreditation offer a large point of difference to ‘free’ education,” he says. QUT’s Professor Eves also highlights the loss of skills at the academic level, arguing that in addition to potential fewer experienced academic staff being available, the imminent retirement of

marry full-time, or at least part-time work, with their studies — or in other words, the creation of ‘blended learning environments’. “The compulsory attendance at all lectures and tutorials is no longer a requirement and students now tend to use the numerous online resources that are available,” he says. “Many lectures are now recorded and are available as podcasts or videos that can be viewed by students in their own time. The use of

“MORE AUSTRALIAN ACADEMICS IN THE DISCIPLINE HAVE DOCTORATES AND THERE HAS BEEN A MOVE AWAY FROM A PRIMARILY TEACHING ROLE TO AN INSTITUTIONAL SITUATION THAT REWARDS RESEARCH AND PUBLICATION OUTPUT WHEN IT COMES TO PROMOTION AND CAREER ADVANCEMENT” UNIVERSITY OF TECHNOLOGY, SYDNEY, ASIA-PACIFIC CENTRE FOR COMPLEX REAL PROPERTY RIGHTS, PROFESSOR OF THE BUILT ENVIRONMENT AND DIRECTOR, PROFESSOR SPIKE BOYDELL a large part of the academic workforce itself will also place a strain on new property academics to have higher qualifications, such as a PhD. “Also, new academics will need to have industry experience, which combined with a PhD is an increasingly rare academic,” he says. “This is affected by the higher level of remuneration in industry. However, the lifestyle and flexible hours of academics, as well as the potential for conference travel, ensures the academic career remains attractive.”

INFORMATION TECHNOLOGY Perhaps more than globalisation or social change, information technology (IT) has been the most powerful driver of property education in recent years – and will certainly be the biggest driver of change in the years to come. For QUT’s Professor Eves, IT has been the enabler to allow students to

IT has been one of the most significant changes in education delivery.” He adds that changes have also been made in the actual learning environment, with large lecture theatres no longer being the preferred teaching accommodation. “Now the focus of teaching spaces is more on collaborative learning areas and encouraging student interaction by computer access in a group work setting,” he says. “Learning resources, and most library resources, are now available electronically and these can be accessed by students from remote locations so it is no longer necessary to actually visit the physical campus to gain access to this information and resources. Many units are now [also] available online to support physical lectures.” UWS’s Professor Newell adds that the last five years in particular have witnessed a major change from standard lecture and tutorial formats to


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“IN LIGHT OF GLOBAL PROPERTY INDUSTRY PRACTICES, A PROPERTY DEGREE IS NOW VIEWED AS AN ESSENTIAL ENTRY REQUIREMENT INTO THE INDUSTRY” UNIVERSITY OF AUCKLAND, ASSOCIATE PROFESSOR, DEBORAH LEVY

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ones that are more focused on student learning when and where they want. “This has seen blended learning become a priority,” he says. “iPads and smartphones are being integrated into the learning process, with [an] increased use of [the] Internet to access [the] latest information. This has been a wonderful resource for high quality student projects.” Current courses are also now focused less on exams and more on larger projects to enhance learning, Professor Newell says. Presentation skills and communication skills are also stressed as part of the learning process. Deakin’s Professor Reed says universities have also adapted their courses to meet student demands to complete their studies more quickly. “Most undergraduate property courses are three years in length. However, we have seen a few universities introduce a trimester system so the course can be completed in two years if required,” he says. There are now also fewer field trips with existing property courses, partly due to the sheer size of the cohort, OH&S restrictions and non-compulsory attendance, Professor Reed says. This has been addressed by the API with the Future Professionals Program (FPP). Also, the smaller valuation courses, such as rural valuation and plant and machinery, are no longer viable as standalone courses. IT has also partly driven what is, in Professor Reed’s view, possibly the largest single change in the delivery of education: the removal of the limited places or ‘caps’ on commencing students in university courses in Australia from 2012. The result, Professor Reed says, is that universities now work on a demand-led situation where they are able to move loads around between all courses in a university, depending on demand. This could potentially result in an up and down spike in the number of enrolled students in property courses. “Previously the allocation for commencing students was fixed and


2012 RMM RISK MANAGEMENT MODULE 2012

RISK MANAGEMENT MODULE (RMM) 2012 IS NOW AVAILABLE. A number of Risk Management Modules have been developed to better suit the areas of practice and interest of API Members. Risk Management Module Fundamentals has been designed as a core Risk Management Module that must be undertaken by all new Members of the API and those who have not undertaken a Risk Management Module previously. The specialist modules include: • RMM Volume Residential • RMM Commercial • RMM Government and Rating • RMM Plant and Machinery • RMM and Financial Institutions • RMM Regional The Risk Management Module can be undertaken by completing face-to-face sessions with Divisions. Alternatively, it can be completed online (with the exception of RMM and Financial Institutions and RMM Regional). For further information refer to www.api.org.au under the Professional Development tab and go to the Risk Management Module heading.


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the number of places for student intake was similar each year,” he says. “Therefore the property courses need the support of stakeholders in the property industry to ensure [the] survival of each property course in an increasingly competitive internal environment. So if a non-property course is in higher demand, the places available for new students in a property course may be decreased.”

THE DARK SIDE OF CHANGE In many ways changes to property education can be viewed as positive. Students increasingly have the freedom to study what they want, how they want and when they want. Interest in property education is up, fuelling growth in demand for courses, and an increasingly professional property sector across Australia and New Zealand is likely to result in the countries producing higher quality and skilled practitioners able to compete in a global economy. However, not everyone in the property education sector is convinced that change has been for the better. Take University of Technology, Sydney (UTS), Asia-Pacific Centre for Complex Real Property Rights Professor of the Built Environment and Director, Spike Boydell. He says that the less positive aspects of change can be clearly seen in the classroom. Two decades ago property class sizes where typically 30 to 40 students, studying in a program with lectures fully supported by a separate tutor. “The emphasis for students was on reading for a degree — where tutorials ensured engagement with the readings — in a program that was probably called land economy, land economics or urban estate management that had a strong theoretical basis and was grounded in the stewardship of the land improvements thereon,” he says. “Most courses were located in a built environment faculty or school. Few Australian academics held doctorates.” 526 ANZPJ SEPTEMBER 2012

“PROPERTY IS SEEN AS AN INTERESTING INSIDE/OUTSIDE CAREER WHICH IS PARTLY DRIVEN BY THE MEDIA’S INCREASING INTEREST IN PROPERTY INVESTMENT AND THE MARKET IN GENERAL” DEAKIN UNIVERSITY PROFESSOR OF PROPERTY AND REAL ESTATE, PROFESSOR RICHARD REED In contrast, Professor Boydell says today’s property classes are typically 80 to 120 students in size in a program lacking tutorial support and taught in three-hour sessions or intensive block mode. “[There is also a] softening of rigour and an increase in academic bureaucracy that focuses on the student as ‘client’ in a program that is probably called property studies, real estate or property economics, with a high vocational orientation and an increasing disconnect with the underlying theories of land economy and land economics,” he says. The drivers of this change, Professor Boydell says, can be easily located: “‘Whackademia’ and the neoliberal expectation of the university to prioritise its role as a business producing graduates rather than an institution of higher learning.” The consequences of these two drivers, he says, is that more than half the courses in Australia are now located in a business school environment operating significantly on the reliance of sessional rather than substantive staff — to the potential detriment of student teaching. “More Australian academics in the discipline have doctorates and there has been a move away from a primarily teaching role to an institutional situation that rewards research and publication output when it comes to promotion and career advancement,” Professor Boydell says. The professor also sees changes in the way in which property is described in Australia and New Zealand — from ‘property profession’ to ‘property

industry’ — as being more than evolving nomenclature. “This ‘industry’ has maintained an insatiable appetite for the products of the university business — the graduates,” he says. “The expectations haven’t changed dramatically in 20 years, if our ‘industry’ partners in the course review process are to be believed. They still expect a work ready graduate who can hit the ground running and overlook in many cases their responsibility in providing two years’ post-degree ‘training’ in the vocational aspects of the profession.” Professor Boydell also suggests the relationship between academia and the industry could be improved and takes particular umbrage at the way academia is viewed by industry. “The perspective of the ‘industry’ in Australia differs significantly from their counterparts in Europe or America where academics are held in higher regard,” he says. “The neoliberal paradigms [which] could prevail is in Australia, and certainly in Sydney, where it is all about the money. Neoclassical economic models have also prevailed with the emphasis on the market rather than the underlying stewardship of land or a corporate state. New financial structures are a product of this growth-driven market and have created new employment destinations in that ‘industry’ for our graduates.” The consequences of this change, Professor Boydell says, are that for some academic programs there has been an increased business focus on content aligning with notions of the


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market. “More recently some programs have swung back towards stewardship and sustainability, but only where there has been strong leadership and alignment with heterodox economic thinking,” he says. “We now see more property courses as very minor players in business schools, whereas some have held out and will probably survive much longer in built environment schools which were their more traditional home 20 years ago.”

THE FUTURE OF EDUCATION If Professor Boydell’s assertions are correct, then the implications for the property industry/profession are pretty serious: recent and forthcoming graduates may lack a wider context and understanding of the industry, while larger class sizes may affect the quality of learning and the relationship between academia and industry may need to be rethought. In the main, Australia and New Zealand’s property academics have mixed feelings about the future of the property industry and education

and see the changes ushered in by IT, globalisation and social change as having both positives and negatives. Deakin’s Professor Reed predicts that the major changes in property education in the coming years will be a globalisation of knowledge, as is the case in the wider economy, and the focus will be on efficiencies of scale. “There is an increasing level of accountability for academics who also must undertake research in the same proportion as teaching,” he explains. “Efficiencies of scales have already been reflected in larger class sizes and [the] increased use of technology.” Professor Reed predicts that g r adu at i ng proper t y st udent s should  be able to ‘hit the ground running’ in industry. “They need to be adaptable to the increasingly rapid  pace of change,” he says. “No longer will they have the same job for life and they may work in different regions and countries during their career. Their education needs to ref lect this and upskill each student with knowledge about the global property sector.”

In New Zealand, Professors Murphy and Levy point to trends of the growing professionalisation within the industry intensifying in coming years, as well as the likely rise of globalised standards and regulatory practices as a result of the global financial crisis. The continuing European debt and banking crises could also have an impact. “ Trad it iona l prac t ices a nd services will be subject to new levels of regulation and supervision,” the professors say. “Local professional bodies, such as PINZ and global players such as RICS, will help to shape these changes and academics will translate these into new programs. “To effect the changes required, property departments and units within universities need to demonstrate academic excellence, publish high quality research and engage in academic networks at the Asia Pacific and global levels.” Research excellence will also promote an increase in the number of international postgraduate students that will produce research of relevance to the industry, according to Professors Murphy and Levy. For example, at the undergraduate level, increased flexibility in the delivery of course materials may result in students undertaking ‘internationalised’ programs. “In the future, students may participate in courses from a variety of program delivered in different countries under the guidance of host departments,” the professors predict. “The ‘internationalised learning experience’ [will] produce graduates that are ready for a globalised industry. “P rop e r t y pro g r a m s h ave traditionally catered for private commercial and residential property interests. In the future, it is likely that courses will need to meet the needs of public sector agents and emerging public private partnerships.” „ 5 27


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FUTURE PROPERTY PROFESSIONALS The Future Property Professionals program is now mandatory for API members seeking PMAPI (RPV) and AAPI (CPV). Below, ANZPJ provides information on the program and what members can get out of it.

he Future Property Professionals (FPP) program is an exciting initiative from the Australian Property Institute which has been designed to contextualise the knowledge gained during tertiary studies and enable it to be put into practice in an industry setting. FPP supports the academic excellence of accredited tertiary institutions and enhances the practical and professional competencies of graduates.

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WHO NEEDS TO COMPLETE FPP? All applicants seeking Provisional Membership (PMAPI) with Residential Property Valuation (RPV) designation and Associate Membership (AAPI) with Certified Practising Valuer (CPV) designation with the API are required to complete the FPP program as a pathway to membership. Additional parameters have also been developed for the FPP program to recognise those with extensive Approved Professional Experience (APE). 528 ANZPJ SEPTEMBER 2012

Those completing their final year of studies at an API accredited tertiary institution can commence their FPP studies, provided they have a minimum of 12 months’ APE at the commencement of the program.

FPP MODULES Applicants seeking Provisional Membership (RPV) will be required to complete nine (six compulsory and three prescribed) online modules. Applicants seeking Associate Membership (CPV) are required to complete 12 (six compulsory, three prescribed and three elective) online modules. Each module in FPP should take between two and three hours to complete. However, if additional reading is required, this should be considered in addition to the estimated completion time. On successful completion of each module, a participant can claim two CPD points. Participants can only enrol in three modules at any one time.

WHAT DOES SUCCESSFUL COMPLETION ENTAIL? Participants completing the FPP program in its entirety have two attempts to successfully complete a module quiz. The pass mark for the quiz has been set at 80 per cent and each quiz has a time limit associated with it.

WHAT IS THE INVESTMENT REQUIRED? The investment for most FPP modules is $55 (GST inclusive). The API also offers the Preparation for Professional Interview module, whether for Provisional or Associate Membership free of charge to those preparing to sit their interview. The Risk Management Module is priced at $255 (GST inclusive) for members and $415 (GST inclusive) for non-members.

WANT FURTHER INFORMATION? Further information about the FPP program can be found on the API website at www.api.org.au. A dedicated FPP helpdesk will provide program support and enrolment by emailing fpp@api.org.au.


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“AFTER COMPLETING THE PROGRAM I BELIEVE I AM MORE CONFIDENT WHEN SPEAKING TO CLIENTS, LENDERS AND EVEN SENIOR MEMBERS IN MY OFFICE” LINDA KIERNAN

LINDA KIERNAN PRESTON ROWE PATERSON The Future Property Professional (FPP) program was particularly useful for me, having graduated from a Property Economics Bachelor’s Degree in Ireland and coming from a somewhat different educational background than other graduates. While making the transition into the Australian property market after commencing employment with Preston Rowe Paterson Valuers (Melbourne), I undertook a semester in real estate law at RMIT, which was very helpful in identifying the differences in legislation between the two systems. The main advantage of the FPP program to me was being able to fill in the gaps of topics I had little exposure to, or needed more information on, in order to fully comprehend them. While the valuations procedures and practices in Ireland and Australia have many similarities, the FPP program has given me the confidence to progress knowing I am using the correct procedure, whether measuring property, assessing leases or calculating GST. It was also a great way to refresh what I had studied at university and reinforce the theory behind the skills I am developing in my current employment. The FPP modules have an advantage over the API graduate seminars as they can be studied at a pace and time which suits the student. The content is clear, easy to understand and possibly the best feature of the modules is the availability of the material for future reference. In particular, I found the GST, Leases and Data Collection and Networking modules the most beneficial. After completing the program I believe I am more confident when speaking to clients, lenders and even senior members in my office. I now feel I can put my best foot forward when sitting my CPV Professional Interview later in the year.

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“BY TACKLING UNFAMILIAR AREAS IN THE PROGRAM I WAS ABLE TO IDENTIFY TOPICS I WAS WEAKER IN AND COULD THEREFORE DEVOTE MORE TIME TO THOSE AREAS IN MY PREPARATION FOR THE PROFESSIONAL INTERVIEW” TY WINDUSS

TY WINDUSS JONES LANG LASALLE I have been working as an Assistant Valuer with Jones Lang LaSalle since the beginning of 2010. I’m predominantly involved in industrial and suburban office valuations and, to a lesser extent, retail shopping centres. The FPP program allowed me to test myself on the areas I am familiar with in my normal working practices and revisit and refresh my knowledge in areas I have not covered since 530 ANZPJ SEPTEMBER 2012

university, such as statutory valuations, acquisition and compensation. The modules on GST and Corporate Real Estate were particularly helpful as they were topics I have not studied in-depth in the past, yet apply to all areas of the property profession. I feel the information contained in the modules provided me with a good basis to work off for future scenarios where I may be expected to provide my opinion on such topics.

The FPP program has helped me build confidence towards my professional interview for CPV. The information provided within the modules acts as a good resource and foundation to build further study on. By tackling unfamiliar areas in the FPP program, I was able to identify topics I was weaker in and could therefore devote more time to those areas in my preparation for the professional interview.


HOTELS

E N U T R FO S R U O V FAHE T BOLD CONRAD HILTON AND THE HILTON HOTEL BRAND Conrad Hilton, founder of the Hilton Hotel brand, believed in the power of travel to foster understanding among people of the world and embraced this philosophy in the Hilton corporate motto, “World peace through international trade and travel”. API’s CFO, Andrew Tregenza, takes a look at the life and times of Mr Hilton and the ongoing business empire he created.

MR HILTON’S PURSUIT OF ACQUIRING AND CONSTRUCTING TOP QUALITY HOTEL PROPERTIES ENABLED HIM TO BUILD AN UNRIVALLED PROPERTY PORTFOLIO WITH ENORMOUS WEALTH GENERATING POWER. 5 31


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SERENDIPITY SPURS MR HILTON INTO HOTELS Chronic accommodation shortages in the mining boom town of Karratha in Western Australia’s Pilbara region have steeply pushed up the price of hotel rooms in the region, and in doing so have attracted the planned construction of one of the world’s newest Hilton Hotels. This latest hotel, born out of the busy comings and goings associated with enormous mineral wealth, harks back to the very beginnings of the Hilton Hotel story. The town was Cisco, Texas, in 1919. Conrad N. Hilton was an enterprising young man looking for his own ‘frontier’ in which to build his fortune. It wasn’t an interest in the hotel business that brought Hilton to Texas, but some sage advice from a trusted acquaintance that the state was the place to make a fortune. With Texas in the midst of a mining boom, Mr Hilton was told: “Where there’s oil, there’s activity. Money, business, building, merchandising, banking. You name it!” Having successfully established the New Mexico State Bank of San Antonio before the outbreak of World War I, banking was the profession Mr Hilton had envisioned for himself when he arrived in Texas — a string of Hilton Banks right across the state — but a twist of fate saw a very fortuitous detour into the acquisition of a hotel instead. Mr Hilton was unable to find a room due to excessive demand for lodgings. He couldn’t believe the throng of people clamouring for an available room, which were leased for eight hours at a time, with the hotel offering three shifts a day. Mr Hilton sought out the owner, who he found to be a willing seller eager to seek his own fortunes in the oil fields. However, Mr Hilton saw his own gold mine right there in the hotel. For the next 60 years Mr Hilton’s pursuit of acquiring and constructing top quality hotel properties, including some of the most iconic buildings in the world, enabled him to build an unrivalled property portfolio with enormous wealth-generating power. 532 ANZPJ SEPTEMBER 2012

Thirty-three years after his death, the company is expanding at its most rapid rate to date, with growth of 30% in 2011 alone resulting in the addition of 20,000 rooms to the system. However, while more and more Hilton Hotels are popping up around the world, fewer properties are corporately owned by Mr Hilton. Instead, it’s the strategic move to grow its intellectual property through the sale of management and franchise rights that is making Hilton Worldwide and its parent company Blackstone increasingly profitable.

professionals involved in every aspect of the property lifecycle, such as site reviews, architectural design, construction, fitout and management. The ownership and business structure of the company itself has undergone many transformations over 93 years. Initially, the ownership of each hotel was contained within a select group of investors partnering with Conrad Hilton in exclusive buying groups. Up until 1935 Hilton ran two forms of operations. The first was buying or leasing run-down Texas hotels

BANKING WAS THE PROFESSION MR HILTON HAD ENVISIONED FOR HIMSELF, BUT A TWIST OF FATE SAW A VERY FORTUITOUS DETOUR INTO THE ACQUISITION OF A HOTEL INSTEAD. THE HILTON BRAND SOLIDIFIES Mr Hilton was an enormously successful man in his own lifetime and his legacy lives on in one of the most prosperous companies in the world and a brand name that is synonymous with quality. Now, the business falls under a group of 10 brands under the Hilton umbrella, each catering to a different market segment, from luxury full-service hotels and resorts to extendedstay suites and mid-priced hotels. The Hilton Hotels story has many facets to it, covering a wide array of business activities and structures across vastly differing economic conditions and eras. But at its heart, it is the story of the leveraging of property assets in a myriad of ways to create sustainable wealth. The statistics on the organisation are impressive and the pace of expansion is so rapid that any figures quoted will soon be superseded. From what started as a 40-room hotel in Texas, there is now a worldwide network of 4,000 hotels and more than 600,000 rooms in 91 countries. Hilton Hotels is also a significant employer of property professionals in a wide range of disciplines. More than 140,000 people are employed in the Hilton system, including property

and rejuvenating them, followed by building hotels from the ground up on leased land in Texas. A good wash, a lick of paint and some carpentry was often all that was required to turn a tired hotel into a profitable venture. Mr Hilton also had a knack for identifying inefficient interior design aspects of established hotels and employed a system for maximising space that he called “mining for gold”. This involved strategies such as converting low-yield dining rooms into additional guest rooms or refitting lobbies to create leasable space for gift shops or news stands as demand dictated. Moving on from renovating established structures, Mr Hilton also pursued his new dream of building hotels from the ground up. With little more than a strong will to achieve this dream, he embarked on the project to construct the first Hilton Hotel in Dallas. Having optioned the ideal site for his hotel, he needed $1 million to build it. He could only raise 10% on his own and another 20% from his regular backers, so he developed a strategy which he pitched to the owner of the site to raise additional funds.


The Recognition You Deserve The Property Institute of New Zealand’s Quality Assurance and Accreditation Scheme offers accreditation to firms operating offering services in: • Real Property Valuation • Infrastructure Plant and Machinery Valuation • Property Advisory • Property and Facilities Management Accreditation with the Institute provides evidence that your firm: • Develops and applies robust policies and processes. • Participates in an external audit by professional peers. • Complies with professional standards. • Recognises the importance of producing a quality service to clients. If your firm is interested in applying for accreditation, visit our website, www.property.org.nz. We’ll also see you at the Pan Pacific Congress in Melbourne in October 2012.


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He decided that instead of buying the land, which would tie up all his capital, he would lease it for 99 years and use the building to be erected on it for collateral. This idea was beginning to be accepted on the east coast, but was new to the Dallas region. Eventually, an agreement was reached to lease the land for $31,000 per year, which amounted to $3 million over the life of the lease. When the project overran the budget and completing the project looked shaky, he approached the landowner to take over the completion of construction and increased the lease price to $100,000 per year. Opening in 1925, the Dallas Hilton was immediately profitable. From there Mr Hilton vowed to build a hotel each year across Texas, a goal which he exceeded – by 1929 he had formed Hilton Hotels Inc. to consolidate all his properties into one group and was making moves to build hotels interstate when the stock market crashed, heralding the start of the great depression.

THE DEPRESSION HELPS MR HILTON EXPAND Economies worldwide were hit hard and Mr Hilton’s burgeoning business empire was no exception. However, through his determination, loyal associations and well-honed negotiation skills, he managed to survive this period where many other hotel operators didn’t, and it was in the aftermath of the depression that the Hilton empire soared. Mr Hilton discovered that right across the US many top quality hotels had ended up in receivership or had changed hands to be owned by people who had no experience running hotels and considered the properties ‘Depression White Elephants’. These hotels were Mr Hilton’s for the taking at Depression prices. And for a man like Mr Hilton, who had retained some capital and had a super-sized drive, many of these properties were incorporated into the growing Hilton property portfolio. Soon Mr Hilton was being approached by out-of-depth hotel 534 ANZPJ SEPTEMBER 2012

owners offering their properties for Mr Hilton to manage — or at least use the Hilton name. This was testimony to the name he was building for himself as an experienced and successful hotelier and the Hilton name was growing in demand – and many wanted to be a part of it. Post-depression deals got bigger and bolder and Mr Hilton developed a funding formula which he used many times over to fund some of his most ambitious real estate acquisitions to date. This formula enabled Mr Hilton to acquire high value properties for a minimum cash outlay. For example, the Sir Francis Drake in San Francisco, a luxury 450-room hotel. The property originally cost $US4.1 million to build, but Mr Hilton acquired it for a cash outlay of just $US275,000. Mr Hilton’s formula firstly involved forming a buying group interested in purchasing the latest target acquisition. He would then get in touch with banking contacts from his home state of New Mexico who in turn got in touch with a growing number of people who had successfully invested with Hilton on past ventures. They would be informed of what he had in mind and advised on how much they were willing to put in. Mr Hilton, ever the sav v y businessman, maintained a practice of keeping one quarter of the total raised as a personal payment. He then paid down the mortgage raised on the property and in doing so negotiated an extension on the term at reduced interest rates. He would then acquire additional mortgages and retain some cash for operational expenses. He was driven by bigger dreams to acquire some of the most architecturally significant and prestigious hotels in America, such as the Stevens in Chicago and the Roosevelt, Plaza and the Waldorf-Astoria in New York. Like his first Texas hotels, a little renovation was required to improve them, but the main focus was on their restoration to their original grandeur.

THE HILTON HOTELS STORY HAS MANY FACETS TO IT, COVERING A WIDE ARRAY OF BUSINESS ACTIVITIES AND STRUCTURES ACROSS VASTLY DIFFERING ECONOMIC CONDITIONS AND ERAS.


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NEW YORK STOCK EXCHANGE INCORPORATION By the time the company incorporated on the New York Stock Exchange in 1946, Mr Hilton’s hotels stretched from coast-to-coast and each hotel was the best of its kind in its own city. Hilton Hotels was also continuing to innovate and adapt to new technologies and business practices and in the process achieve many world firsts. For example, Hilton Hotels was the first to install televisions in guest rooms. It was also the first to introduce air-conditioning to every room; the first to innovate the airport hotel for business travellers; the first to introduce a multi-hotel reservation system; and the first to introduce computer technology in a centralised reservation system. In 1954, the acquisition of the Statler Hotel Company for $US111 million was also the world’s most expensive real estate transaction. The next logical step was to expand internationally – the company spun-off its international operations into a separately traded company in 1964, with the Hilton International sold several times within the US in the ’60s and the ’80s, including to a British firm in 1987. For 40 years there were two separate, fully independent companies operating under the Hilton name. To minimise confusion, in the 1990s the American and British Hilton companies entered into a joint marketing agreement to share the same logos and promote each other’s brands and maintain joint reservation systems. The international wing of Hilton still operated in the US using the Vista Hotel name and the US-based Hilton operated internationally under the Conrad Hotels name, the first of which opened in Brisbane. In 2005, the two Hiltons once again combined to become one company for the first time in 40 years as a result of a $US5.7 billion cash buy-out of the international operations by the US-based Hilton operations. 536 ANZPJ SEPTEMBER 2012

THE HILTON HOTEL IN SYDNEY IS AN EXAMPLE OF THE HILTON’S BRAND BUILDING, WITH THE HOTEL INCLUDING THE GLASS BRASSERIE, CELEBRITY CHEF LUKE MANGAN’S RESTAURANT, AND ZETA BAR AND MARBLE BAR, WELL KNOWN BARS IN SYDNEY.


HOTELS

operations. By leveraging its extensive network of existing hotels, it can take advantage of commonalities across the group of brands and maximise its purchasing power to achieve product and service delivery at a competitive price. While the strongest unit growth for Hilton Hotels has historically been in the US, particularly in Hawaii, Florida, THE HILTON HOTELS BRAND ALSO Chicago and New York, the expanding EXTENDS TO BARS, WITH THE global Hilton brand is a key strategy MARBLE BAR IN SYDNEY LOCATED for the company. Under Blackstone, the UNDERNEATH THE HOTEL. company franchised 50,000 new rooms per year in 2008 and 2009 in regions such as Turkey, southern Italy and Asia. However, the deal was made Hilton also maximises its revenueBLACKSTONE BUYS HILTON HOTELS immediately prior to the global per-available-room (RevPAR) by In the past 10 years, Hilton Hotels has economic turmoil which was about to concentrating on a select number of embarked on an asset sale program occur and after the deal travel dropped the world’s most in-demand markets: in a strategic move away from asset sharply in line with stock markets and the United Kingdom, Germany, Italy, ownership towards being a fee-based property values. In 2009, the company Qatar, United Arab Emirates, India, company. The strategy was to sell many wrote down the value of its investment Russia, China, Japan, Australia and now of the hotels acquired in the first 87 by 70 per cent of its book value, but Karratha in the Pilbara. Profitable and years of the Hilton’s history and shift the the Hilton Empire again proved to be fast growing sectors also include the sales company’s focus to management and a sound and lucrative business and of timeshare accommodation through franchise fees. quickly returned to profitability. its Hilton Grand Vacations brand and the expansion of its luxury brands Conrad MR HILTON’S HOTELS STRETCHED FROM COAST-TOand Waldorf-Astoria. COAST AND EACH HOTEL WAS THE BEST OF ITS KIND IN T he bu si ne s s ITS OWN CITY, WITH THE PERSONALITY OF EACH HOTEL aspects of the Hilton VARYING WITH COMMUNITY TASTES AND NEEDS. story are many and varied and it is a However, there were a number Hilton Worldwide now continues to story filled with innovative financial of historically significant properties expand at breakneck speed. transactions and business deals. that were never likely to be sold by the The network started by Conrad company as they were considered to be HILTON HOTELS IN THE MODERN ERA Hilton and now growing strongly Hilton ‘brand builders’ and attracted The modern Hilton organisation is now a under Blackstone’s watch still offers significant cash flows. These included multi-faceted business offering investors the same quality product that’s come hotels in Chicago, New York, Florida a multitude of fee-based products and to be associated with Hilton Hotels. But and Hawaii which made up a significant services and ready-made solutions for behind the scenes, revenue growth is less portion of the company’s total revenue. all aspects of developing and operating reliant on the ownership of properties The extraordinary rapid pace a Hilton Hotel. It is also considered to and more on the ownership of the rights of growth between 2004 and 2007 be a high-tech and innovative company over the use of properties. attracted an eager buyer – US private with a strong balance sheet and strong Ultimately, the combination of the equity firm Blackstone – which went prospects for future growth. significant competitive advantages Hilton The Hilton brand continues to on to acquire the Hilton group in 2007 can offer investors as a result of its extensive innovate with proprietary state-of-the-art for $US27 billion dollars, renaming global network and the long-standing e-procurement platforms; supply chain its operations Hilton Worldwide. This goodwill associated with the Hilton name management systems; global measurement was most significant investment to date as a yardstick for quality is attracting many and reporting systems; and the use of for Blackstone and made it the world’s new customers who want to operate not shared-services teams supporting multiple largest hotel owner. just any hotel, but a Hilton Hotel. „ 5 37


LEGAL NOTEBOOK

LEGAL NOTEBOOK Recent cases, headline issues and new legislation

AUTHORS

538 ANZPJ SEPTEMBER 2012

JAMES BERG James.Berg@dlapiper.com

JAMES MORSE James.Morse@dlapiper.com

James is a Partner at DLA Piper Australia and practises extensively in the area of professional negligence as it affects property professionals, including valuers. James has had the privilege of acting for the valuers in the recent case of Provident Capital Limited v John Virtue Pty Ltd (No 2) [2012] NSWSC 319, which forms the basis for this edition of Legal Notebook.

James Morse is a Senior Associate at DLA Piper Australia who also practises in the area of professional negligence, including with respect to claims for and against valuers. James regularly advises on valuation liability issues and is a guest lecturer at the University of Western Sydney, addressing students from the School of Economics and Finance on legal issues and professional liability arising from property valuations.


LEGAL NOTEBOOK

PROVIDENT CAPITAL LIMITED V JOHN VIRTUE PTY LTD (NO 2) [2012] NSWSC 319

negligent valuation of a development site in Erskineville in Sydney, New South Wales.

Snapshot

The first valuation

John Virtue Valuers (JVV) has successfully defended court proceedings on the basis that the valuation method adopted (and the relevant valuation figure) was reasonable, notwithstanding the potential for some variance on those issues. Further, reliance on the valuation by the plaintiff lender, Provident Capital Limited (Provident Capital), was considered unreasonable in circumstances where the valuation was based on an assumption that Provident Capital knew (or ought to have known) it was actually or potentially incorrect. That assumption related to the bona fides of pre-sale contracts for the proposed development. Relevantly, on numerous occasions in the valuation report, JVV had ‘warned’ Provident Capital that the assessment of value was conditional upon the pre-sale contracts being determined available and bona fide.

In December 2004, JVV valued the property at $12 million. In providing that assessment of value, JVV:

Facts Provident Capital sought damages from JVV due to an allegedly

• utilised a gross realisation, hypothetical development/ feasibility methodology as the only valuation methodology • explained that following a search of sales evidence, it was unable to identify any useful sales for the purposes of undertaking an assessment by direct comparison Provident Capital loaned funds secured by the property. However, the borrower defaulted.

The second valuation Following default in October 2005, Provident Capital requested that JVV provide a further valuation of the property. At that time JVV assessed the value of the property at between $6.25 million and $7 million. However, it did so on the basis that the presale contracts were no longer available for consideration, thereby significantly

increasing the risk and cost of the proposed development. In addition, JVV used a direct comparison methodology as one of the methodologies in the second valuation.

The submissions Provident Capital’s expert valuer criticised JVV's first valuation on the basis that the direct comparison methodology should have been used as a primary valuation methodology in the circumstances. Thereafter, a gross realisation, hypothetical development/feasibility methodology should have been used as a ‘check’ for the method of valuation. Provident Capital also asserted that the significant difference between JVV’s two valuations was enough to establish negligence. JVV denied negligence and submitted that the second valuation was irrelevant yet, in any event, there was no inconsistency between the two valuations such that no adverse inference could be drawn.

The determination Following a detailed and considered review of the relevant legal authority by the court, JVV was successful. Amongst other things, the court found that: 539


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1

JVV did not breach its duty of care to Provident Capital.

The court accepted that valuation is ‘an art, not a science’. When considering the method by which JVV undertook the initial valuation, the court accepted the evidence of JVV and acknowledged that the specific valuer was an experienced valuer in the type of valuation required and for the area in respect of which the property was located. The court found that the specific valuer was entitled to exercise his professional opinion/discretion by adopting what he considered to be the appropriate methodology in circumstances where, it appeared to the court, that he could adequately justify why (for example) he did not have regard to the direct comparison methodology. In this instance, the evidence was that there were no relevantly comparable sales within the previous 12 to 18 months which would have been of assistance. The evidence from the specific valuer was that if he were to have regard to dated sales, the process of adjustment would make the assessment of value less reliable. Against that background, although JVV had adopted a different approach to that proposed by the relevant experts, the difference was ‘not significant’. Relevantly, the court stated (at paragraphs 157 to 158): “A valuer is entitled to exercise his professional judgment in carrying out a valuation ... The guidelines support [the

540 ANZPJ SEPTEMBER 2012

specific valuer’s] approach that where there are only a small number of comparable sales, the comparative method is not appropriate. While [the specific valuer] applied a more favourable value to the unit price in the feasibility studies, the difference was only 1 to 3% from those of the two expert valuers. Valuation is not an exact science and this different margin is not significant overall. “It is my view that [the specific valuer] exercised all reasonable care, skill and diligence that would be expected from a competent valuer when [it] prepared the first valuation in accordance with the instructions he was given … [and] exercised reasonable care and skill when [it] valued the property at $12 million, proceeding as he did on the disclosed assumption that the presales were bona fide. The valuation was well within the reasonable range or “bracket” of values that are prima facie not negligent … To the extent that the instructions furnished to [the specific valuer] informed the content of the duty of care … [the specific valuer] complied with those instructions.”

2

JVV did not cause Provident Capital’s loss.

In short, JVV did not cause Provident Capital’s loss as the valuation was accurate.

Capital’s reliance on the (first) valuation 3wasProvident unreasonable. JVV made it abundantly clear numerous times in the valuation report that it was important to check that the presales were bona fide. The court accepted, having regard to the multiple warnings in the valuation, that it was therefore up to Provident Capital to verify the bona fides of the presales if it wished to rely on the valuation. As it turned out, Provident Capital proceeded without such verification of presales which ultimately proved to be unreliable. Relevantly, the court stated (at paragraph 196): “[The specific valuer] made many references to the importance of the presale being bona fide in his report. Provident Capital evaluated this issue as being an important one. Provident Capital had taken notice in its internal evaluation that there had been a slowdown in the market and that this could adversely affect the security or saleability of the property market. [JVV] had cautioned Provident Capital that because of the slowdown it was important to ensure that the presales were in place. “The valuer made it abundantly clear to Provident Capital that it was important to check the presales were bona fide and that the bona fides of the sales


LEGAL NOTEBOOK

THIS CASE IS YET ANOTHER REMINDER THAT THE PRACTISE OF VALUATION IS AN ART, NOT A SCIENCE. IT IS NOT SIMPLY A ‘TICK-A-BOX’ OR PROCESS-DRIVEN SERVICE

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affected the valuation figure. Once that had been done it was up to Provident Capital to verify the bona fides of the presales. They, not the valuer, were in a position to find out the true position with regard to the presales. “Provident Capital decided to proceed with the settlement of the loan when 17 out of 24 contracts were in trade dollars. Provident Capital’s reliance on the valuation, in circumstances where it proceeded with the loan despite knowing that most of the contracts were in trade dollars, was unreasonable.” Another particularly significant aspect of the judgment was the fact that the court appears to have preferred the evidence of JVV and its expert, both of which were acknowledged by the court to be actively working in the area at the time that the valuation was provided. This was in contrast to Provident Capital's expert valuer who had not been actively providing valuations of the type in the area for a number of years. In addition, the court accepted JVV’s submission that the existence of the second valuation could in no way be relevant to an assessment of liability with respect to the first valuation. This was for a number of reasons, including: • the negligence of JVV in respect of the first valuation can only be assessed against JVV as at the date of the first valuation 542 ANZPJ SEPTEMBER 2012

GIVEN THE NUMEROUS BASES UPON WHICH VALUATIONS CAN BE UNDERTAKEN AND PROVIDED, CLOSE ATTENTION MUST BE GIVEN TO THE INSTRUCTIONS THAT UNDERLIE A VALUATION REQUEST • in any event, there were plausible explanations for the significant drop in value over a relatively short period of time, namely the unavailability or unreliability of the presale contracts In summary, the court concluded that JVV and the specific valuer did not breach their duty of care to Provident Capital (nor did they cause Provident Capital’s loss) and Provident Capital’s reliance on the valuation was unreasonable. Hence, JVV and the specific valuer were not negligent, such that Provident Capital’s claim failed. Verdict and judgment was therefore entered in favour of JVV and the specific valuer.

Impact This case is yet another reminder that the practise of valuation is an art, not a science. It is not simply a ‘tick-a-box’ or process-driven service. A valuer must adapt and evolve the valuation method to suit the facts, matters and circumstances that give rise to the provision of the valuation – especially the instructions given by a lender-client. The professional valuer must exercise his/

her mind and bring all relevant skill and experience to bear. In this instance, JVV applied its expertise in determining that a direct comparison methodology was not appropriate and noted as such in the valuation report. JVV then proceeded to value the property using a gross realisation, hypothetical development methodology and included a number of warnings to Provident Capital regarding the relevance of the presale contracts. Given the numerous bases upon which valuations can be undertaken and provided, close attention must be given to the instructions that underlie a valuation request. The impact of market fluctuations also means that the time at which a valuation is provided (and the information that is reasonably available at that time) is a critical consideration. Likewise, the content of parts of the valuation must be viewed in the context of the entire valuation.

Note The judgment of Provident Capital Limited v John Virtue Pty Ltd (No 2) [2012] NSWSC 319 has since been appealed to the Supreme Court of New South Wales – Court of Appeal. „


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INFRASTRUCTURE

THE NEW ERA OF THE EASTERN SEA BOARD

While countries such as Japan invested in a high-speed train in the 60s, Australia has been less slow to adopt a similar rail network. But this could soon be a reality on the eastern seaboard. Adrienne Thomas writes about the network and its potential impact on property prices.

544 ANZPJ SEPTEMBER 2012


INFRASTRUCTURE

THE AUSTRALIAN HIGH-SPEED VEHICLE (A-HSV) DESIGNED BY HASSELL WAS INSPIRED BY THE LINES OF THE ICONIC AUSTRALIAN SPEED MACHINE IN THE 1960s, THE HK MONARO (IMAGE COURTESY OF HASSELL)

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magine stepping onto a high-speed train that could take you at 350 km an hour from Brisbane to Sydney or Sydney to Melbourne in just three hours. It would mean a commute of 40 minutes from Newcastle to Sydney and an hour from Sydney to the nation’s capital, Canberra. It’s a bold idea that is the subject of a $20 million feasibility study by the federal Labor government, an election promise which was spurred on by Labor’s agreement with the Greens to help form a minority government. Such systems have helped to revolutionise countries like Japan, which unveiled its bullet train in 1964 before the Tokyo Olympics. But Australia, with its vast distances between capital cities and low population base, faces different challenges. The first phase of the feasibility study completed last year by AECOM projected the population of the east coast states and the Australian Capital Territory

I

Federal Transport Minister, Anthony Albanese, has sought to kickstart the national conversation about such a possibility, with his department dedicating an HSR unit. “We are now looking at an east coast high-speed rail network that has the potential to connect almost 65% of Australians and provide a foundation for a low carbon, high productivity economy,” Mr Albanese told an infrastructure conference last year. The idea of a fast train linking Brisbane and Melbourne was discussed as far back as two decades ago, with the AECOM study identifying broad corridors and indicative station locations which will be refined in the second stage of the study currently underway and on track to be finalised later this year. The construction cost of the entire network in the first phase of the study has put construction of the entire network between $61 billion and $108 billion, depending on the route. Costs

“WE ARE NOW LOOKING AT AN EAST COAST HIGH-SPEED RAIL NETWORK THAT HAS THE POTENTIAL TO CONNECT ALMOST 65% OF AUSTRALIANS AND PROVIDE A FOUNDATION FOR A LOW CARBON, HIGH PRODUCTIVITY ECONOMY” ANTHONY ALBANESE, FEDERAL TRANSPORT MINISTER would grow from 18 million in 2011 to 28 million by 2056. Each year, 100 million long distance trips are made up and down the coast and that is expected to grow to 264 million in the next 45 years. The report forecasts patronage demand at 54 million people using a high-speed rail (HSR) network each year by 2036, with regional demand accounting for 50% of travel to areas outside Sydney, Melbourne and Brisbane. 546 ANZPJ SEPTEMBER 2012

have been broken down over various sections of the route – $11 billion to $18 billion for the Sydney to Newcastle route, between $20 billion and $26 billion for the Canberra to Melbourne leg and $20 billion to $41 billion between Brisbane and Newcastle. Land acquisition alone is estimated at $6 billion, with the Minister acknowledging it is not going to get any cheaper or any easier the longer it takes.

“As with all big nation building projects, the capital cost upfront is large but the long-term benefits for the nation are evident,” Mr Albanese said. However, if Australia is serious about HSR it needs to look to the future and determine what is needed in the next decade and beyond to make it a reality, the Minister said. He has also pointed to the environmental positives of having such a network. “It is worth noting that the CO2 emissions per high-speed rail passenger would be around one-third of those emitted if they were travelling in a car,” Mr Albanese said. The HSR would cut carbon pollution, with emissions per passenger one-third of what a car emits and each full train of 450 passengers the equivalent of taking 128 cars off the road.


INFRASTRUCTURE

THE HSR WOULD CUT CARBON POLLUTION (IMAGE COURTESY OF HASSELL)

Forecast patronage demand • On the basis of demographic forecasts which will see the population on the east coast grow from 18 million in 2011 to 28 million in 2056, the number of long distance trips is expected to grow from 100 million each year to 264 million in the next 45 years. • By 2036 it is suggested 54 million people could use a high-speed rail network annually. • Eight million passengers are predicted to travel on high-speed rail between Sydney and Melbourne in 2036. • Between Brisbane and Sydney it is expected 3.5 million passengers would use the line in 2036. • Travel between Newcastle, the Central Coast and Sydney is predicted to equal 15 million trips in 2036, with around 5 million commuting trips.

The Minister has acknowledged that the cost and construction challenges are high and compared with Europe, Japan and China, the population for such a project is much smaller. The community response during the consultation period has not been huge, but the feasibility study has been downloaded more than 500,000 times from the Department’s website. Australia is also seeking international involvement in the project, with an Italian delegation visiting Canberra last year to showcase its HSR engineering capacity. Italy’s first HSR route opened in 1977, connecting Rome with Florence, and has grown to connect Italy’s major cities on two lines, with further routes and construction planned and underway, including international connections. In Spain, HSR is such a popular option it carries more people between Madrid and Seville than car and air travel combined. 5 47


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THE A-HSV IS A LOW CARBON OPTION FOR FUTURE TRANSPORT IN AUSTRALIA (IMAGE COURTESY OF HASSELL)

Over in China, in just four years the country has developed an HSR network larger than most countries. Japan is also extending its HSR system from Tokyo to Osaka to reach speeds of 500 km an hour. However, not all countries have been able to successfully implement HSR networks. In the Netherlands the Fyra HSR network has rung warning bells, with trains running nearly empty and the government forced to bail the train company running it out after passengers failed to fork out for the premium fares. Experiences like the Netherlands, however, did not deter the UK government from giving a HSR network between London and Birmingham the nod, with a price tag of £33 billion, stating it would create jobs, growth and prosperity and economic benefits of up to £47 billion.

FLOW-ON EFFECTS TO HOUSING A spin-off from an HSR network in Australia is the potential to improve housing affordability, especially for people in Sydney, by offering them the potential to commute from regional areas. One man with a close eye on the 548 ANZPJ SEPTEMBER 2012

progress of the feasibility study is Raine & Horne Chief Executive, Angus Horne. Sydney is under enormous pressure, with an extra 60,000 people moving to the city through migration and immigration, Mr Horne says. This makes the prospect of an HSR network very attractive. “The high-speed rail would possibly unclog most of the main highways, north, south and west, the M5 and the M2,” Mr Horne says. It could also alleviate the housing shortages experienced in Sydney and open up affordable housing alternatives in Canberra, Goulburn and Newcastle, if approved. Mr Horne has urged the NSW government to get behind the project, which he says has the ability to solve Sydney’s affordability issue and push up regional real estate values by as much as 10% if it is approved by the Federal Government. “It’s been a pipedream for a couple of decades but this is exactly the sort of thing that the NSW state government should shake down the [Federal Government] and the Future Fund to either fully fund or part fund it,” Mr Horne says.

The HSR could also create satellite cities. Mr Horne believes the Goulburn plains would be the logical place to have a new satellite city halfway between Sydney and Canberra in 15 or 20 years if HSR was in place. Goulburn has threebedroom houses for less than $200,000 and would be a 30 minute commute if the rail network was up and running. An HSR network could also encourage more businesses to shift to regional centres such as Newcastle and Gosford. “This will help to generate jobs growth, which is a key factor in long term real estate growth,” Mr Horne says. In North Gosford three-bedroom houses sell for $320,000, while in Newcastle two-bedroom apartments in the CBD are priced under $333,000. Nothing underpins a property market like good, well-planned infrastructure, Mr Horne says, pointing to the opening up of northwest Sydney, which was at one stage the biggest residential land release in the nation. “It was all on the back of a new freeway,” he says. But all the talk and no action is frustrating, with Mr Horne concerned


INFRASTRUCTURE

further delays in committing to the project could put it out of reach altogether. “If they started resuming land when they first started talking about it about 20 years ago, then it would have all been resumed for far less a cost,” he says. “The more [the] delay the more it’s going to cost.” Mr Horne is of the view Australians would embrace the notion of an HSR network more readily than the tens of billions being spent on the National Broadband Network (NBN). “It’s something they can touch and feel and physically use,” he says. Stations short-listed for further analysis include: • Roma Street and South Bank stations in Brisbane • Central Station, Eveleigh, Homebush and Parramatta stations in Sydney • Southern Cross Station and North Melbourne in Victoria • Civic and Canberra airport in Canberra Patronage demand analysis suggests CBD locations would act as the major trip

generator and attractor in each city, with stations closest to the CBD generating the most demand. Regional areas which have sufficient size and demand for a parkway HSR station include the Gold Coast, Far North Coast, Northern Rivers, Mid North Coast, Central Coast, Southern Highlands, Illawarra, Riverina, Murray and Goulburn Valley.

• coastal corridors between Brisbane and Newcastle, with potential variations around coastal cities and the Gold Coast • the Central Coast between Newcastle and Sydney • the Hume Highway and Princes Highway corridors between Sydney and Canberra, via the Southern Highlands • the Hume Highway corridor between

BY 2036 IT IS SUGGESTED 54 MILLION PEOPLE COULD USE A HIGH-SPEED RAIL NETWORK ANNUALLY Phase one examined potential corridors against a number of criteria – potential development benefits, potential connectivity with other transport systems, land use and environmental impacts, potential future population catchment and indicative capital costs. From this, a short-list was identified for further analysis in the second phase of the study. Short-listed corridors for phase two of the study include:

THE A-HSV HAS BEEN DESIGNED BY HASSELL TO BE RESPONSIVE TO THE AUSTRALIAN CONTEXT (IMAGE COURTESY OF HASSELL)

Canberra and Melbourne, via the Riverina, Murray and with a potential route to the Goulburn Valley The short-listed corridors broadly follow the alignment of existing long-distance rail, provide access to larger regional towns and cities along coastal NSW and inland Victoria and have lower capital costs for infrastructure and land acquisition. However, a number of issues have been identified for further consideration to refine route alignments further. These include topographical and environmental constraints in the Newcastle to Sydney corridor where existing road and rail links are congested, particularly for rail freight. There are also issues surrounding access to Sydney’s CBD, with the alternative HSR station at Parramatta potentially reducing patronage demand by 10%. Wollongong and the Illawarra have also been identified as a beneficiary of an HSR service, but the terrain makes the provision of infrastructure to the area challenging. The second phase of the study will be considerably broader and deeper in scope and will include detailed investigations and analysis, international case studies and an appraisal of alternatives. It will also examine the financing needs, financial performance and commercial viability of an HSR network. This will ultimately shape the debate over whether the Federal Government should fund such a massive infrastructure project which it may be faced with operating – at no profit. „ 549


MEMBER PROFILE

VALUER PROFILE JONES LANG LASALLE’S JACKIE VOSLOO WHAT IS YOUR CURRENT ROLE AND WHO DO YOU WORK FOR? I’m a Senior Valuer in the Valuations and Advisory Team in the Brisbane office of Jones Lang LaSalle. I primarily undertake retail and commercial valuations for institutional, bank and local private clients. My main focus is retail, with a focus on the valuation of neighbourhood centres up to regional shopping centres.

HOW DID YOU COME TO BE IN THIS ROLE? Real estate was always an area that interested me and in 2005 I enrolled at the University of Queensland in a Bachelor of Business Management. During my first week of university I started part-time work with McLeod Partners (an independent contractor of Ray White Real Estate), primarily servicing the western suburbs of Brisbane. In 2006 I obtained my REIQ Real Estate Salesperson Certificate which enabled me to be involved in open for inspections, contract preparation and auction campaigns. I started part-time work with Jones Lang LaSalle in January 2008 as a cadet valuer in my final year of university and coincidentally the year the global financial crisis began. At the time I felt very lucky to have a position with such a highly regarded company that I had a great deal of respect for. It was challenging learning and interpreting the market at a time when it was rapidly changing, but it has definitely made me 550 ANZPJ SEPTEMBER 2012

a more rounded property professional and a considered decision maker.

WHY DID YOU DECIDE TO PURSUE A CAREER IN VALUATIONS? In my opinion valuation is the best profession in which to experience the accelerated learning of fundamental property skills. In commercial real estate every property is different and during my time as a valuer I’ve learnt something new from every job, which I’ve found extremely rewarding and interesting.

WHAT DO YOU THINK THE BIGGEST ISSUE IS FACING THE VALUATIONS INDUSTRY NOW? As a younger member I’m concerned that the profession is losing talented young valuers to other areas of the property industry. Valuers play an important role in the property industry and in my opinion the level of service we provide is somewhat disproportionate to professional fees. The amount of time taken to undertake a job to a high level, as well as the significant risk we carry and cost associated with PI insurance, should be better reflected in the level of professional fees. Entry into the profession requires an approved university degree, two years practical experience and intensive registration and API interview processes which help to ensure the quality of the profession is maintained. Increasing the profile and highlighting the importance of a valuer’s role as a professional service provider is key.

ARE THERE ANY CHALLENGES WITH BEING A FEMALE IN A MALEDOMINATED INDUSTRY? In some situations, being a young female in the property industry is about earning a person’s respect and having high-level market knowledge, providing high quality service and being determined to succeed.

HOW LONG HAVE YOU BEEN AN API MEMBER? I first heard about the API at a university lecture and became a student member while studying at the University of Queensland. In 2010 I became an Associate Member of the API.

WHAT DO YOU LIKE MOST ABOUT BEING AN API MEMBER? The API is a professional body that sets and maintains standards and is respected by the wider property industry. Being an API member is viewed by the property industry as a prerequisite for all property valuers. The API aims to constantly improve standards within the industry to the benefit of all of its members.

WHAT IS YOUR INVOLVEMENT WITH THE API COMMITTEE? I am the Chairperson of the Queensland Young Property Professionals (YPP) Committee, which is an energetic committee set up to represent the views of young property professionals to provide them with support. It also aims to bring


MEMBER PROFILE

a fresh approach to the API and is a forum to meet other professionals, make industry contacts and get involved with social and professional development events. I am also the youngest of the 14 members of the Queensland Divisional Council Board as the YPP representative.

HOW HAS THE API HELPED YOU IN YOUR CAREER? Before being involved in the API and attending events I had a limited network, and this is definitely a major benefit of being a member of the API as a professional body. Involvement with the API has not only helped me build a professional network of like-minded professionals but it has allowed me to build potentially lifelong friendships.

WHAT WOULD YOU SAY TO UPCOMING PROPERTY PROFESSIONALS? Having a good mentor is extremely important in developing your professional and personal skills. I would encourage all young members to become part of a mentoring program, something which wasn’t available through the API when I was a student member, but has now been introduced in Queensland. Secondly, being confident and knowledgeable is extremely important. This includes not only knowledge of the market, assets and key players, but sometimes it can also be about who you know, which is why building a network is vital.

HOW IMPORTANT DO YOU THINK CONTINUING EDUCATION IS FOR VALUERS? Continuing education is important to better yourself and keep building knowledge. Events and seminars are the most common way to do this and also provide an excellent opportunity to network. „ 551


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In recent years, the capacity, adequacy and function of Australia’s infrastructure has enjoyed increasing attention from policymakers, the media and the general public, Jonathan Kennedy writes. ince the mid-2000s state governments have more than doubled their annual capital investment to around $60 billion per annum (ABS, 2012). We have also seen a renewal of the Commonwealth Government’s engagement with infrastructure, including through the appointment of a minister for infrastructure; the creation of Infrastructure Australia; and an initial

S

552 ANZPJ SEPTEMBER 2012

investment in a number of nationally significant projects. There has also been growing awareness of the need for rigour in project selection and prioritisation, as well as value for money in project delivery. Public understanding of the infrastructure debate in Australia has matured to the point that governments are increasingly being held to account for selecting the right projects, for the right

reasons – and being able to deliver them at best value to taxpayers. But notwithstanding this progress, Australia is still failing to keep pace with demand for new infrastructure or to deal effectively with the existing backlog, with flow-on impacts for national productivity, liveability and sustainability. We are reminded of these challenges daily, whether through road congestion; overcrowding on public


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INFRASTRUCTURE IN 2012 AND BEYOND: CHALLENGES AND OPPORTUNITIES

THE HONG KONG SLUDGE TREATMENT FACILITY WILL HAVE A TREATMENT CAPACITY OF 2,000 METRIC TONNES OF SLUDGE A DAY AND WILL EVENTUALLY PRODUCE 14 MW OF ELECTRICITY.

transport; sharply rising utilities prices; and short-falls in services across health, education and social housing. These pinch points are much more than just a personal inconvenience – infrastructure is a key economic driver underpinning Australia’s national productivity and global competitiveness. Overcoming these challenges will not be easy. Funding the required investment for infrastructure comes at a time of

substantial capacity constraints on public balance sheets, sharply declining government revenues and a period of fiscal consolidation. Beyond 2020 the investment task is set to further escalate. Australia’s population is projected to reach 34 million by 2050 based on medium growth assumptions, with 96% of this growth expected to be accommodated within existing urban areas (ABS, 2008

& FDI 2010). This will mean 10 million more people living in the nation’s cities and Sydney and Melbourne housing more than 7 million people each. But the good news is that solutions are at hand. Through a three-fold response aimed at increasing the size of the funding envelope, increasing the allocative efficiency of investment and creating rational infrastructure markets, Australia can make substantial inroads 553


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INCREASING THE SIZE OF THE FUNDING ENVELOPE By any measure the scale of investment required to meet future demand for infrastructure is substantial. A 2008 Royal Bank of Scotland study put Australia’s infrastructure investment task at a conservative $455 billion over the next decade, while Citigroup estimates Australia will need to fund $770 billion over 10 years to 2018 (RBS, 2008 & Citigroup, 2010). But while the investment task is sizeable, to argue that it is a failure of Australia’s governments to invest sufficiently is overly simplistic. State governments have more than doubled their funding of infrastructure in the past decade. In both (current price) dollar terms and as a proportion of GDP, public sector infrastructure spending has reached unprecedented levels. However, with this increased investment funded almost exclusively by additional public sector borrowings, states are now contending with severe funding capacity constraints. IPA analysis of the borrowing capacity of each jurisdiction finds that only the Commonwealth Government has substantial capacity for new infrastructure investment. The message is clear – historically high levels of capital investment cannot be increased, or even sustained, without reform aimed at increasing the size of the funding envelope. This section explores several solutions to increasing funding capacity, including revenue mechanisms such as user pays and value capture, as well as unlocking the considerable public capital tied up in brownfield assets.

A ROLE FOR USER-CHARGING User-charging is a necessary and rational tool for increasing the funding pool for capital investment. It also provides a targeted and equitable way of ensuring 554 ANZPJ SEPTEMBER 2012

those who derive the most benefit from public infrastructure investment – such as a new motorway, rail line or utility asset – contribute more directly to its provision and upkeep. Beyond these funding benefits, user charging can also assist with achieving broader sustainability objectives by facilitating shifts in consumer behaviour and by positively influencing demand. User-charging has a particularly important role to play in dealing with Australia’s urban congestion challenge.

constraints facing the states, user-charging will need to account for a greater share of the funding pool in the future.

VALUE CAPTURE AND WIDER PRECINCT STRATEGIES In the context of constrained balance sheets and increasing competition for government resources, any opportunity to improve the function and uplift in value of infrastructure should be maximised. Mechanisms which capture

FIGURE 1 PROJECTED COST OF AVOIDABLE CONGESTION BY CITY (1990-2020) $25

$20

$AUD Billions

into existing backlogs and can deliver the assets and services that households and businesses expect.

$15

$10

$5

$0

19 9

0

19 9

Sydney

2

19 9

4

19 9

Melbourne

6

19 9

8

20

00

Brisbane

20

02

20

04

Adelaide

20

06

20

Perth

08

2 2 2 2 20 2 10 012 014 016 018 020

Hobart

Darwin

Canberra

Source: BITRE, 2007

Every day, motorists and businesses have to navigate the challenges posed by excessive demand for capital city road networks. In Sydney, Melbourne and South East Queensland, congestion is now chronic – Sydney faces congestion costs of around $5 billion a year, while in Melbourne congestion strips the economy of around $4 billion a year (see Figure 1) (BITRE, 2007). Australia-wide, congestion costs the economy an estimated $13.5 billion in 2011 – without action it is expected to cost over $20 billion a year by 2020 (BITRE, 2007). Ultimately, infrastructure has to be paid for regardless of how it is financed and delivered. As such, and given the capacity

the value created by the provision of infrastructure may well provide this opportunity – particularly in respect to transport networks. In a submission to the recent NSW parliamentary inquiry into rail corridor utilisation, IPA called for the closer examination of opportunities to use value capture at the state’s stations and precincts – including models such as Joint Development, Benefit Assessment Districts (BAD) and Tax Increment Financing (TIF). IPA’s submission also cited case studies of international best practice, including the Dulles Washington Metro Rail Project in


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the United States where value capture provided 16% of the project’s $5.2 billion cost. It is also worth noting that the imposition of a value capture mechanism – in this case a BAD – was voluntary, requiring the consent of 51% of commercial and industrial property owners for approval. Once approved, property owners within the assessment districts were charged 22 cents for every $100 of assessed value increases in their real estate – just 0.22 % of the additional value uplift. Value capture is not a silver bullet, but it does represent a proven way of increasing the funding pool and, as such, must be considered by Australia’s governments. The use of value capture in station precincts can also facilitate wider precinct strategies, known as Transit Oriented Developments (TODs). TODs provide a land-use strategy which aims to create a network of well-designed urban communities focused around transit stations. Subiaco Central train station in Perth provides a practical case study in this regard. Previously an industrial site, the area has been transformed into a major mixed-use urban centre, including more than 1,300 new dwellings and 7,000 sq. m of retail space. Subiaco train station has also seen a tripling of patronage levels since 1999, further demonstrating the dual benefits of a well-designed TOD that is increasing the potential of value capture and increasing the value proposition of transport infrastructure.

BROWNFIELD ASSETS A sustained and deep privatisation programme is a further critical means of increasing the size of the funding envelope. There are already some positive signs in this regard, with Queensland undertaking a sustained privatisation program in 2010 and other jurisdictions beginning to head down this path. Examples of assets which must still be brought to market include electricity network assets; an ongoing program of

privatisation of Australia’s sea ports; and other opportunities in the transport and water sectors. At a time of historic infrastructure shortfalls we cannot afford for scarce capital to be allocated to areas where private capital is readily available, yet in some states, electricity investment consumes up to one quarter of total statesector capital investment. For instance, in NSW, the sale of network assets would shift $15 billion in required investment

they bring forward the right projects in the right places and deliver them at the right time – governments must ensure that scarce public capital is invested as efficiently as possible. This requires a longer term outlook to project inception, selection and prioritisation, as well as an integrated and systems-thinking approach to infrastructure delivery and operation. These key drivers for increasing the allocative efficiency of investment are explored in greater detail below.

AUSTRALIA IS STILL FAILING TO KEEP PACE WITH DEMAND FOR NEW INFRASTRUCTURE OR TO DEAL EFFECTIVELY WITH THE EXISTING BACKLOG, WITH FLOW-ON IMPACTS FOR NATIONAL PRODUCTIVITY, LIVEABILITY AND SUSTAINABILITY over four years onto the private sector. This is in addition to the $35 billion in capital which a full sale could realise. Just some of the projects this sale could fund include the North West Rail Link, the M5 East Duplication, the Northern Beaches Hospital, the M4 East or the F3-M2 Connection. With Queensland, Tasmania and Western Australia sharing these same opportunities to unlock much needed capital the size and scale of likely privatisations in coming years is substantial and it is representing a truly generational opportunity to increase public funding capacity. The successful privatisation of electricity networks in Victoria and South Australia in the late 1990s and early 2000 should provide policymakers with much confidence in this regard.

INCREASING THE ALLOCATIVE EFFICIENCY OF INVESTMENT Aside from increasing the size of the funding envelope for public infrastructure, Australia’s governments must ensure

A LONGER TERM OUTLOOK Short-term electoral cycles can serve as a practical constraint on a longer term project outlook. The abandoned CBD metro project in Sydney is a case in point. This is not an argument in favour of extending political cycles. Rather, it is an argument for all jurisdictions to embrace a longer term infrastructure strategy that reaches beyond political, geographic or modal bias. This will afford investors much greater certainty on the longer term infrastructure direction, allowing for the more efficient deployment of capital and resources and will better equip governments to invest in the right projects once budgetary constraints are eased. It will also assist with the protection of land corridors before they become prohibitively expensive. The importance of corridor preservation has been well-illustrated by the debate surrounding a high-speed rail link along Australia’s east-coast (see page 544 for ANZPJ’s article on the high speed rail link). A 2010 IPA study, undertaken in collaboration with AECOM, found the cost of preserving an east coast rail 555


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corridor would grow from $13.7 billion in 2010 to $57 billion by 2030, representing a 300% increase. This clearly demonstrates that a lack of forward planning can make or break a project well in advance of it actually coming on line. Comparatively, the 1951 Cumberland County Council Planning Scheme in New South Wales provides a practical example of a sound strategic planning approach and its implications for corridor preservation. By protecting linear transport corridors for future development the Cumberland Scheme effectively set out the network of motorways and supporting arterial roads that form the backbone of Sydney’s contemporary road network. This included the most recent addition to the orbital network, the M7, meaning the community had 50 years’ notice before the project actually came on line. The Sydney Harbour Bridge represents another sound example of forward planning. Upon completion, John Bradfield’s masterpiece had a deck of 49m, eight lanes and integrated heavy rail, tram and pedestrian traffic, meaning it was 72 years until additional road capacity was required with the opening of the Sydney Harbour Tunnel. Tellingly, when the bridge opened there were fewer than 10,000 cars registered in the state. To meet the needs of the next 50 years of growth Australia’s governments must once again embrace this kind of visionary approach.

FIGURE 2 PROJECTED COST OF AVOIDABLE CONGESTION BY CITY (1990-2020)

Source: R. Trubka, P. Newman and D. Bilsborough, 2008

SEAMLESS INTEGRATION Seamless integration of infrastructure and land-use planning is a further critical component to increasing the allocative efficiency of investment. The development of new land, whether residential, commercial or other types has a major impact on the infrastructure requirements of the surrounding areas. But notwithstanding this well-known connection, the formal planning link between urban land-use and infrastructure planning remains ad 556 ANZPJ SEPTEMBER 2012

SUBIACO CENTRAL TRAIN STATION IN PERTH WAS PREVIOUSLY AN INDUSTRIAL SITE WHICH HAS BEEN TRANSFORMED INTO A MAJOR MIXED-USE URBAN CENTRE


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hoc and often peripheral to the central planning process. Properly integrating land-use and infrastructure planning will result in better outcomes which respond more effectively to population growth, technological change and sustainable development. Seamless integration is especially important when it comes to new growth areas on the edges of Australia’s major cities. As shown in Figure 2, the comparative capital costs for infrastructure associated with developing 1,000 new dwellings are significantly higher in outer areas relative to inner city areas. Aside from strengthening the case for urban densification, this cost differential underlines the potential to properly integrate land-use and infrastructure planning both to minimise rollout costs and to maximise the derived benefits from investment.

At a broader strategic level the integration of policy and planning functions within and across governments is also needed. While jurisdictions around Australia have taken some positive steps forward in this regard, generally speaking state planning and infrastructure departments continue to have sole responsibility for strategic planning, with limited input and buy-in from other government stakeholders.

SYSTEMS-THINKING A systems-thinking approach to infrastructure delivery and operation represents a further opportunity to increase the allocative efficiency of investment. Infrastructure networks, and individual projects within networks, often impact well beyond their original intent and functional demand. Harnessing potential efficiencies from these overlaps requires stakeholders to move past the traditional, largely siloed approach towards citywide and cross network infrastructure solutions. Some practical examples in this regard include innovative technological solutions such as energy from waste plants and wholeof-city integrated public transport networks that support seamless multidestination and multi-modal travel. The Hong Kong Sludge Treatment Facility provides a practical case-study in this regard. The facility – which is expected to be commissioned in late 2013 – will have a treatment capacity of 2,000 metric tonnes of sludge a day and will eventually produce 14 MW of electricity. It will be entirely self-sufficient, with a seawater desalination plant producing up to 600 cubic metres of potable and process water a day. Excess energy generated will be exported to the regional electricity grid. The plant showcases the considerable opportunities to integrate previously siloed sectors, in this case waste, energy and water. The result is a more innovative and efficient infrastructure solution.

LOCALISED INFRASTRUCTURE SOLUTIONS Policymakers and city planners should also explore opportunities to move from a centralised approach towards a decentralised approach to infrastructure rollout where it makes commercial sense and benefits end-consumers. For taxpayers and developers this can markedly reduce the cost of trunk infrastructure rollout, particularly in new growth areas, while for consumers it can apply much needed downward pressure to utility prices and housing costs. The Vermont housing estate at Pitt Town in North Western Sydney is a useful case study. The development is serviced by a micro water utility, the Water Factory Company, which has constructed its own wastewater treatment plant at the site supplying 500 kL of non-potable water use a day to homes and businesses. As well as saving up to 120 ML of drinking water per year, the treatment plant will save the developer an estimated $12 million by avoiding the cost of connecting to Hawkesbur y City Council ’s sewerage system, which would have required 14 km of pipelines and two pumping stations. Considerable potential benefits from localised infrastructure rollout are also available in Australia’s energy sector. For instance, distributed energy schemes can provide more efficient and sustainable energy through the direct provision of heat and cooling. Again, the success of these schemes will ultimately depend on whether or not they make good commercial sense.

CREATING RATIONAL INFRASTRUCTURE MARKETS Significant opportunities also exist to enhance infrastructure market efficiencies across transport, energy, water and waste. In particular, opportunities remain to drive greater levels of competition and contestability 5 57


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into these markets, with substantial f low-on benef its for nationa l productivity and wellbeing. Where progressive market reforms have been introduced, such as in freight, some passenger transport services and the wholesale and retail energy sectors, the legacy has been an overwhelmingly positive one. According to the Productivity Commission, structural

reform to rationalise pricing between and across transport modes. A 2009 IPA study on road pricing undertaken in collaboration with Deloitte-SAHA found that a per kilometre charge averaging 10.4 cents for light vehicles could generate revenue equivalent to all that currently collected in fuel excise and fixed statebased charges. This rational approach

PROPERLY INTEGRATING LAND-USE AND INFRASTRUCTURE PLANNING WILL RESULT IN BETTER OUTCOMES WHICH RESPOND MORE EFFECTIVELY TO POPULATION GROWTH, TECHNOLOGICAL CHANGE AND SUSTAINABLE DEVELOPMENT reform implemented to-date has added around $7,000 dollars to household income each year (PC, 2005).

BUILDING A RATIONAL TRANSPORT MARKET With a forecast doubling in demand for passenger transport over the next 25 years, Australia will need to substantially upgrade its road capacity and invest heavily in mass transit – including metro rail in our major cities (BITRE, 2006). But policymakers will also need to consider the demand side of the equation. This will mean difficult decisions about the role of pricing in maximising the value of existing investment and increasing funding capacity. The scale and complexity of the congestion challenge has seen road pricing attract renewed attention from policymakers, particularly the need to overcome the artificial price advantage that roads enjoy over other modes of transport and the fact the current system of charging does not reflect externalities such as congestion costs. As early as 1991, the Industry Commission argued for consideration of a whole-of-network road pricing system in Australia as part of a broader 558 ANZPJ SEPTEMBER 2012

would also enable commuters to better understand their own impact on the broader road network and would assist governments to better manage demand across road networks. Road pricing is by no means an easy – or an immediate – option for overcoming congestion bottlenecks. However, it could well be a game-changer in establishing efficient price signals in transport and in increasing funding capacity. Creating a rational and transparent transport market would also have significant upsides for the economy – and ultimately offers an acceptance that supply alone will not be sufficient to overcome freight and passenger network congestion. Rather, we need to also shape demand. As such, it is something Australia’s governments must continue to explore.

A FULLY FUNCTIONING NATIONAL ELECTRICITY MARKET Continued progress toward a fully functioning and truly national electricity market is a further reform priority, with considerable flow-on benefits for the community and broader economy. Australia experienced a strong period of energy reform in the 1990s

and early 2000, culminating in the establishment of the National Electricity Market (NEM). Bringing together Queensland, New South Wales, Victoria and South Australia – as well as Tasmania following the completion of the Bass-Link in 2006 – the NEM facilitates more than $11 billion of trade each year and meets the demand of 9 million end-use consumers. But whilst Australia has come a long way from the days of single, vertically integrated utilities under full public ownership, an important reality remains – reform momentum has stalled, with some states retaining retail price regulation, significant public ownership in generation and absolute monopolies in distribution and transmission. Continued state ownership in these sectors is distorting the function and efficient signals across the NEM and is contributing to inefficiencies and higher usage costs for households and businesses. Victoria, which fully privatised its electricity sector in 1997, provides a firsthand demonstration of the benefits of reform. In the 15 years following privatisation, electricity prices in Victoria grew at just half the rate of those in New South Wales. In the 15 years preceding, privatisation price rises in both states were neck-and-neck. There is also light on the horizon in other states. The New South Wales government announced in late 2011 that it will privatise its generation sector and will revisit the ownership of transmission and distribution. Fiscal pressures, coupled with the need to ease cost pressures for energy consumers, is likely to spur similar reforms in Queensland, Tasmania and Western Australia.

EFFICIENT METROPOLITAN WATER MARKETS Governance reforms, coupled with unprecedented levels of investment, has in recent years positioned


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Australia’s metropolitan water sector to be significantly more efficient, secure and better able to adapt to changing environmental conditions. But this does not preclude the need for further improvements. Competition within Australian water markets is currently limited, with the majority of infrastructure and services under the management of state government or local council controlled entities. Furthermore, public utilities are facing considerable pressure to reign in capital spending programs and ensure downward pressure on prices. Continued investment in water assets and services is, in most cases, unavoidable. However, the view that public sector utilities should continue to deliver all of this required investment should be rightly challenged. In the context of these capital constraints there is particular value in governments exploring innovative options for the rollout of water and wastewater

infrastructure to new growth areas. Better utilising private sector capacity to finance, construct and operate water and wastewater infrastructure in these areas – including through instruments such as PPPs (with appropriate risk transfer and balance sheet structures) – may assist to reduce the upfront infrastructure costs for public utilities and private developers. At the same time it can assist with broader sustainability objectives such as recycling and stormwater capture. The success of this approach will ultimately come down to whether or not it makes commercial sense and whether it provides value for money for consumers. Ultimately, there is no reason why Australia’s water sector cannot realise the same benefits that progressive market reforms have brought to other essential sectors, such as telecommunications and energy. This means that in the longer term, Australia’s governments must also continue to explore possible structural reform of metropolitan water markets with the aim of facilitating increased bulk supply and possibly retail competition.

CONCLUDING REMARKS In the 1980s and 1990s, Australia’s governments faced similar problems of high government debt levels, inefficient infrastructure and low productivity. As we grapple with contemporary challenges, it is time to once again consider broad scale reforms that

will underpin the next round of productivity growth and nationwide infrastructure investment. A sustained period of reform founded on the need to increase the size of the funding envelope, increase the allocative efficiency of investment and create rational infrastructure markets will ensure Australia is well-placed to overcome existing backlogs and to lay the foundations for the next 50 years of growth. Delivering on reforms such as road pricing, asset privatisations, value capture and broader structural reforms to water, waste and energy markets may be complex, but they will largely determine Australia’s success in solving its productivity and liveability challenges. There is, however, considerable cause for optimism. We have recently seen the commissioning of reviews into the ownership, shape and cost of public assets – as well as the productivity of government service delivery more broadly. These developments provide a clear signal that governments are getting serious about creating the budget capacity to fund a deeper, wider and more efficient capital investment program. Ultimately, every dollar saved through more efficient public service delivery or the sale of public assets can instead be used to deliver productivity enhancing infrastructure projects. With the right leadership and seasoned debate about the way forward, Australia can get its infrastructure right within this decade. „

JONATHAN KENNEDY, DIRECTOR, POLICY AT INFRASTRUCTURE PARTNERSHIPS AUSTRALIA (IPA), HEADS THE ORGANISATION’S RESEARCH AND POLICY ACROSS ENERGY, WATER AND TELECOMMUNICATIONS, TOGETHER WITH SUSTAINABILITY AND CARBON ABATEMENT AND SPECIALISING IN REGULATORY AND ECONOMIC REFORM. PRIOR TO JOINING IPA IN 2010, MR KENNEDY’S CAREER SPANNED SENIOR POLICY ROLES IN A NUMBER OF PUBLIC AND PRIVATE SECTOR ORGANISATIONS. 559


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RAISING THE BAR FOR THE VALUATION PROFESSION The financial crisis that began in 2008 led to extensive reductions in asset values and challenged the solvency of banks, companies, individuals and even governments. Steven J. Sherman discusses the valuation industry post-financial crisis and provides an update on recent interactions between the valuation profession and regulators. ssets that plunged in value during the financial crisis included equities, real estate and loans across all sectors and geographies. Nearly one-third of the goodwill on the balance sheets of US public companies that was generated in the prior 10 years via acquisition was written off between 2008 and 2009 (over $700 billion). Although many assets have recovered in value, we are now on the fringe of another financial crisis related to challenges in the Eurozone and slowing economies elsewhere. As valuation standards around the world start to converge, diversity in practice can be reduced, which can improve both the consistency and the quality of our services.

A

main objectives behind the IVSC’s standards improvements project which was completed last year. This resulted in a simplification of the previous collection of standards – what had been over 450 pages was reduced to only 128. The valuation profession’s challenge in today’s post-crisis environment is to bring greater consistency, quality and transparency to those who rely on our work. Many entities, such as investors, regulators and auditors need more support from independent valuers than ever before. By focusing on principles rather than prescriptive details the IVSC hopes for a much wider application than the predecessor standards and the removal of some obstacles to adoption and convergence. The improvements project had its genesis in 2007 and included

“ONE POTENTIAL SOLUTION TO CONSIDER IS WHETHER THERE SHOULD BE, SIMILAR TO OTHER PROFESSIONS, A SINGLE SET OF QUALIFICATIONS WITH RESPECT TO EDUCATION LEVEL AND WORK EXPERIENCE, A CONTINUING EDUCATION CURRICULUM, STANDARDS OF PRACTICE AND ETHICS AND A CODE OF CONDUCT” PAUL BESWICK For the past two years I have served as chairman of the standards board of the International Valuation Standards Council (IVSC), which is based in London. Convergence was one of the 560 ANZPJ SEPTEMBER 2012

much more extensive consultation than any previous IVSC standards. Comment letters on the drafts were received from over 60 different organisations and roundtable discussions on some of the

more contentious issues were held in Hong Kong, London and New York. Completion of the revision of the International Valuation Standards is just a start – there is a long way to go. Our profession’s challenges are well highlighted in the following excerpts from a speech in December 2011 by Paul Beswick, then deputy chief accountant and now acting chief accountant of the SEC. “The broadening application of fair value … and the 2008 financial crisis have cast the spotlight on valuation professionals. At last count, valuation professionals in the US can choose among five business valuation credentials available from four different organisations, each with its own set of criteria for attainment... “Risks created by the differences in valuation credentials that exist today range from the seemingly innocuous concerns of market confusion … to the more overt concerns of objectivity of the [valuer] and analytical inconsistency. “One potential solution to consider is whether there should be, similar to other professions, a single set of qualifications with respect to education level and work experience, a continuing education curriculum, standards of practice and ethics and a code of conduct. One could also contemplate whether a comprehensive inspection program and a fair disciplinary mechanism should be established to encourage proper behaviour and enforce the rules of the profession in the public interest.”


PAN PACIFIC CONGRESS 2012

Although the message contained in Beswick’s speech was aimed squarely at the business valuation sector, similar criticisms could be aimed at the plethora of property valuation accreditations available around the world, each having its own set of criteria for attainment. That said, the property valuation profession in Australia and New Zealand has well-defined and recognised accreditations. However, the same cannot be said for many other countries.

bodies to improve valuation quality and consistency. We also welcome efforts to put in place the means to effectively enforce compliance with professional standards. Training, certification, peer review and auditor scrutiny are all important tools that will enhance professional quality if properly utilised. Our standards board has a series of projects currently underway to further bolster the profession, including developing sector-related standards for extractive industries, forestry and financial instruments. Of particular interest to API and PINZ members will be two real estaterelated projects. After representations

“NEARLY ONE-THIRD OF THE GOODWILL ON THE BALANCE SHEETS OF US PUBLIC COMPANIES THAT WAS GENERATED IN THE PRIOR 10 YEARS VIA ACQUISITION WAS WRITTEN OFF BETWEEN 2008 AND 2009” STEVEN SHERMAN The IVSC has responded to feedback from regulators, as well as Mr Beswick. Over the past year we have met with regulatory authorities from the IASB/ IFRS Foundation, the SEC, the FASB, the Hong Kong Stock Exchange, the Russian Ministry of Economic Development and many others. The IVSC is also a participant in the Private Sector Taskforce of Regulated Professions and Industries that was formed at the request of the G20 to advise on the development of financial policy and regulation to facilitate economic stability in the world’s capital markets. A major objective of the IVSC is to be the global voice for the valuation profession by raising the bar for standards, quality and professionalism. Where differences exist, we are challenging professional bodies to work with us to further reduce diversity and we welcome efforts by regulators and professional

from the property investment industry around the world, the board is looking to produce a dedicated standard for investment property which may replace the current IVS 233 ‘Investment Property under Construction’. The board is also aware of significant diversity in the techniques used to value ‘trade-related property’, such as hotels. Beyond enhancing technical standards, possibly of equal or greater importance are several projects related to the global profession. Our professional board has developed a code of ethical principles for professional valuers and released exposure drafts aimed at developing a consistent competency framework. One project involves identifying quality technical guidance, whether developed by the IVSC or other standard setting bodies, such as the CFA Institute and the Appraisal Foundation. Upon completion

of appropriate quality protocols, these documents could be accessed at a common website of all global and regional appraisal organisations and act as an ‘electronic library’ for the profession. Another project has been proposed to identify major organisations that have their own standards and undertake a reconciliation effort with the International Valuation Standards. Over time, the goal would be to eliminate multiple sets of standards so that IVS becomes of even greater prominence and benefit to users and regulators in the future. I understand that the API and PINZ have effectively adopted the IVSs and many others have either adopted them or are substantially converged. The way forward for the valuations industry is predicated on leveraging the IVSC’s global platform (a common voice to address issues raised by regulators); continuing to work with accounting standards setters and professional bodies to drive convergence; develop tools to advance professionalism (code of ethics, training guidance); and encouraging enforcement efforts. With these factors in mind, IVSC has a keen understanding of what needs to occur in the coming years to continue to raise the bar for our profession. My two years in this role have moved along very quickly and have exposed me to professionals and regulators who are genuinely committed to improving the valuation profession. We have a very keen understanding of what needs to occur in the coming years in both mature and developing markets to continue to raise the bar for our profession. „ Steven J. Sherman, Partner and Chair, Global Valuations Committee, KPMG, is based in Chicago. He has experience in financial reporting, acquisitions, divestitures, tax planning and expert testimony. Mr Sherman will be a keynote speaker at the 26th Pan Pacific Congress, which will be held 1-4 October, 2012 in Melbourne. 5 61


HOLDING COSTS

n greenfield residential property developments, it is generally accepted that aside from the cost of the undeveloped land and subsequent direct development costs (building and construction), development cost contributions expended towards infrastructure typically represent the largest planning-related cost. However, it may be demonstrated that holding costs (i.e. essentially those costs

I

562 ANZPJ SEPTEMBER 2012

revolving around an assessment of ‘carrying costs’ related to capital and other outlays) not only rival, but typically even exceed apparently more pervasive, obvious costs involved in property development. Of particular significance is that together with non-financial barriers, these costs are being increasingly recognised as significant impactors in relation to housing affordability. Such costs arise from inconsistent planning requirements, development

assessment procedures and conflicts between developers and local councils. Their impact has underpinned a diverse range of planning reforms currently underway in various regions throughout Australia. Examples include systematic enhancements intended to provide greater standardisation and reduced administrative requirements, system complexity and timeliness. It is indisputable that developer infrastructure costs strongly


HOLDING COSTS

HOUSING AFFORDABILITY OUTCOMES FOR GREENFIELD RESIDENTIAL PROPERTY DEVELOPMENT

THE DYNAMICS OF

HOLDING COSTS

impact housing costs and therefore affordability, and compared to holding costs, they are much more visible and easily quantified. In contrast, holding costs may seem less tangible as they typically stem from issues revolving around uncertainty, timeliness and inconsistency. Nonetheless, it can be established that they represent a potentially formidable fi nancial barrier. As a consequence, the impact of holding costs emphasises

the fi nancial benefits arising from planning reform and intervention. Whilst this research involves investigation of the dimensions of holding costs based on data largely derived from case study investigations originating from midsized to larger (up to 200 lot) residential greenfield property development in South East Queensland, theoretical modelling strongly suggests that the outcomes have application outside this specification.

HOLDING COSTS AND THEIR EMERGING SIGNIFICANCE Despite the quantum and high economic impact of related statutory intervention by policy makers, only limited formalised research into the impact of holding costs on housing affordability has been hitherto undertaken in Australia. At the very least, a better understanding is required (Gurran et al., 2009; Matthew et al., 2010; Randolph, 2007; UDIA, 2010; ULDA, 2010). 563


HOLDING COSTS

One of the main difficulties in conducting research in this area is due to the lack of baseline information – i.e. highly sensitive commercial-inconfidence data that is tightly held by major industry players (a problem well documented by researchers, such as Gurran et al., 2009). Furthermore, there has been little evidential material identifying to whom the burden of these effects are passed. Holding costs are nevertheless emerging as an important factor impacting housing affordability, having particular application in the case of new housing greenfield development. The fact that holding costs are widely held to impact housing affordability is well established in the literature (Barnes, 2007; Bourassa, 1992; Brown et al., 1986; Çorbacıoğlua & van der Laan, 2007; Eagles, 2008; Gurran et al., 2009; Tse, 1998; ULDA, 2010; Yardney, 2007). The Queensland Housing Affordability Strategy (QHAS) calculates that development holding costs typically add at least $15,000 to $20,000 per dwelling for greenfield developments (Queensland Housing Affordability Strategy, 2007, p. 3). Until now this has never been seriously challenged. It is therefore important to authenticate not only the quantum amount, but also the extent of their significance – especially where time taken for regulatory assessment is excessive. The perception that land use planning requirements and government taxes are increasingly responsible for the rising costs of residential development and consequent housing unaffordability (Gurran et al., 2008) therefore requires scrutiny. The reason why these matters are of significance is because of the implications for public policy and the associated potential (in association with other factors 564 ANZPJ SEPTEMBER 2012

outside the scope of this study) for the development of a strategic jurisdictional framework likely to promote or assist housing affordability.

CASE STUDY PARTICIPANT INVOLVEMENT AND RESEARCH METHODOLOGY Having developed a theoretical model for the calculation of holding costs, information derived from actual mid-sized to large greenfield property developments is used to cross check for authenticity. In this instance, participants consist of

has shown (Garner, 2008) that projects of state significance often mean that they are more susceptible to manipulation by non-economic parameters, especially political and other behavioural influences. For example, special treatment by regulatory authorities, particularly in terms of environmental compliance and certain economic and other government support measures. Restricting and stratifying the data sets in the manner described therefore maximises the potential collegiality and homogeneity of data sets since

IT IS INDISPUTABLE THAT DEVELOPER INFRASTRUCTURE COSTS STRONGLY IMPACT HOUSING COSTS AND THEREFORE AFFORDABILITY, AND COMPARED TO HOLDING COSTS, THEY ARE MUCH MORE VISIBLE AND EASILY QUANTIFIED

property development organisations which have been engaged in midsized to large-sized projects in South East Queensland – i.e. between 15 to 200 residential allotments in the total development. Developments outside this range are unlikely to be compatible. For example, smaller ‘six-pack’ and ‘eightpack’ developments are niche market property developments likely to exhibit characteristics peculiar to that distinct style and size of development. On the other hand, larger developments are likely to exhibit different sets of characteristics common to very large or even state significant projects. Such large-scale developments are more specialised and research

the information is derived from congruent geographic areas and development sizes less susceptible to non-economic influences. In accordance with methodology similar to that developed over recent years by AHURI (Gurran et al., 2008), developers were asked to provide financial data which was compiled and analysed against standard development costings methodology, along with expenditure associated with planning approval and expenditure. Obtaining both types of cost data (pre-development feasibility estimates, where available, and actual expenditure) allows the exploration of shifts in planning requirements and development contribution


HOLDING COSTS

TABLE 1 - SENSITIVITY OF TIME ON A DEVELOPMENT PROJECT – GROSS REALISATION REQUIRED TO COVER HOLDING COSTS (PER LOT BASIS) PER LOT BASIS Statutory planning/subdivision, including DA (months)

0

12

24

36

48

60

N/A*

Total development time from acquisition (months)

12

24

36

48

60

72

84

1.0

2.0

3.0

4.0

5.0

6.0

7.0

$81,795

$90,778

$105,126

$120,999

$138,559

$157,987

$179,481

$120,458

$129,440

$143,789

$159,662

$177,222

$196,649

$218,143

Developer’s margin

$24,092

$25,888

$28,758

$31,932

$35,444

$39,330

$43,629

Selling costs

$5,544

$5,958

$6,618

$7,349

$8,157

$9,051

$10,040

$150,094

$161,286

$179,165

$198,943

$220,823

$245,030

$271,812

$3,702

$9,592

$20,847

$33,627

$48,094

$64,429

$82,830

(years) Total development costs, including interest Total costs of development, including acquisition costs

Gross realisation

TOTAL HOLDING COSTS

n/a* not applicable – statutory approval times in this timeframe is unrealistic

levies between project inception, the lodging of development applications, determination and approval and the capacity to accurately estimate and cost planning requirements at project feasibility stage. Case study investigations assist the quantitative data modelling by providing ‘live data’ for input into the theoretical modelling of holding costs and testing the ability of it to capture all possible project variations and financial/physical combinations across a range of scenarios. It also facilitates changes to be made to the structure of the model and provide a means to check the componentry aspects of holding costs, as well as ensuring that the output of the model is consistent and logical. The case study projects range in size from 17 to 142 allotments, with their scope ranging from $1.3 million to $23.4 million, with the cost of greenfield site acquisition ranging from $0.1 million to $7.2 million. Average gross realisations (i.e. the final sale prices for the allotments) range from $86,621 to $521,303 per allotment. Development timeframes range from 28 months

to 52 months. Accordingly, it may be appreciated that there is considerable variability in the case studies.

QUANTUM OF HOLDING COSTS DETERMINED The theoretical model (‘holding cost economic model’) indicates total holding costs for a typical ‘base case scenario’ is $15,039 per lot (refer to Table 3). This amount tends to confirm Queensland Housing Affordability Strategy (QHAS) estimations suggesting that development holding costs can add between $15,000 and $20,000 per dwelling. However, results for alternate timeframes indicate significant volatility. For example, if the time taken for completing a development is reduced by six months, the holding costs will reduce by 36.2% to approximately $9,600 per lot, and if time is increased by six months, the holding costs will increase by 38.6% to approximately $20,800 per lot. Put simply, for every month the assessment time is delayed, the end-user (whom ultimately incurs the holding costs) will pay more than $800 more, equating to around $5,000

for every six months differential. If any of the assumptions used vary, then there will be a commensurate (or more usually accentuated) impact on the project. Those assumptions (independent variables), having the greatest singular impact, include interest rates and development timing (incorporating holding period). Initial acquisition costs and the developer’s margin tend to be a function related to gross realisation expectations. Furthermore, the effect of extended timeframes rapidly accelerates holding costs over time. For example, as shown in Table 1, holding costs rise by 123.6% to nearly $34,000 per allotment where there is a four-year total development period or by 328.4% to just more than $64,000 for a six-year development period. Regardless of whether the fundamental cause of excessive time delay is due to the assessment period or not, the model demonstrates how readily holding costs can climb to these levels – and beyond. The ultimate impact is highlighted by examining gross realisation where, assuming a total development period rises to five years, the average 565


HOLDING COSTS

TABLE 2 - SENSITIVITY OF NINE FACTORS IMPACTING HOLDING COSTS AND SUBSEQUENT EFFECT ON HOUSING AFFORDABILITY cost of each allotment is effectively raised from $170,000 (base model assumption) to more than $220,000. In order to assess the impact on housing affordability, the quantum of holding costs can be converted to a mortgage repayment equivalent required to cover these additional costs (i.e. the additional costs of holding can be expressed in terms of additional mortgage repayments required to cover those costs). This amount can be further converted into a proportionate amount of average household income. In this way, calculated holding cost amounts can be directly applied against the ‘30/40 affordability rule’ or other commonly used measures that identify impacts against housing affordability. For example, reverting to our base case scenario, the holding cost amount of $15,309 can be expressed as being equivalent to a mortgage payment of an additional $154 per month to cover all holding costs or $55 per month to cover the costs of the assessment period alone. Expressed as a percentage of average

SENSITIVITY ASSESSMENT

ANGLE (SLOPE)

>10 °

• Interest/infl ation rate change

Extreme

7-10 °

• Mean equivalised household income • Development time from acquisition

Significant

4-7 °

• Undeveloped land cost • Number of lots in subdivision

Moderate

1-4 °

• Development costs, including major civil works, building and construction - per lot

Minor

Nil

up to 1 °

zero °

VOLATILITY OF HOLDING AND OTHER MAJOR DEVELOPMENT COSTS Perhaps surprisingly, a comparison of the variability of holding costs apparent amongst case studies indicates relative non-volatility. They account for up to approximately 12% of all costs in the case studies with a standard deviation σ of only 3.41% (by way of comparison, development costs

HOLDING COSTS ARE NEVERTHELESS EMERGING AS AN IMPORTANT FACTOR IMPACTING HOUSING AFFORDABILITY, HAVING PARTICULAR APPLICATION IN THE CASE OF NEW HOUSING GREENFIELD DEVELOPMENT. household income, the amount of total holding costs for our base case scenario would be 3.58%, of which 1.27% is contributed by the assessment period. The impact of even lengthier assessment periods accelerates as time proceeds (i.e. accelerating the increase of mortgage repayments due to holding costs over time). 566 ANZPJ SEPTEMBER 2012

VARIABLE

Very extreme

account for up to approximately 64% of all costs in the case studies with a standard deviation σ of 11.06%). For a 95 per cent confidence level α=0.05 the population mean for holding costs of 6.08% has a confidence interval ˆp of only ±5.96% (or in other words we can be 95% confident that the interval from 0.12%

• Rates, infrastructure charges, DA, consultants, etc - % land acquisition costs per lot p.a. • Acquisition costs (% of undeveloped land cost) • Developer’s margin

to 12.04% contains the true value of p). This may be referenced against the actual holding costs for the case studies, which range between $5,006 and $32,941 per lot (i.e. accounting for between 4.25% and 12.05% of gross realisation), whilst development costs range between $55,000 and $227,824 per lot (accounting for between 38.7% and 64.2% of gross realisation). It is important to note here that those cost components which have the greatest level of volatility and variability (in order of variability – development costs, developer’s margin and acquisition costs) are also, especially by comparison with holding costs, at least directly affected by increases in interest rates and time. This is quite apart from their overall significant impact on gross realisation.

FACTORS CRITICAL TO THE HOLDING COST EQUATION ‘Best fit’ trend equations may be established for each of the case studies based on the dependant variable y (measured by the mortgage repayment equivalent as derived from the quantum of holding costs, expressed as a percentage of mean household income) and the independent variable


HOLDING COSTS

x, being the length of development period. A ‘Holding Cost – Housing Affordability Trend Line’ can be achieved by inputting the actual results for each specific property development project into the Holding Cost Model. It is then possible to run the best fit linear or non-linear trend analysis on the Holding Cost – Housing Affordability Trend Lines, which in this case results in polynomial regression equations which are summarised in Table 3. Here, polynomial regression equations are used to solve the housing affordability variable y. An assessment of sensitivity of factors impacting holding costs and the subsequent impact on housing affordability can be gauged by measuring the angle of the slope of the equations referred to. The results are summarised in Table 2,

which demonstrates that interest rates and development timeframes are critical to the holding cost equation. This confirms the general thrust of the literature on that topic, yet perhaps highlights that the extent of these impacts may not have been fully appreciated. It should be noted that although some of the variables have limited or no impact on holding costs (as measured by the sensitivity assessment), that does not mean they have a correspondingly limited impact on housing affordability. This is important since a factor could have a limited or even no impact on holding costs, yet have a significant impact on housing affordability because it affects gross realisation prices. A good example of this is the developer’s margin – it has no impact on holding costs at all, yet could be significant for end-users.

CONCLUSION This study has established that the impact of holding costs on housing affordability is not only profound, but also exceedingly variable. In the case of a residential development in South East Queensland, the quantum amount is ‘typically’ in the order of $15,000 per allotment. Whilst this amount is generally in alignment with the expectations of some commentators, by no means does this figure on its own give a real sense of its profundity or reveal the true nature and extent of potential impact. Th is is because even slight changes to key underlying holding cost component variables have a severe and disproportionate effect. At the extreme end, the level of prevailing interest rates and/or development timeframes (including regulatory assessment timeframes) is

TABLE 3 - CASE STUDY COMPARISONS AGAINST THE BASE CASE SCENARIO (SUMMARY DATA) BASE CASE MODEL SCENARIO

CASE STUDY A

CASE STUDY B

CASE STUDY C

CASE STUDY D

Detail

Per Lot

Per Lot

Per Lot

Per Lot

Per Lot

Acquisition cost (undeveloped land)

$38,663

$49,771

$107,941

$50,627

$5,225

$7,733

$26,687

$34,529

$23,585

$1,400

Development costs, including major civil works, building and construction

$75,000

$167,048

$227,824

$68,887

$55,000

Developer’s margin

$27,287

$72,122

$112,906

$11,516

$16,658

Selling costs

$6,279

$1,649

$5,161

$1,760

$2,332

BASE CASE SCENARIO - CASE STUDY COMPARISONS: SUMMARY DATA

Rates, infrastructure levies/charges, DA, consultants, special council charges and land tax

Holding costs

$15,039

$14,072

$32,941

$21,423

$5,006

Gross realisation (total price of allotment)

$170,000

$331,349

$521,303

$177,798

$85,621

Number of lots in subdivision

200

83

17

142

20

Total project time - acquisition to final settlement (years)

3.0

2.8

3.1

4.8

2.3

Development time from acquisition (months)

30.00

28.00

34.00

52.00

28.00

Developer’s margin

20%

28%

28%

7%

25%

3.58%

3.19%

7.70%

5.85%

1.56%

y = 7E-05x2 + 0.0027x + 0.0027

y = 5E-05x2 + 0.0026x + 0.0044

y = 1E-04x2 + 0.0061x 0.0102

y = 9E-05x2 + 0.0012x 0.0064

y = 2E-05x2 + 0.0019x 0.0029

Cost of mortgage repayment equivalent due to holding costs as a % of mean household income* Polynomial (curvilinear) trend line equation

* Mean equivalised household income utilised is calculated as at date of first settlement 5 67


HOLDING COSTS

critical. Lot density and undeveloped land costs are also significant. At the moderate to minor end are development costs and infrastructure charges. These sensitivities are borne out by field investigations which also demonstrate that the quantum amount of holding costs can readily double. As a consequence, the impact on the housing affordability equation is such that end-users can be easily pushed into mortgage stress if they ultimately absorb holding cost variations. Particular combinations of varying holding cost elements demonstrate the potential for even greater levels of volatility. In fact, increases in holding costs overall accelerate at a faster rate over time than other components that aggregate to constitute the final sale value of the end product. It may be readily anticipated that the combined effects of holding cost

REFERENCES

„ Barnes, T. (2007). NSW Planning System Adds Massive Holding Costs. Retrieved from http://www. urbantaskforce.com.au/attachment. php?id=615 „ Bourassa, S. C. (1992). Economic effects of taxes on land: A review. American Journal of Economics & Sociology, 51(1), 109-113.

„ Brown, R. M., Conine, T. E. J., & Tamarkin, M. (1986). A Note on Holding Costs and Lot Size Errors. Decision Sciences, 17(4 ), 603-610.

„ Çorbacıoğlua, U., & van der Laan, E. A. (2007). Setting the holding cost rates in a two-product system with remanufacturing RSM Erasmus University, Rotterdam, The Netherlands

„ Eagles, P. (2008). The Urban Land Development Authority and Affordability. Urban Developer(01 2008), 1.

568 ANZPJ SEPTEMBER 2012

components can be extreme and drastically affect housing affordability. The importance of this research potentially emphasises a number of aspects, such as the impact of land banking behaviour by developers (the kind of which has been outlined by various researchers such as Rowley & Costello, 2010; Tse, 1998; and Walker et al., 2008), and the significance of the timely processing of development applications and other relevant statutory documents by regulatory authorities. This latter aspect has been a major consideration in establishing legislation and statutory authorities in many Australian states – in the case of Queensland, notably the Affordable Housing Strategy, and establishment of the Urban Land Development Authority. It was through the Queensland Housing Affordability Strategy that the

Queensland government established the Urban Land Development Authority. According to the Queensland Housing Affordability Strategy, 2007, it undertook certain other changes to speed up the planning and development assessment process as a primary means to significantly reduce timelines and the associated holding costs of bringing new housing to the market. Therefore, the rigorous determination of holding cost variables on housing affordability provides continuing evidence supporting changes to the public policy framework that promotes, retains or maximises the opportunities for affordable housing. „ Dr Gary Owen Garner, Senior Lecturer in Property Studies, Lincoln University, New Zealand, has experience on both the practical and technical sides of property economics.

„ Garner, G. O. (2008). Implications of “State Significant Projects” in Queensland. Paper presented at the 2009 Pacific Rim Real Estate Society Conference, Sydney http://eprints.qut. edu.au/19586/

„ Queensland Housing Affordability Strategy. (2007). Brisbane: Queensland Government - Office of Urban Management, Department of Infrastructure Retrieved from http:// www.oum.qld.gov.au/.

„ Gurran, N., Ruming, K., & Randolph, B. (2009). Counting the costs: planning requirements, infrastructure contributions, and residential development in Australia: Australian Housing and Urban Research Institute.

„ Randolph, B. (2007). Planning, government charges, and the costs of land and housing (Research Project - Research Theme: Housing Affordability): Australian Housing & Research Institute - Research Centre: UNSW-UWS

„ Gurran, N., Ruming, K., Randolph, B., & Quintal, D. (2008). Planning, government charges, and the costs of land and housing (No. ISSN: 1834-9250 ISBN: 1 921201 32 0): Australian Housing and Urban Research Institute - UNSW-UWS Research Centre - Sydney Research Centre.

„ Rowley, S., & Costello, G. (2010). The impact of land supply on housing affordability in the Perth metropolitan region. Pacific Rim Property Real Estate Journal, 16(1), 5-22.

„ Matthew, G., Maldonado, M., Paphitis, S., & Morris, P. (2010). Barriers to financing mixed-use infill property developments: KPMG for Department of Infrastructure and Planning.

„ Tse, R. Y. C. (1998). Housing Price, Land Supply and Revenue from Land Sales. Urban Studies, 35(8), 1377-1392.

„ UDIA. (2010). UDIA Response to the Productivity Commission Issues Paper - Performance Benchmarking of Australian Business Regulation: Planning, Zoning and Development Assessments. Canberra, ACT: Urban Development Institute of Australia.

„ ULDA. (2010). Submission to the Productivity Commission Performance Benchmarking of Australian Business Regulation: Planning, Zoning Productivity Commission and Development Assessments. Brisbane: Urban Land Development Authority. „ Walker, R., Courtney, M., Shing, C., & Robertson, J. (2008). Residential Land Development Study Prepared for the UDIA (Qld) by URBIS Brisbane Qld.

„ Yardney, M. (2007). The Risks Related to Property Development. Retrieved from http://www. propertyupdate.com.au/articles/70/1/ The-Risks-Related-to-PropertyDevelopment/Page1.html


VALUER PROFILE

RODNEY HYMAN

ORDER OF AUSTRALIA

s beginnings go, it wasn’t exactly auspicious — newly married, out of a job and with worldly wealth totalling a cordial bottle half full of threepenny and sixpenny pieces. However, it set RHAS Managing Director and Life Fellow of the API, Rodney Hyman, on the road to being awarded an Order of Australia medal for services to the plant and machinery valuation profession, his charity work and his contribution to the API. Moving from a brief foray in the legal profession to his father’s auction and valuation business in 1970, Mr Hyman has since gone on to amass a wide range of experience as a valuer, auctioneer, marketer and guest lecturer. He has also held industry

A

positions such as Senior Vice President of the NSW Division of the API and Chairman of the Machinery and Business Assets Faculty of the Royal Institution of Chartered Surveyors.

ANZPJ: WHAT WAS THE AUCTIONEERING SIDE OF THE BUSINESS LIKE WHEN YOU STARTED OUT?

Rodney Hyman: The auctioneering side has changed dramatically as a lot of the drivers for that part no longer exist. Insolvency used to be a huge driver of auctions. When I first came into the industry, there would have been 15 to 20 insolvency auctions per week in the Sydney Morning Herald. Today, you would have to hunt out three or four. The 70s were the years

The ANZPJ sat down with Mr Hyman to discuss how the plant and machinery valuation and auctioneering aspects of the industry have changed in the last 40 years, the value of the API and some of the challenges facing the industry.

569


VALUER PROFILE

“WHEN I CAME INTO VALUING — BECAUSE OF MY LEGAL BACKGROUND — I EXPECTED EVERYTHING TO BE PRESCRIBED, BUT THERE WERE NO RULES”

570 ANZPJ SEPTEMBER 2012

of the rationalisation of the Australian industry. The big players of the day had three to four manufacturing businesses being auctioned every week … week in, week out, every week of the year. That rationalisation is complete and there is, relatively speaking, no manufacturing left in Australia. Those auctions no longer occur. The other driver was just surplus stock. One auctioneer, who no longer exists, used to have two auctions per week with 1,000 lots each day of just giftware. They were being bought by market people and sold at Paddy’s [Market]. That’s been superseded for two reasons: those market people now go direct to providers of surplus stock, and secondly, it now ends up on eBay. The online auctions are making inroads.

WHAT WAS THE VALUATION SIDE OF THE BUSINESS LIKE IN THE 70s?

Rodney Hyman: Back then you knew everything. You didn’t need to do a lot of research as you knew what something was worth. Interestingly, back in those uncomplicated days, you weren’t far wrong. You were basing values on everyday interaction with the auction industry. Every week you were seeing a whole range of an industry’s assets going under the hammer, so what most valuers did then was make market-based valuations. The auction industry was a great adjunct to the valuation industry in that you had live sales sitting on your books all the time. While it is perhaps a bit presumptuous to say that you knew the value, if you had something like a lathe and you sold 20 in the last week then you didn’t have to go and do a whole lot of research because you knew what they’d brought. You didn’t need to ring a dealer and ask what they’d

been sold for – you’d seen the sale and in many instances, you were the one who did the sale.

HAS SOMETHING BEEN LOST SINCE THEN AS VALUERS AND AUCTIONEERS HAVE DIVERGED?

Rodney Hyman: No, we’ve become far more professional. The level of expertise has really grown, and to an extent that’s due to the API. When I came into valuing — because of my legal background — I expected everything to be prescribed, but there were no rules. The little bit that was written was for real estate valuation. There was nothing for plant machinery … So one of the first things I did was to say to the NSW Division [of the API], ‘What about a set of definitions for plant and machinery?’ … I remember sitting down with Phil Bennett, who is also a Life Member of the API but who is now retired, and we created a committee that created definitions for plant and machinery, and that was the beginning of the plant and machinery part of the profession beginning to get professional.

HOW WOULD YOU DESCRIBE THE PROPERTY SECTOR TODAY?

Rodney Hyman: In my sector, its level of professionalism is so far beyond what it was even 10 years ago, let alone 40 years ago. The roles and tasks we take on are beyond what you would ever have dreamt of. Some of the esoteric work we have done over the years has been as broad as a Venetian glass chandelier — where I actually went to Venice to see how they were made — to the whole power grid of Tanzania. We’ve done landfill power projects in the UK and US, we did an injection moulding plant in Brazil and have done valuations as diverse as major power generators in Australia.


VALUER PROFILE

571


VALUER PROFILE

SO THE NEXT GENERATION ENTERING THE PROFESSION CAN LOOK FORWARD TO SEEING THE WORLD? WHAT ADVICE WOULD YOU HAVE FOR THEM?

Rodney Hyman: It depends who you work for, but if you are at a reasonable level, then you will do a lot of Australian travel in this business. I would absolutely do my time over. If I could start again knowing what I know now then it would be a whole different ballgame. Valuation is a field with great potential and it is interesting. In addition to the real estate valuers who value industrial buildings and who get to go into all sorts of different plants, the diversity of what we do is far greater. We go into the plant and look at the four walls which are around it because the building is intrinsic to the plant machinery. However, we also look at how things are done and how they’re made and how the machines work. I find this fascinating.

IN YOUR VIEW, WHAT VALUE DOES THE API CONTRIBUTE TO THE INDUSTRY?

Rodney Hyman: Firstly, the value of the API is that it gives you a set of rules by which to work. The rules take international rules and apply them for local use and that is a huge bonus. When I do an expert witness job, I can do it using a set of rules my peers have set as the way it should be done. Perhaps it’s not step-by-step, but it is a broad set of principles. Secondly, it gives me prestige in the marketplace. It differentiates me from the guy down the road — you don’t have to be licensed to do plant and machinery valuation — so having the qualification from the API differentiates me. Lastly, the API is a nice place to call home. You can call someone for advice about a widget 572 ANZPJ SEPTEMBER 2012

you may be valuing. It gives you the confidence to be able to call someone because you have something behind you stating that you are a valuer.

HOW DO YOU SEE THE INDUSTRY EVOLVING? WHAT CHALLENGES DOES IT FACE?

Rodney Hyman: The first thing is that there will be a shortage of personnel as the majority of people in this industry have grey hair, like me, and we are not bringing enough young people through. There are not enough training courses [either]. To get into the API you need at least 10 years’ experience behind you so that the API’s usual academic requirements can be waived. I also think the work will get more complex and we are doing more and more specialised assets — the sorts of things that 20 or 30 years ago you would not have contemplated valuing. For example, I recently did a drill rig which only drills to 100m on the ocean floor, but it will work at depths of 3000m, with the idea being that it can tell an exploration company what the substrata is below the ocean floor so they can put a drilling platform in knowing what sort of foundations it needs. Firstly, 20 or 30 years ago they probably couldn’t have built that drill machine, and if they had, without the Internet, how would you have started to value it? Now, we not only have access to information we wouldn’t have had [thanks to the Internet] but we also have valuation methodologies which we have established. [An] immediate challenge is going to be personnel, and the other is the people outside the profession who try to do discount work as they don’t have a set of standards to abide. That is a constant issue for us. „

SOME OF THE ESOTERIC WORK WE HAVE DONE OVER THE YEARS HAS BEEN AS BROAD AS A VENETIAN GLASS CHANDELIER — WHERE I ACTUALLY WENT TO VENICE TO SEE HOW THEY WERE MADE — TO THE WHOLE POWER GRID OF TANZANIA. WE’VE DONE LANDFILL POWER PROJECTS IN THE UK AND US, WE DID AN INJECTION MOULDING PLANT IN BRAZIL AND HAVE DONE VALUATIONS AS DIVERSE AS MAJOR POWER GENERATORS IN AUSTRALIA


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RISK MANAGEMENT

RISK MANAGEMENT FOR PROPERTY OWNERS Stephen Cooper, General Manager – Real Estate at Jardine Lloyd Thompson (JLT) provides an overview of some of the traditional risks CRE owners and managers face, together with other emerging risks and some tools available to manage them.

n 2010, a renowned property developer embarked on a major investment by acquiring an old warehouse with the intention of developing the site for residential accommodation. Through its due diligence it was identified that the site had, as part of its history, previously been used for printing and publishing. Although management undertook a high-level risk assessment, the focus  was largely on the financial viability of the development, rather than a wide-ranging assessment of the risks which may have potentially impacted on the investment. It was this narrow focus on the venture’s potential risks that later came back to haunt it. Nine months after the purchase a site excavation led to the discovery of toxic levels of PBT, a carcinogen, halting all development on the project. The property was later sold at a substantial loss and remains undeveloped. This story of an unsuccessful investment would no doubt strike a chord with many commercial real estate (CRE) owners and managers and is reflective of failed investments which may have been avoided if a more rigorous risk assessment process was undertaken.

I

574 ANZPJ SEPTEMBER 2012

STEPHEN COOPER


RISK MANAGEMENT

RISK REGISTERS Development of a risk register, where the risks are identified and quantified, is an essential process for any CRE portfolio which should be re-tested against each new investment. Risk management for CRE is a mature discipline, with many owners/managers having developed robust processes to minimise risk to their organisation. For the sake of brevity, JLT has grouped risks into three main categories – property and business interruption; liability; and commercial risks. It is also convenient to group risk treatments into four general areas: • risk avoidance – action is taken to simply avoid or remove the risk

POTENTIAL RISKS: INCREASED INSURANCE TAXES The Victorian Government proposes to abolish the Victorian Fire Services Levy (FSL) 1 July, 2013 to be replaced by a levy via council rates and spreading the cost against a broader base and lowering the cost of insurance. In the interim period, certain FSL levies have been increased, making the cumulative impact of all government charges in excess of 100% of the base premium in certain instances. If you have property insurance covering Victorian properties expiring between 1 July, 2012 and 30 June, 2013, avoidance of double fire-service related charges may be possible if your insurer allows you to pro-rata the FSL applicable.

EFFECTIVE RISK MANAGEMENT ENHANCES AN ORGANISATION’S RESILIENCE AND PREPAREDNESS AGAINST THE IMPACT ON ITS HEALTH AND REPUTATION AS WELL AS ITS FINANCIAL, OPERATIONAL AND ENVIRONMENTAL SUCCESS • mitigation – implementing controls which seek to minimise or reduce the risk exposure • risk transfer – the risk is transferred contractually or otherwise to another party • risk finance – the risk is financed through either funding or insurance

NATURAL CATASTROPHE RISKS Natural catastrophe activity over the past few years has heightened the exposure of properties in earthquake and flood zones, with increases in property insurance premiums and deductibles and reduced policy limits. Mitigation of risk through proper design and physical

protection of CRE properties in exposed locations is key. Ensuring adequate insurance protection is purchased is also essential – cover, valuations, business interruption reviews and policy limits are key focus areas. Insurance costs can be minimised by working with your broker to ‘sell’ your risk to insurers. Preparation for major weather events is also essential. Having a current crisis management plan which responds to weather and other catastrophic events, accompanied by staff training, is paramount.

CLIMATE CHANGE AND FIRE RISK Climatologists are currently predicting a potential reversing of our climate from La Niña (characterised by high rainfall in Australia) to El Niño, marking a return to drought conditions. The result is a period of prolonged vegetation growth, followed by a prolonged dry spell resulting in high fire fuel loads and, hence, fire risk to properties. Treatment is one method of prevention. This includes removing fuel loads surrounding properties, as well as ensuring that adequate sprinkler protection systems are in place both inside and, where appropriate, outside the premises (rooftop). When all else fails, close scrutiny of the property 57 5


RISK MANAGEMENT

and business interruption insurance, well before sighting an encroaching bushfire, is advisable.

DAMAGE TO UNOCCUPIED PROPERTIES Unoccupied premises pose an increased risk of damage for property owners and insurers. The current business environment can lead to increased vacancies depending on the property and surrounding economic environment. Prevention of damage to property is the primary protection. Owners facing long-term vacancies need to take appropriate measures to reduce the risk of damage through vandals. Long-term vacancy of a property is generally deemed to be a fact requiring material disclosure to an insurer. Failure to implement adequate prevention measures may also make it difficult to insure the property or result in increased costs. The best defence to deal with risk is undertaking adequate due diligence to avoid surprises. Historically, environmental insurance was relegated to specialist insurers providing limited protection for liability or clean-up costs. Major insurers now offer bespoke, broad coverage with realistic limits at competitive prices. If a decision not to insure against this exposure goes back a few years, it may be worth reinvestigating.

LIABILITY Liability due to injury through slips, trips and falls is also typically a chronic risk for CRE owners/managers. Unfortunately, there appears to be a growing trend for increased public liability claim costs in this area. This is largely due to our courts relaxing their attitudes to tort law reform and proceedings where workers’ compensation claim costs are recovered against a CRE owner’s/manager’s public liability insurance. Property owners and managers have many tools in their arsenal to mitigate

576 ANZPJ SEPTEMBER 2012

exposure in this area, including: • analysis of incident/claims, their cause and identification of trends and implementing corrective measures • ensuring any slip or trip hazards are identified and rectified • protocols and training, including inspection programs, signage and use of sheaths for wet umbrellas • developing incident and claim intervention strategies • thinking long-term – developing strategies that will have lasting impact • transferring risks under contractual arrangement CREs also have an obligation to personnel, contractors and third parties to protect them from injury. Prevention, proper planning and training are paramount. Owners/managers should have an up-to-date crisis management plan documenting procedures for each site for major events such as weather, fire, earthquake, etc. At the end of the day, such losses can be potentially catastrophic in nature and having adequate public liability insurance is important.

COMMERCIAL RISKS Liquidity remains a high risk concern for property owners and developers. The banking sector in Australia has not fully recovered from the global financial crisis, with debt facilities for new developments difficult to raise without a substantial balance sheet, a solid business plan and pre-committed sales. Ensuring that potential purchasers and tenants have the financial capacity to underpin their contractual obligations with developers/owners is vital. Often these obligations should be supported by substantial means such as through bank guarantees, credit insurance or surety bonds over the tenure (or part thereof) of the agreement. Capital diminution and a decline in commercial property values also poses risk. Avoiding a downturn in CRE values requires substantial foresight and CRE owners need to have the financial capacity

to ‘ride out’ the cycles of the property market. However, the impact can be diminished by ensuring investment in prime properties where lease or rental returns (and hence values) are less volatile. Finally, a loss of tenancies should also be on CRE owners’ and managers’ radars. There is clear evidence that online shopping will ultimately cause a quantum shift in market dynamics and it is changing buyer behaviour. It is difficult to mitigate risk in the long term in this regard unless CRE owners/ managers adapt their property portfolio. However, short- to medium-term risk mitigation strategies could include: • changing the selection criteria of tenancies and identifying businesses which are adapting well to the online shopping threat • ensuring the tenancies have adequate collateral to withstand a poorer trading environment • seeking stronger guarantees from tenants to pay rent

RISK MANAGEMENT BUILDS RESILIENCE The risk for CRE property owners/ managers is an evolving one with constantly increasing and more onerous regulatory and governance requirements. The impact of climate change will continue to be felt. Strategies must be developed to combat some of the emerging, more chronic commercial risks which may have some short-term solutions, but in the longer term may only be treated through a change in the commercial property landscape. Ef fect ive risk ma nagement enhances an organisation’s resilience and preparedness against the impact on its health and reputation, as well as its financial, operational and environmental success. Developing risk strategies and treatments can prevent or mitigate these risks to a tolerable level. An effective risk-management strategy is therefore a vital component of successful property management. „


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PRIVATE PROPERTY RIGHTS

578 ANZPJ SEPTEMBER 2012


PRIVATE PROPERTY

In the second part of a two-part paper, Alan A Hyam OAM, Barrister-at-Law and LFAPI, details the High Court battle of the Commonwealth versus Newcrest Mining.

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PRIVATE PROPERTY

“AUSTRALIAN LAW, INCLUDING ITS CONSTITUTIONAL LAW, MAY SOMETIMES FALL SHORT OF GIVING EFFECT TO FUNDAMENTAL RIGHTS. THE DUTY OF THE COURT IS TO INTERPRET WHAT THE CONSTITUTION SAYS AND NOT WHAT INDIVIDUAL JUDGES MAY THINK IT SHOULD HAVE SAID”

INTRODUCTION For many years there has been a tension between the protection of the common law of private property rights and environmental and town planning law. An example of the tension is demonstrated by the High Court decision in Newcrest Mining (WA) Pty Ltd v the Commonwealth (1997) 190 CLR 513. In that case the predecessor in title to Newcrest had been granted a number of mining leases at Coronation Hill in the Northern Territory under the Mining Ordinance 1939 (NT). The original terms of some of the leases had expired, whilst others were still current. The Northern Territory government had purported to renew the terms of the leases which had expired under the Ordinance. In 1975, stage one of Kakadu National Park was proclaimed by the Commonwealth Government under the National Parks and Wildlife Act 1975 (Cth) under which the National Parks and Wildlife Service was created. In section 10(1A) of the Act, the recovery of minerals in Kakadu National Park was prohibited. The Act purported to exempt the Commonwealth to pay compensation to any person by reason of the provisions relating to the establishment of Kakadu National Park. Pursuant to proclamations made under the Act, the lands subject to the mining leases were included within the Park.

NEWCREST Newcrest contended that the combined operation of the legislation and the proclamations effected an acquisition of its property rights in the mining leases by the Commonwealth, which was required to comply with condition as to just terms in s 51(xxxi) of the Constitution, which empowers the Commonwealth to acquire property, but only on just terms. 580 ANZPJ SEPTEMBER 2012

The High Court, by a majority, held that s 51(xxxi) of the Constitution fettered the legislative power of the Parliament where property was sought to be acquired “for any purpose in respect of which the Parliament has power to make laws”. The court further held that a purpose of the Act was the performance of Australia’s international obligations, being a purpose in respect of which the Commonwealth had power to make laws within the meaning of s 51(xxxi), which operated to fetter the implementation of that purpose by means of a law with respect to the acquisition of property.

In so holding, Gummow J said at 635, that: “Nor is this a case where there was merely an impairment of the bundle of rights constituting the property of Newcrest … Here there was an effective sterilisation of the rights constituting the property in question. That this is to so only emphasised upon a consideration of the contrary submission made by the Commonwealth and the Director. It is true, as they submit, that the mining tenements were not, in terms, extinguished. It is true also


PRIVATE PROPERTY

His Honour continued by saying: “The outcome of the prohibition on ‘operations for the recovery of minerals’ … in Kakadu National Park was, in my view, an acquisition of the first appellant’s remaining mining tenements. It was an event which had occurred ‘by reason of the enactment of’ the 1987 Act. If s 7 of the 1987 Act is valid it purportedly exempted the Commonwealth from any liability to pay compensation to the appellants for such acquisition. Hence, the appellants’ assertion of invalidity based upon the constitutional requirement of just terms.

that Kakadu extended only 1,000m beneath the surface. But, on the surface and to that depth … the Act forbade the carrying out of operations for the recovery of minerals. “The vesting in the Commonwealth of the minerals to that depth and the vesting of the surface and balance of the relevant segments of the subterranean land in the Director had the effect, as a legal and practical matter, of denying to Newcrest the exercise of its rights under the mining tenements. “In respect of [inter alia] the mining tenements … there were acquisitions of

property from Newcrest other than on the constitutional requirement of just terms. This result is reached by a series of steps which involve denial of the propositions which support the orders made by the Full [Federal] Court.”

Kirby J referred, at 639-640, to s 7 of the Act, which provided that: “Notwithstanding any law of the Commonwealth or of the Northern Territory, the Commonwealth is not liable to pay compensation to any person by reason of the enactment of the amendment of this Act.”

“Pause for a moment to reflect upon the result of the impugned legislation, if valid. It is one thing to expand a National Park for the benefit of everyone who will enjoy its facility. It is another to do so as an economic cost to the owners of valuable property interests in sections of the Park whose rights are effectively confiscated to achieve that end. Ordinarily, at least under federal law, the expansion of areas for public use is carried out at the price of justly compensating those private individuals who lose their property interests in order to contribute to the greater public good. It is possible that the operation of the Constitution and the applicable federal legislation might result in such an uncompensated acquisition. That, after all, could certainly occur, so far as the Constitution is concerned, in respect of the acquisition of property under State law which is not subject to the ‘just terms’ requirement of s 51(xxxi). “If the correct interpretation of the Constitution requires such a result, this Court must give effect to it. “It must do so, whatever opinions might be held concerning the justice or fairness or propriety of obliging 5 81


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selected property holders to suffer uncompensated losses for the benefit of the community as a whole. “Nevertheless, the result of such a course is so manifestly unjust that the mind inclines against an interpretation of the Constitution which has that consequence. At least it does so if another interpretation which avoids it is available.”

Later in his judgment, Kirby J made some important observations concerning interpretative principle, at 657-658: “There is one final consideration which reinforces the views to which I am driven by the foregoing reasons. Where the Constitution is ambiguous, this Court should adopt that meaning which conforms to the principles of fundamental rights rather than an interpretation which would involve a departure from such rights. “Australian law, including its constitutional law, may sometimes fall short of giving effect to fundamental rights. The duty of the court is to interpret what the Constitution says and now what individual judges may think it should have said. “If the Constitution is clear, the court must (as in interpretation of any legislation) give effect to its terms. Nor should the court adopt an interpretative principle as a means of introducing, by the backdoor, provisions of international treaties or other international law concerning fundamental rights not yet incorporated into Australian domestic law.”

CHANG V LAIDLEY Another example of the tension is contained in Chang v Laidley 582 ANZPJ SEPTEMBER 2012


PRIVATE PROPERTY

“IT IS ONE THING TO EXPAND A NATIONAL PARK FOR THE BENEFIT OF EVERYONE WHO WILL ENJOY ITS FACILITY. IT IS ANOTHER TO DO SO AS AN ECONOMIC COST TO THE OWNERS OF VALUABLE PROPERTY INTERESTS IN SECTIONS OF THE PARK WHOSE RIGHTS ARE EFFECTIVELY CONFISCATED TO ACHIEVE THAT END” Shire Council around the claim for compensation arising out of successive provisions of planning law in Queensland affecting a parcel of land owned by the appellants. The appeal concerned the interpretation of those successive planning provisions. Under earlier planning provisions, the land subject of the proceedings could, with development consent, have been subdivided into 25 allotments. After supervening changes to the planning provisions the subdivision was prohibited. Under the supervening changes, a development application (DA) by an affected landowner was not a ‘properly made application’ if the proposed subdivision was contrary to those provisions. Under the Integrated Planning Act 1997 (Qld) a landowner whose land was reduced in value by the changes was entitled to lodge a DA with the council within two years. The council was empowered to assess a DA under the terms of the earlier planning provisions and to consent to the proposed subdivision provided that it would have been permissible or to assess the application under the supervening laws. If it was not permissible under those provisions to pay compensation to the landowner for the consequent reduction in land value. The appellants made a DA for the subdivision within the two-year period, with the council rejecting the application on the ground that it was

not a “properly made application” for the purposes of the Act. The appellants sought to recover their claimed entitlement to statutory compensation for the diminution in the value of their land brought about by their inability to subdivide their land in the manner which they previously could. The appellants contended the new procedural requirement for such applications did not clearly and explicitly govern their situation. They claimed that, conformably with statutory provisions and common law principles, which were defensive of accrued entitlements and were protective against their extinguishment by amending laws, did not clearly state that effect. Thus, the supervening changes to the provisions should read so as not to apply. In the joint judgment of the majority of the court, it was held that the council was entitled to reject the DA on the ground it fell to be assessed in accordance with the Act, which was in force when the DA was made, but it was contrary to the supervening planning provisions. Thus, the application had not been “properly made” for the purposes of the Act. Kirby J held that the legislative purpose of the Act was in respect of a DA lodged by an affected landowner following the introduction of the supervening planning provisions, which abolished any entitlement to compensation if the proposed subdivision was contrary to those laws. In his judgment, after referring

to the joint judgment and that given by Callinan J, said, at [5]-[6]: “Ultimately, I reach the same result. But I do not regard this as an ‘open and shut case’. Cases of this kind (at least when they reach this Court) rarely are. In part, this is because this Court ‘has rejected a narrow view of the survival of accrued rights in the context of repealing [or amending] legislation’. In particular, it has not confined the protection of the law to ‘rights’ narrowly understood. In part this is because of the reasons of legal and constitutional principle that lie behind the general protection of accrued legal entitlement. “This appeal fails because of the terms of the legislation governing the matter. However, for me, this means the whole of the legislation, yielding from its detail the applicable purpose and policy of Parliament. The solution is not confined to what is meant by a supervening change to the requirements for ‘a properly made application’ for the proposed development. That consideration is but one factor in the analysis that leads to the stated outcome.”

Callinan J said, at [120]: “It is with regret that I find myself obliged to agree, subject to what I set out below, with the reasoning and conclusion of Hayne, Heydon and Crennan JJ, regret, I hasten to say, not because of any perceived deficiency in the reasoning of their Honours, but because the relevant statutory language, whether unintentionally, or deliberately and cynically, necessarily does take away the appellant’s valuable proprietary rights, suddenly and without compensation.”

The question arose in Cumerlong Holdings Pty Ltd v Dalcross Properties 583


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Pty Ltd [2011] HCA 27 as to whether the purported effect of the rezoning of land rendered unenforceable a restrictive covenant which burdened land for the benefit of other land. In that case the appellant was the owner of a parcel land at Killara, whilst the respondents were the owners of adjacent parcels of land. A private hospital was operated on one of the land parcels, which was proposed to be extended onto the other parcels. That land was subject to a restrictive covenant which benefited the appellant’s land and which provided that no part of the land was to be used for a number of purposes, including a hospital. The covenant was created pursuant to the provisions of s 88B of the Conveyancing Act 1919 (NSW). Section 28 of the Environmental Planning and Assessment Act 1979 (NSW), provided that: “(1) In this section, regularity instrument means any Act (other than this Act), rule, regulation, by-law, ordinance, proclamation, agreement, covenant or instrument by or under whatever authority made. “(2) For the purpose of enabling development to be carried out in accordance with an environmental planning instrument, or in accordance with a consent … an environmental planning instrument may provide that, to the extent necessary to serve that purpose, a regulatory instrument specified in that environmental planning instrument shall not apply to any such development. “(3) A provision referred to in subsection (2) shall have effect according to its tenor, but only if the Governor has before the making of the local environmental plan, approved of the provision.

584 ANZPJ SEPTEMBER 2012

“(4) Where a Minister is responsible for the administration of a regulatory instrument referred to in subsection (2), the approval of the Governor for the purposes of subsection (3) shall not be recommended except with the prior concurrence in writing of that Minister. “(5) A declaration in the local environmental plan as to the approval of the Governor as referred to in subsection (3) or the concurrence of a Minister as referred to in subsection (4) shall be prima facie evidence of the approval or concurrence.”

Clause 68(2) of the local environmental plan [‘LEP 194’], as amended, reads: “…the operation of any covenant, agreement or instrument imposing restrictions as to the erection or use of buildings for certain purposes or as to the use of land for certain purposes is hereby suspended to the extent to which any such covenant, agreement or instrument is inconsistent with any provision of this Ordinance or with any consent given thereunder.”

The Council granted a deferred commencement development consent to an application for the extension of the private hospital on adjacent land. The appellant sought an order in the Equity Division of the Supreme Court that the respondents be restrained from using or permitting use on the adjacent land as a hospital in contravention of the restriction on use imposed by the covenant. The suit was dismissed, as was an appeal to the NSW Court of Appeal, by a majority. The appellant successfully sought special leave to appeal to the High Court. In allowing the appeal, the High Court declared that the change to the zoning of the land of the appellant does not have the effect to

suspend the operation of the restrictive covenant burdening the land of the third respondent. Their Honours ordered that the third respondent be restrained from using the adjacent land for any hospital or ancillary purpose, contrary to the restriction imposed by the registered instrument. Their Honours Gummow ACJ, Hayne, Crennan and Bell JJ, said in their joint judgment, at [7]; “This dispute illustrates several points of general significance. It may be true to say that State planning legislation ‘is concerned with land as a topographical entity, indifferently to its proprietorship, and that this may entail interference with private property rights’. But legislation which operates to mitigate the extent of that interference, by prescription of a particular manner and form for making of planning instruments, should be read in light of that purpose of mitigating the derogation of private rights.”

After examining the provisions of LEP 194, their Honours remarked, at [12]: “Before LEP 194, cl 68(2) had not operated to ‘suspend’ the operation of the restrictive covenant burdening [the adjacent land]. In using the term ‘suspend’, clause 68(2) appears to contemplate that if the relevant development consent later became inoperative for some reason, the suspension would cease and the covenant would again be enforceable according to its terms. The Minister contended that this meant that the rights the appellant enjoyed under the restrictive covenant were placed no more than in abeyance, which might be infinite or indefinite. This may be so, but that abeyance represents a serious inroad upon the property rights of the appellant.”


PRIVATE PROPERTY

In conclusion, their Honours stated, at [23]-[24]: “The appeal should succeed. Within the meaning of s 28(2), LEP 194 is an environmental planning instrument which, by its engagement with the provisions of the Ordinance, including cl 68(2), provides and specifies that, to the extent necessary to serve the purpose of enabling development to be carried out in accordance with

“The purported suspension of the appellant’s restrictive covenant was effected by the combined operation of cl 68(2) and the making of [LEP 194] with effect from 28 May, 2004. The suspension, if it took place, did not cause the total destruction of the restrictive covenant, but it affected it adversely.”

In Marshall v Director General, Department of Transport (2001)

“THE RELEVANT STATUTORY LANGUAGE ... NECESSARILY DOES TAKE AWAY THE APPELLANT’S VALUABLE PROPRIETARY RIGHTS SUDDENLY AND WITHOUT COMPENSATION”

LEP 194, the restrictive covenant of the which the appellant’s land has the benefit shall not apply to the land which it is sought to develop and use for the purpose of a hospital. But LEP 194 cannot have this effect because approval, as required by s 28(3), was not given. “LEP 194 did so provide and specify with respect to the suspension to the restrictive covenant in question because, as Handley JA [in his dissenting judgment in the Court of Appeal] put it [at [79]-[80]], that was a necessary result of making of LEP 194. The conclusion is contrary to the view of the majority of the Court of Appeal that s 28(3) is only engaged if there be in LEP 194 a statement that in terms that a category of regulatory instrument, which includes the restrictive covenant, is not to apply to any development permissible under LEP 194.”

The situation was more fully explained by Heydon J, at [32]-[35]:

205 CLR 603 Gaudron J (Hayne J concurring) said, at 623 [38]: “Although the rule that legislative provisions are to be construed according to their natural and ordinary meaning is a rule of general application, it is particularly important that it be given its full effect when, to do otherwise, would limit or impair individual rights, particularly property rights. The right to compensation for injurious affection following the resumption of land is an important right of that kind and statutory provisions conferring such a right should be construed with all generality that their words permit.”

McHugh J also said that legislation dealing with compensation for the compulsory acquisition of land, at 627 [48]: “… is intended to ensure that the person whose land has been taken is justly compensated. Such legislation should [be] construed with the presumption that the legislature intended the

claimant to be liberally compensated. The present case does not concern the resumption of land, but it does concern something similar – government action pursuant to legislative power which affects proprietary rights in land adversely. And sub ss (2) and (3) of s 28 do not provide for compensation, but they replace legislation which did provide for compensation. The principles stated in Marshall v Director General, Department of Transport apply as fully to the present case as they do to legislation providing for compensation for the resumption of land. Sub-section (2) and (3A) should be construed generously and liberally because they are protective of the interests of those whose property rights may be damaged by an environmental planning instrument. “The protective function of s 28(3) ensured that before an environmental planning instrument enabling development to be carried out can contain a provision that a covenant does not apply to the development, a certain procedure must be carried out. By reason of s 14 of the Interpretation Act 1987 (NSW), the procedure requires Ministers to advise the Governor to approve the provision, and it requires that that approval be given formally in a meeting of the Executive Council. If Ministers are determined to pursue a particular course, the procedure may not be much protection. But it is some protection, and in many circumstances it will be a significant protection.”

His Honour concluded, at [38]: “… the prior approval of the Governor, acting on the advice of the Executive Council, was necessary. It was not obtained. Hence the appellant’s restrictive covenant was not suspended by [LEP 194].” „ 585


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• Advisory

(02) 4922 0600

• Corporate Real Estate Solutions

COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION

• Property & Asset Management

Heath Dowling Poasa Raqiyawa Ili Raqiyawa Tim Selby Alex Maher

Robert Dupont, FAPI, Director David Rich, AAPI, Director Joshua Smith, AAPI, Director

396 Stuart Highway, Winnellie NT 0820 Tel: 08 8997 0888 Fax: 08 8997 0899

• Research

Albury/Wodonga | Wagga | Grif¿th

(02) 6041 1362

Director Valuer Valuer Valuer Valuer

Certified Practising Valuers

www.prp.com.au

Daniel Hogg, AAPI, Director Michael Redfern, AAPI, Assoc.Director

AAPI AAPI AAPI AAPI AAPI

www.colliers.com.au/darwin

Darwin

(02) 9292 7400 Greg Rowe, FAPI, Director • Valuation • Advisory • Research • Corporate Real Estate Solutions • Property & Asset Management

67 Grey Street ‡ South Brisbane QLD 4101 GPO Box 1776 ‡ Brisbane QLD 4001

www.prp.com.au

www.taylorbyrne.com.au VA L U E R S & P R O P E R T Y C O N S U L T A N T S

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T Bartholomew D Burley C Caleo T Cavanagh J Clune ''XIÀHOG *'XIÀHOG B Guest L Hamilton S Herbert R Hewitt A Hoolihan A Innes C Lando J Lyons P Lyons T Rabbitt P Turner

RESIDENTIAL RETAIL

‡

‡

COMMERCIAL

LITIGATION

‡

‡

RURAL

FA M I LY L A W

‡

‡

INDUSTRIAL

QUEENSLAND

ACQUISITION

2IÀFHVLQ

Knight Frank Valuations Queensland

QUEENSLAND

Brisbane ‡ Bundaberg ‡ Cairns ‡ Emerald ‡ Gladstone Gold Coast ‡ Hervey Bay ‡ Kingaroy ‡ Mackay Rockhampton ‡ Roma ‡ Sunshine Coast ‡ Toowoomba Townsville NEW SOUTH WALES

Level 11, AMP Place, 10 Eagle Street, Brisbane 4000 T: 07 3246 8888 F: 07 3229 5436

Gordon Price, AAPI Timothy Uhr, AAPI Ian Gregory, AAPI Daniel Billiau, AAPI

Paul Kwan, AAPI Peter Zischke, AAPI Samantha Macann, AAPI Verushka Dimitrov, AAPI

www.knightfrank.com.au

Ballina ‡ Coffs Harbour ‡ Grafton ‡ Inverell Lismore ‡ Port Macquarie

Brisbane

Wayne Wotton

AAPI

Mobile 0407 778 954

Carly Jones

AAPI

Mobile 0407 262 580

David Curtis Mobile 0407 778 954

AAPI

WK Wotton & Partners ABN 72 083 750 476 Suite 49 Upper Deck Jones Bay Wharf 26-32 Pirrama Road Pyrmont NSW 2009 Phone +61 2 9552 6633 Fax +61 2 9552 6433 Email wayne@wkw.com.au

2B/96 Lytton Road East Brisbane QLD 4169 Ph: 1300 737 687 Fax: 1300 737 688 Email: mvs.qld@mvsvaluers.biz www.mvsvaluers.biz Robert Pearson AAPI

Wotton Curtis & Partners ABN 72 083 750 476 Suite 2/271 Brunker Road Adamstown NSW 2289 PO Box 273 Newcastle NSW 2300 Phone +61 2 4978 7804 Fax +61 2 4978 7899 Email david@wkw.com.au

„ Real Estate Valuers „ Property Consultants „ Real Estate Asset Managers

register your details

Richard Nash, AAPI Philip Willington, FAPI Tim O’Sullivan, AAPI Mallory Lees, GAPI

NAVIGATING A BALANCED OUTCOME

John Kendall, FAPI Level 4, 345 Ann Street Brisbane QLD 4000 T 07 3613 7394 M 0434 227 253 www.kendallsva.com.au

www.professionals.api.org.au

The Property Practitioner Directory is now live. Register your details NOW, and be found online! 587


ANZPJ PROFESSIONAL CARDS

QUEENSLAND

SOUTH AUSTRALIA Adelaide

67 Grey Street ‡ South Brisbane QLD 4101 GPO Box 1776 ‡ Brisbane QLD 4001

(08) 8277 0500

www.taylorbyrne.com.au

Rob Simmons, AAPI, Director V A L U E R S & P R O P E R T Y C O N S U L TA N T S

'LUHFWRUV

T Bartholomew D Burley C Caleo T Cavanagh J Clune ''XIÀHOG *'XIÀHOG B Guest L Hamilton S Herbert R Hewitt A Hoolihan A Innes C Lando J Lyons P Lyons T Rabbitt P Turner

RESIDENTIAL RETAIL

‡

‡

COMMERCIAL

LITIGATION

‡

‡

RURAL

FA M I LY L A W

‡

‡

INDUSTRIAL

ACQUISITION

• Valuation • Advisory • Research • Corporate Real Estate Solutions • Property & Asset Management

www.prp.com.au

2IÀFHVLQ QUEENSLAND

Brisbane ‡ Bundaberg ‡ Cairns ‡ Emerald ‡ Gladstone Gold Coast ‡ Hervey Bay ‡ Kingaroy ‡ Mackay Rockhampton ‡ Roma ‡ Sunshine Coast ‡ Toowoomba Townsville NEW SOUTH WALES

Ballina ‡ Coffs Harbour ‡ Grafton ‡ Inverell Lismore ‡ Port Macquarie

Brisbane

(07) 3846 2822 Troy Chaplin, AAPI, Director Matthew Harris, AAPI, Senior Valuer

Knight Frank Valuations (SA) James Pledge Alex Smithson Nick Bell Jason Oster Zac Vartuli Craig Barlow Rob Mitchell Lucy Graham Paul Scrivener Carol Simons Sam Tucker Ben Badenoch Chris Hill David Coventry Tom Walker

FAPI FAPI AAPI AAPI AAPI AAPI AAPI AAPI AAPI AAPI AAPI APPI AAPI AAPI AAPI

Level 25 Westpac House 91 King William Street ADELAIDE SA 5000 T: +61 08 8223 5222 F: +61 08 8231 0122 Lyle Montgomerie Nicki Quinn Andrew Skilbeck Peter Hansen Mark Whitcher Kim Wallace

RPV RPV RPV RPV RPV RPV

͗ĂĚŵŝŶΛƐĂ͘ŬŶŝŐŚƞƌĂŶŬǀĂů͘ĐŽŵ͘ĂƵ

ǁǁǁ͘ŬŶŝŐŚƞƌĂŶŬ͘ĐŽŵ͘ĂƵ

We have Specialist Valuers in the areas of: WůĂŶƚΘƋƵŝƉŵĞŶƚͻ,ĞĂůƚŚ͕ZĞƟƌĞŵĞŶƚΘŐĞĚĂƌĞͻŚŝůĚĂƌĞͻŐƌŝďƵƐŝŶĞƐƐͻZĞŶƚĂůĞƚĞƌŵŝŶĂƟŽŶ ,ŽƚĞůƐ͕DŽƚĞůƐΘĂƌĂǀĂŶWĂƌŬƐͻZĞƐŝĚĞŶƟĂů͕^ƵďĚŝǀŝƐŝŽŶΘĞǀĞůŽƉŵĞŶƚƐͻŽŵŵĞƌĐŝĂůͻ/ŶĚƵƐƚƌŝĂůͻZĞƚĂŝů

Cairns

• Valuation • Advisory • Corporate Real Estate Solutions • Property & Asset Management • Research

(07) 4031 9552 Robert Cowell, AAPI, Director Brian Walsh, AAPI, Director www.prp.com.au

COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION Level 10, Statewide House 99 Gawler Place, Adelaide SA 5000 Tel: 08 8305 8888 Fax: 08 8231 7712 Tony West Jennifer Robertson Alex Thamm Angus Barrington-Case

FAPI AAPI AAPI AAPI

Director Director – Healthcare and Retirement Living National Director – Rural and Agribusiness Director – Rural and Agribusiness

Certified Practising Valuers

www.colliers.com.au

COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION

Level 20, Central Plaza One 345 Queen Street, Brisbane QLD 4000 Tel: 07 3229 1233 Fax: 07 3229 1100 Troy Linnane Craig Clayworth Warren Galea Scott McKeiver Tim Kent

AAPI AAPI AAPI AAPI AAPI

Certified Practising Valuers

Brett McCracken Graeme Smith John Burke Tom Lister Peter Bouwmeester Chris Kennedy Jamie Brown Claudine Reinecke Paige Sherwood

AAPI AAPI AAPI AAPI AAPI AAPI, MRICS AAPI AAPI AAPI

National Director Director Director Associate Director Associate Director

Partners in your su

ccess.

Marcus Johnson FAPI: Director /DZ\HUDQGTXDOL¿HG9DOXHU Property law, commercial litigation, compulsory acquisitions, site value objections DQGSODQQLQJDSSHDOV

Cleveland | Capalaba | Brisbane CBD 07 3370 5100 WPFFDUWK\GXULHFRPDX

www.colliers.com.au

TASMANIA Hotels: Management Rights Hotels: Manufactured Home Estates Hotels: Management Rights Hotels: Child Care, Rent Rolls

CBRE Valuations Pty Limited Level 3, Oracle East Tower 6 Charles Avenue, Broadbeach Qld 4218 T: 61 7 5581 2000 F: 61 7 5581 2099

Damien Taplin AAPI CPV C.P.M. Tas Managing Director Mobile 0418 513 003

Our Certified Practising Valuers provide professional specialist service to the Mortgage Industry. www.tpcvaluers.com.au

register your details

5 Audley Street North Hobart TAS 7000 Phone 03 6231 6688 Fax 03 62316788 Email valuations@tpcvaluers.com.au

www.professionals.api.org.au

The Property Practitioner Directory is now live. Register your details NOW, and be found online! 588 ANZPJ SEPTEMBER 2012


ANZPJ PROFESSIONAL CARDS

VICTORIA

TASMANIA Hobart

COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION

(03) 9602 0555 Level 32, Optus Centre 367 Collins Street, Melbourne VIC 3000 Tel: 03 9629 8888 Fax: 03 9629 8549

Damian Kininmonth, FAPI, Director • Valuation • Advisory • Research • Corporate Real Estate Solutions • Property & Asset Management

Jim Macey Stephen Andrew John Conrick Ben McCallum Paul Wheate Peter Volakos

www.prp.com.au

Knight Frank Valuations (TAS) Matthew Page, AAPI Scott Newton, FAPI Ian Wells, FAPI Stuart Wigston, AAPI

Chris Dupen www.knightfrank.com.au

SAUNDERS & PITT Incorporating D. Saunders & Co. Established 1905

National Director National Director - Retail Director - Healthcare & Retirement Living Director Director Associate Director

Level 3, Building 3 195 Wellington Road, Clayton North VIC 3168 Tel: 03 8562 1111 Fax: 03 8562 1122 Director www.colliers.com.au

BARTROP REAL ESTATE BALLARAT REAL ESTATE AUCTIONEERS & VALUERS

Andrew Pitt Dip.Val. AAPI, AREI -RH6WDQVÂżHOG B.Prop. AAPI

14-16 Victoria Street, Hobart TAS 7000 3KRQH  )D[   (PDLOVDXQGHUVSLWW#ELJSRQGFRP

AAPI

CertiďŹ ed Practising Valuers

5 Victoria Street, Hobart TAS 7000 T: 03 6220 6999 F:03 6224 3218, matthew.page@au.knightfrank.com

David Saunders B.Ec. Dip.Val. FAPI Russell Cripps B.Bus Dip.Val. FAPI, AREI &HUWLÂżHG3UDFWLVLQJ9DOXHUV

AAPI FAPI AAPI AAPI AAPI AAPI

BRUCE E. BARTROP, FAPI, FREI, ACIS Certified Practising Valuer

50–54 LYDIARD ST STH, BALLARAT 3350 “A Real Estate Office Since 1876� Phone: (03) 5331 1011 Fax: (03) 5333 3098 Email: realestate@bartrop.com.au

VICTORIA Knight Frank Valuations Melbourne | Mornington

(03) 9602 0555|(03) 5975 0480 Damian Kininmonth, FAPI, Director Neal Ellis, AAPI, Director Ballarat

(03) 5334 4441 Darren Evans, AAPI, Director

Property Services • Valuation

Gippsland

• Advisory

(03) 5672 4422

• Corporate Real Estate Solutions

Tim Barlow, AAPI, Director Alex Ellis, AAPI, Director Geelong | Warrnambool

(03) 5221 9511|(03) 5562 5851 Gareth Kent, AAPI, Director Stuart Mcdonald, AAPI, Director Mitchell Rowe, FAPI, Assoc. Director

The Valuation Expert for Hospitality, Tourism and Leisure Telephone 61 3 9884 7336 Bob Butterworth FAPI

Joseph Perillo David Way Michael Schuh Samuel Murphy Samantha Freeman David Keenan Chris Safstrom Yong-Fu Lim Natasha Altson Matthew Crowther

FAPI MRICS AAPI MRICS AAPI MRICS AAPI F Fin FAPI AAPI AAPI AAPI AAPI AAPI

Level 31 360 Collins Street Melbourne VIC 3000 T: 03 9604 4600 F: 03 9604 4773 E: jperillo@vic.knightfrankval.com.au

www.knightfrank.com.au

• Property & Asset Management • Research

Charter Keck Cramer - Independent Strategic Property Consultants

www.prp.com.au

Strategic Research; Urban Economics & Policy Development & Project Management; Land Surveying; Civil Engineering; Quantity Surveying Corporate Real Estate; Private Equity; Strategic Asset Management; Accommodation Solutions; Commercial Valuations; Residential Valuations; Specialist Valuations

Peter Hutchins AAPI Managing Director L1, 620 Church St, Richmond, VIC 03 9425 5555

www.butterworth.com.au

www.charterkc.com.au

589


ANZPJ PROFESSIONAL CARDS

VICTORIA

AUCKLAND

Level 1/501 Church Street Richmond VIC 3121 T 03 9428 7676 www.avaproperty.com.au

Nicholas Bond AAPI Trevor Crittle AAPI Andrew Kollmorgen AAPI Nicholas Tassell AAPI Chris Pulvirenti AAPI

K L Dowling & Co Specialist Valuers Estate Agents & Property Managers

John K Dowling FAPI FREI Valuations and Expert Evidence prepared for: ‡ /LWLJDWLRQ ‡ &RPSHQVDWLRQ ‡ 5HQWDO'HWHUPLQDWLRQ ‡ 0HGLDWLRQ $UELWUDWLRQ ‡ 6DOHSXUFKDVH ORDQVHFXULW\ ‡ ,QVXUDQFH JHQHUDOSXUSRVHV

City – Level 8, 52 Swanson Street, Auckland 1010 Phone: (09) 309 2116 Facsimile: (09) 309 2471 Email: First name and surname initial (one word) @ seagars.co.nz

6HFRQG)ORRU%RXUNH6WUHHW0HOERXUQH 7HO )D[ (PDLOMRKQGRZOLQJ#NOGRZOLQJQHWDX

WESTERN AUSTRALIA Knight Frank Valuations Marc Crowe Sean Ray David Bolton Andrew Buchanan David Lang Jonathan Vaughan

AAPI DIRECTOR AAPI MRICS DIRECTOR AAPI AAPI MRICS AAPI AAPI

Level 10, Exchange Plaza, 2 The Esplanade Perth WA 6000 T: 08 9325 2533

www.knightfrank.com.au

Manukau – Level 1, Cnr Te Irirangi Dr & Ormiston Rd, Botany Junction, Auckland PO Box 258 032, Greenmount, Manukau 2141 Phone: (09) 271 3820 Facsimile: (09) 271 3821 Email: First name and surname initial (one word) @ seagarmanukau.co.nz

City

Manukau

Chris Seagar, DIP URB VAL, FPINZ, FNZIV Ian McGowan, B COM (VPM), FPINZ, FNZIV Ian Colcord, B PROP ADMIN, SPINZ, ANZIV Reid Quinlan, B PROP ADMIN, DIP BUS (FIN), SPINZ, ANZIV Stephen MacKisack, B AGR, SPINZ, ANZIV Andrew Buckley, B PROP ADMIN, SPINZ, ANZIV Scott Keenan, BA, B PROP, MPINZ, ANZIV Jane Wright, BBS (VPM), MPINZ Kelly Beckett, B PROP, B COM, MPINZ Glenn Paul, B SC, B PROP Damon Buckley, B COM, B PROP Jamie Ellis, B COM, B PROP Brad Featherstone, B COM, B PROP

Mike Clark, DIP VAL, FPINZ, FNZIV Joseph Gillard, DIP URB VAL, FPINZ, FNZIV Richard Peters, BBS, DIP BUS STUD, SPINZ, ANZIV Warren Priest, B AGR COM, SPINZ, ANZIV Ken Stevenson, QSM DIP VFM, VAL PROF URB, FPINZ, FNZIV Malcolm Hardie, FPINZ, FNZIV Mark Brebner, B PROP ADMIN, SPINZ, ANZIV Charlene Smith, B PROP, MPINZ, ANZIV Carina Cheung, B PROP, DIP COM (FIN), MPINZ Pamela Smith, B PROP Julia Flett, B PROP

Perth

(02) 9292 7400

HAWKES BAY

Greg Rowe, FAPI, Director • Valuation • Advisory • Research • Corporate Real Estate Solutions • Property & Asset Management

www.prp.com.au

LOGAN STONE LTD REGISTERED VALUERS & PROPERTY SPECIALISTS 205 Hastings Street South, Hastings. PO Box 914, Hastings. Phone (06) 870 9850 Email valuers@loganstone.co.nz Facsimile (06) 876 3543 www.loganstone.co.nz

Advertising Enquiries adsales@api.org.au +61 (0)2 9902 2706 +61 (0)407 201 386 590 ANZPJ SEPTEMBER 2012

Frank Spencer, BBS (VAL PM), FPINZ, FNZIV, AREINZ John Reid, M PROPERTY STUDIES, B COM, FNZIV, FPINZ Philippa Pearse, BBS (VPM), MPINZ Jay Sorensen, B APPL SC (RURAL VAL, AGBUS), MPINZ

Boyd Gross, B AGR (VAL), DIP BUS STD, FNZIV, FPINZ Grant Barron, B COM (AG) VFM, MBA, ANZIV, MPINZ, AREINZ Louise Thompson, BBS (VPM), MPINZ

TAURANGA PROPERTY SOLUTIONS (BOP) LIMITED REGISTERED VALUERS, MANAGERS, PROPERTY ADVISORS TAURANGA Phone (07) 578 3749

MOUNT MAUNGANUI Phone (07) 572 3950

Email: info@4propertysolutions.co.nz Simon Harris, B AG COM, ANZIV, FPINZ Harley Balsom, BBS (VPM), ANZIV, SPINZ Steve Newton, BBS (VPM), SPINZ

ROTORUA Phone (07) 343 9261

www.4propertysolutions

Garth Laing, BCOM (VPM), ANZIV, SPINZ Mark Grinlinton, BCOM (VFM) SPINZ Todd Davidson, BBS (VPM), SPINZ


ANZPJ PROFESSIONAL CARDS

AUCKLAND

AUCKLAND COLLIERS INTERNATIONAL NEW ZEALAND LIMITED REGISTERED VALUERS

REGISTERED VALUERS, PROPERTY CONSULTANTS, RESEARCH, PROPERTY MANAGEMENT, LICENSED REAL ESTATE AGENTS

Web: www.cbre.co.nz Email: firstname.lastname@cbre.co.nz

Auckland CBD Office Level 14, 21 Queen Street, Auckland PO Box 2723, Auckland Phone: +64 (09) 355 3333

Hotels & Leisure Valuation & Advisory Services Director Stephen Doyle, B.Prop, MPINZ, ANZIV

North Auckland Office Unit 8, 35 Apollo Drive Mairangi Bay, North Shore City, PO Box 33-1080 Phone: +64 (09) 984 3333 Director Jamahl Williams, BBS,(VPM), SPINZ, ANZIV

South Auckland Office Level 1, 7a Pacific Rise Mt Wellington, Auckland PO Box 11-2241, Penrose, Auckland Phone: +64 (09) 573 3333

Valuation & Advisory Services Director Wouter Robberts, NDPV, MPINZ, ANZIV

Plant & Machinery Valuation Mike Morales, SPINZ

Hamilton Office Ground Floor, 155 Te Rapa Road PO Box 1330, Hamilton Phone: (07) 850 3333

Valuation & Advisory Services Director Matt Snelgrove, SPINZ, ANZIV

Wellington Office Level 12, ASB Tower, 2 Hunter Street, Wellington PO Box 5053, Wellington Phone: (04) 499 8899

Valuation & Advisory Services Directors Peter Schellekens, SPINZ, ANZIV William Bunt, FPINZ, FNZIV

Christchurch Office Level 3 CBRE House, 112 Tuam Street PO Box 13-643, Christchurch Phone: +64 (03) 374 9889

Valuation & Advisory Services Directors Chris Barraclough, B.Com, FPINZ, FNZIV Marius Ogg, SPINZ, ANZIV

PROPERTY ADVISORY

Auckland

Wellington

Level 27, 151 Queen Street, Auckland 1010 PO Box 1631, Shortland Street, Auckland 1140 Phone +64 9 3581888 Facsimile +64 9 3581999 Email firstname.surname@colliers.com

Level 10, 36 Customhouse Quay, Wellington 6011 PO Box 2747, Wellington 6140 Phone +64 4 473 4413 Facsimile +64 4 4703902 Email firstname.surname@colliers.co.nz

National Director: Kane Sweetman BA BPROP MPINZ AAPI FRICS

Directors: Gwendoline Callaghan FPINZ FNZIV Mike Horsley FPINZ FNZIV Andrew Washington BCom (VPM) SPINZ ANZIV Milton Bevin BPA FPINZ FNZIV

Directors: S Nigel Dean DipUrbVal FNZIV FPINZ AREINZ John W Charters Val Prof (Urb/Rural) FNZIV FPINZ AREINZ Mark Parlane BBS ANZIV SPINZ Russell Clark BCom (VPM) MPINZ Michael Granberg BCom BPROP ANZIV

Valuation & Advisory Services National Director Campbell Stewart, B.Prop, SPINZ, ANZIV Directors Steven Dunlop, B.Prop, SPINZ, ANZIV Patrick Ryan, BBS, SPINZ, ANZIV Tim Arnott, B.Com, (VPM), MPINZ Michael Gunn, B.Com, (VPM) SPINZ, ANZIV

CONSULTANTS

Associates, Registered Valuers & Valuers Lianne Harrison BBS (VPM), ANZIV, MPINZ Anthony Long BPA ANZIV SPINZ Melaney Kuper B.ApplSc (RVM) DipUrbVal Chris Bennett BPROP Melody Spaull BPROP ANZIV MPINZ Darren Park BPROP Nick Hooper BPROP Dhilan Balia BCom BPROP Gemma Peterson BCom BPROP (Hons)

Associates, Registered Valuers & Valuers Jeremy Simpson BBS (VPM) MPINZ Kellie Slade BBS (VPM) MPINZ Reuben Blackwell BSc BCo m GRAD DIP VAL MPINZ Genevieve Grant BCom (VPM) GRAD CERT BUS SUST MPINZ Jacqueline Forshaw BBS (VPM) MPINZ Louise Hammond BBS (VPM) MPINZ William Franks BCom (Mktg) GRAD DIP VAL

Christchurch

Queenstown

Unit A, 15 Sir Gil Simpson Drive, Burnside, Christchurch 8053 PO Box 13478, Christchurch 8141 Phone +64 3 379 6280 Facsimile +64 3 366 1240 Email firstname.surname@colliers.com

Level 1, Cnr Camp & Shotover Sts, Queenstown 9300 PO Box 416, Queenstown 9348 Phone +64 3 441 0790 Facsimile +64 3 441 0791 Email firstname.surname@colliers.com

Directors: Gary Sellars FNZIV FPINZ Warren Glassey Val Prof (Urban) FNZIV AREINZ FPINZ David Harris FNZIV FPINZ Martin Cummings DipUrbVal FNZIV

Directors: John Scobie BCom BBS (VPM) Registered Valuers & Valuers Doug Reid BCom (VPM) ANZIV SPINZ AREINZ Andrew Hyndman BCom (VPM) Geoff McElrea BBS (VPM) John Fletcher FNZIV FPINZ AREINZ Tim Thomas BCom GRAD DIP VAL

Registered Valuers & Valuers Samantha Stark BBus Prop (Val) AAPI MPINZ Carl Graham BCom (VPM) MPINZ Ryan Teear BCom (VPM) MPINZ Paul Koster BCom (VPM) MPINZ

Accelerating success.

www.colliers.co.nz

NELSON / MARLBOROUGH

WELLINGTON

42 Halifax Street, Nelson P (03) 548 9104 F (03) 546 8668 E admin@valuersnelson.co.nz Motueka: P (03) 528 6123 Dick Bennison, DIP.AGR, B.AG.COM, MNZIPIM (REG) ANZIV, SPINZ Rhonda Muir, B.B.S (VPM), ANZIV, SPINZ Murray Lauchlan, FNZIV, FPINZ, AREINZ Trudy Barnett, B.COM AG (AG MGMT & RURAL VAL) Barry Rowe, B.COM (VPM), ANZIV, SPINZ Ian Wallace, B SC (HONS), DIP BUS STUD, DIP AG SCI, MPINZ

propertyelearning.co.nz NATIONWIDE CORPORATE PROPERTY ADVISORS & NEGOTIATORS SPECIALISING IN PUBLIC LAND & INFRASTRUCTURAL ASSETS 12 OFFICES NATIONWIDE

Turning Professionals into Leaders

Level 10, Technology One House, 86-96 Victoria Street, PO Box 2874, Wellington. Chief Executive: Wayne Crowley Phone (04) 470 6105 Facsimile (04) 470 6101 Email wcrowley@propertygroup.co.nz Website www.propertygroup.co.nz

property.org.nz Professional Pathways

591


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ANZPJ Septemeber 2012