Australia and New Zealand Property Journal: April 2012

RESIDENTIAL VALUATION HOTEL INVESTMENT BUMPER EDITION What’s the value of a view? Dispelling the myths

AUSTRALIA AND NEW ZEALAND

PROPERTY JOURNAL December 2012 Vol 3/No. 8 $12.95 (incl GST)

GREEN REAL ESTATE DOES IT GIVE A COMPETITIVE EDGE? Print Post Approved PP246764/00006 Print Post Approved A.R.B.N. 007 505 866 ABN 49007 ISSN 1836-6635 PINZ ISN 100 1330

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

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YARDI Advanced Budgeting & ForecastingTM Make quick, highly accurate projections and forecasts to help maximize profitability across your entire portfolio Call +61 (2) 8227 2200 or visit www.yardi.com.au CONTENTS DECEMBER 2012 638 COVER STORY GREEN REAL ESTATE Does sustainability give companies a competitive edge? REGULARS FEATURES

API PRESIDENT’S 598 REPORT

PINZ PRESIDENT’S 600 REPORT 602 API CEO Q&A

OPINION WHAT’S THE ADDED HOTEL Australia’s new INVESTMENT 609 remuneration reality 614 VALUE OF A VIEW? 624 John Leeson assesses what the Are some of the preconceptions about MEMBER PROFILE value is in a view, what the market will pay for that view investment in hotels true? Garmony Property 656 Consultants’ Matt Garmony AWARDS INTERNATIONAL LEGAL NOTEBOOK 606 Robert Hecek FAPI 610 VALUATION Recent cases, headline has been presented the STANDARDS COUNCIL 668 issues and new SF Whittington Memorial Sir David Tweedie has been legislation Gold Medal appointed Chairman of the IVSC Board of Trustees FUTURE PROPERTY AWARDS 678 PROFESSIONALS 608 Norman Harker has A DAY IN Testimonials been presented a Meritorious 622 THE LIFE OF A Service Award REAL ESTATE AGENT Matthew Shepherd describes his typical working day

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594-595_TableOfContents.indd 594 12/7/2012 5:24:40 PM HOTEL FINANCE RETIREMENT VALUATION VILLAGES 630 658 The role of PPPs 645 The evolution of valuation in infrastructure funding Retirement village tenure methodology in hotels models in Australia

PROPERTY INVESTMENT LEGAL 662 Challenges for real estate 682 Lease disclaimers investment trusts globally GREEN 686 BUILDING URBAN Local government bodies in 675 DESIGN NZ and sustainability Why has the Green Square vision not been realised?

SUSTAINABILITY 680 Investa: making sustainability more transparent

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Australian Property Institute CEO David Haythorn Financial Accountant Zainab Mwamtenda 6 Campion St, Deakin, ACT 2600 CFO Andrew Tregenza Financial Accountant Venus Barredo Property Institute of New Zealand CIO Joel Leslie Senior Journalist Kelli Wells Level 5, 181 Willis Street, Wellington, New Zealand Executive Assistant!Jill Lewis Online Content Ofﬁ cer 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 Sub Editor: Rebecca Merrett National Compliance & Audit Manager Carlos De Vos Creative: Fletcher Guinness API PINZ Senior Designor: Kate Dougan API National President Philip Western PINZ National President Phil Hinton President and Publisher: Barbara Simon API Senior Vice-President Tony Gorman PINZ Immediate Past President Ian Campbell API Junior Vice-President Robert Hecek PINZ National Board EDITORIAL COMMITTEE API Immediate Past President I Campbell, G Barton, G Munroe, Nick McDonald Crowley B Hancock, P Hinton, I Mitchell, M Dow, Managing Editor: Joel Leslie P Merfi eld (Independent) API National Council • Professor Richard Reed Chief Executive Ofﬁ cer M Cations (VIC), P Western and R Hecek David Clark • Michelle Glastris (NSW), C Harris (QLD), A Cubbins (TAS), • Professor Chris Eves M Kay (SA), N Mcdonald Crowley (ACT) • Sean Ventris National Director David Haythorn • Ian Flynn PRODUCED BY • Amy Guy • Gail Sanders IDG Communications for the Editorial Australian Property Institute. [email protected] • Tracy Kriesel Advertising [email protected] MARKETING AND Ph: + 61 2 9902 2706 COMMUNICATIONS Level 22, 8-20 Napier Street North Sydney, NSW 2060 Subscriptions Joel Leslie, API National Offi ce Ph: +61 2 9902 2700 [email protected] Ph: +61 2 6282 2411

CONTRIBUTORS The Australia and New Zealand Property Journal is published slander, unfair competition, trade practices and any violation by the Australian Property Institute (API) and the Property of the rights of privacy. Paul Anderson, Costa Argyrou, Rita Institute of New Zealand (PINZ) for the members. Authors, contributors and advertisers warrant that the Avdiev, Andrea Blake, Glen Boultwood, The Publishers invite authors to submit articles of material supplied complies with all laws and regulations Ross Catanzariti, Lucy Cradduck, David interest that further professional practice in the property and that publication of the supplied material will not give industry. Articles of 500 to 5000 words will be considered. right to claims of liability or are being capable of being Higgins, Phil Hinton, Lindsay Joyce, Guidelines for authors are available from the publishers. misleading or deceptive or in breach of respective laws in Chris Lawton, John Leeson, Martin The Publishers reserve the right to alter or omit all States and Territories of Australia and New Zealand. Locke, John McDonagh, Stephanie any article or advertisement submitted. Authors and At times, the Australia and New Zealand Property advertisers indemnify the Publishers and publishers’ agents Journal publishes technical material to assist professional McDonald, Gino Mitrione, James Morse, against damages and liabilities that may arise from the practice as supplied by authors and 3rd party sources. Mark Perkins, Elias Plastiras, Peter published material. The Editor accepts no responsibility for the expressions, Power, David Rees, Kelli Wells, Phil Advertisers, advertiser agents and representatives opinions, outcomes or effectiveness of formulas or calculations contained in those articles. Readers Western, Julian Whiston. lodging material with the Publishers indemnify the Publishers, its servants, staff and agents against all claims of should seek independent, specialist advice on matters liability or proceedings in relation to defamation, trademark concerning business practice, ﬁ nancial outcomes and infringement, breeches of copyright, licences and royalty, legal implications.

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he Institute has had a busy year, featuring important changes and significant steps forward. API National Office Tsuccessfully delivered several projects designed to enhance communication, enrich professional development, promote networking and deliver cost savings. SUCCESSFUL PROJECT DELIVERY These projects include:

• successful implementation of the Future Property Professionals (FPP) and Risk Management Modules (RMM) programs (now both online) • introduction of the compulsory Australian Property Institute Valuers Limited Liability Scheme (APIV) • continued growth, success and distribution of the new-look Australia and New Zealand Property Journal and the eNews newsletter • construction of state and national websites and creation of an online bookshop • establishment of the Young Property Professionals (YPP) Forum

More effective technology has also taken the efficient delivery of IT services and information management into the more cost effective, more PHIL WESTERN, FAPI reliable cloud space. NATIONAL PRESIDENT AUSTRALIAN PROPERTY INSTITUTE IVSC – SIR DAVID TWEEDIE APPOINTMENT The International Valuation Standards Council (IVSC) had a triumph, with the appointment of Sir David Tweedie as Chairman of the Board of Trustees. The IVSC and the API wish him all the best in this challenging and vital role (see page 610 for a profile of Sir David Tweedie).

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BUSINESS EFFICIENCY REVIEW Peter Worsnop is based in Canberra seeks appropriate advice, be it legal The amalgamation of a decade of an and is a director at Military Casework or otherwise, before entering into API-considered business and structural and Benefits (including family law) contractual arrangements with review is now coming to fruition, at ComSuper. He was previously major clients. which will help to reshape the API to a relationship banker at CBA The Australian Banking and better meet members’ needs. While Corporate Banking. Finance Industry Residential Valuation the current structure served the API He holds an MBA in Business Standing Instructions were recently well for the past 80 years, changes from the University of Canberra and released into the marketplace and are required to adequately address an Advanced Diploma of Business, complement the earlier work undertaken members’ future needs. Accounting and Finance from the with respect to the PropertyPRO Canberra Institute of Technology. Supporting Memorandum. PAN PACIFIC CONGRESS Peter is not an API member, which Many of you, myself included, attended is an important part of good NATIONAL LICENSING the successful 2012 Pan Pacific governance. Introducing independent The Institute has responded to the Congress of Real Estate Appraisers, board members brings balance and COAG Consultation Regulatory Impact Valuers and Counsellors in October. fresh perspective. Statement (RIS) on national licensing The API hosted the event and I of the property occupations. While the would like to sincerely thank everyone PROFESSIONAL STANDARDS API supports the concept of national involved. It was a wonderful example of As members would be aware, the API licensing it has strong objections to divisional collaboration. and the Property Institute of New the proposals as contained in the RIS I’d particularly like to thank Zealand (PINZ) adopted the recently as they do not truly reflect a national the Victorian Division and Amy released IVSC standards. To date the licensing system and have the effect Guy, as well as Andrew Bell and his IVSC has issued: of lowering licensing standards to the Queensland team (see our special lowest common denominator within coverage of the Pan Pac Congress on • IVS 2011 the jurisdictions. the flip side of the magazine). • technical information papers - Discounted cash flow EDUCATION GOOD GOVERNANCE - The cost approach for tangible assets We have experienced an impressive I’d like to announce a couple of new - The valuation of intangible assets influx of registration for both of the appointments. Chris Shaw has been recently launched API online training appointed to National Council, while The API and PINZ have been products, attracting more than 1000 Peter Worsnop has been appointed to negotiating with the IVSC regarding registrations since July 2012. the National Finance Board. access to the documents and as a Members have embraced the Mr Shaw is a solicitor and an adviser result it is expected these, and future, FPP program which enables those to many property industry developers. documents will be available to the seeking Provisional Membership with He formed Shaw Reynolds Lawyers, is a Institute’s valuer members free of Residential Property Valuer PMAPI former a partner of Phillips Fox solicitors charge via the API website. (RPV) designation or Associate and was a senior associate with Allen Membership with Certified Practising Allen & Hemsley. MORTGAGE LENDING VALUATIONS Valuer AAPI (CPV) certification to He is a member of the Law Society of Over the past year the Institute use their knowledge and develop their NSW, the Property Council of Australia’s has been more heavily involved practical skills. Planning Committee, a member of the in the contractual arrangements I am tremendously proud of the Land and Environment Court Users between lending institutions and API’s achievements and look forward to Committee and a member of the Royal valuation firms. continued growth and success in 2013. I Australian Institute of Architects’ It is pleasing to see the profession wish API members and employees all the Practice Committee. mature to a stage where it now best for a safe, happy festive season.

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598-599_APIReport.indd 599 12/6/2012 9:50:44 AM ince the middle of the year the New Zealand PINZ market has shown signs of strengthening in parts of some sectors. Notably, the AucklandS residential market has inner PRESIDENT’S city suburbs strongly increasing values on the back of demand fed by lower than usual building consents and a steadily REPORT increasing population base. Other residential markets around New Zealand are yet to respond to the same degree, although they are likely to also improve as they follow the Auckland trends. Likewise, commercial investment for top tier properties has strengthened in recent times, with yields for prime properties in some cases falling by half a per cent or more. Fuelled by low interest rates for longer as the global financial markets struggle under increasing debt burden, many investors have taken the opportunity to have their equity working for them in a relatively steady commercial market. Members are reporting strong workloads in many cases, although it is evident that those practitioners with a degree of specialisation and particular demand factors are often the most active in the market.

ANNUAL GENERAL MEETING (AGM) A very successful AGM and conference was held in Auckland in June. Around 300 attendees enjoyed a wide range of property-related topics and workshop sessions, in addition to a well-attended awards dinner. Congratulations go to the Auckland Branch organisers and National Office support staff for such a successful event. We are now in planning for 2013 where the national conference will be held in Queenstown. We expect a large number of API members will be looking to attend.

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EDUCATION LEADERSHIP PROGRAM 2013 PLANT AND MACHINERY CONFERENCE Nationally, an ethics seminar series A leadership program has been The New Zealand conference for plant was carried out in recent months, instigated by the Property Institute and machinery valuers was held in New with NZIV Council and PINZ Board to encourage and promote young Plymouth 8-9 November. Twenty-eight members assisting facilitation. This professionals into positions on national people attended over the day-and-a- was an opportunity for face-to-face committees. Part of this process will be half conference, benefitting from a discussion on what is a very real and to engage with our young leaders and wide range of presentations. Work is interactive topic for members, with gain their views on issues regarding now commencing on planning a joint positive feedback received so far. Other their professional future, as well as the conference with the API later in 2013. collaborative recent events included role and form of the Institute in the the Massey Spring Seminar and future. We see this as a very important Lincoln Mainland Seminar, which are step in providing a base for growing QAAS traditionally well attended and attract a the Institute while also improving The Quality Assurance program large number of members. the potential for succession planning continues to roll out steadily throughout Other national events included throughout the whole membership base. the country, with 22 firms having a graduate seminar run in October, now been accredited and a further with an excellent turnout of nearly 15 in the pipeline. Of the accredited 40 graduates. The theme was on the CHINA TRIP firms, one is an Australasian-based Future of the Profession, with input The China trip took place 20-31 October firm operating between New Zealand from a variety of parties, including the this year and was jointly held with the NZ and Australia. Another function was Valuer General, Auckland University Property Council. Twenty-eight travellers held mid-November in Wellington to and emerging young leaders in the attended the trip, where they visited Hong acknowledge and congratulate the firms profession, amongst others. Kong, Beijing and Shanghai. that have received accreditation. Many National webinars were also The trip was very successful, have already reported significant worth completed on topics such as insurance with participants getting a strong in helping them understand their own premiums on commercial and understanding of the Hong Kong business procedures and practices, as well residential markets, the revised property market and the mainland as finding their clients are acknowledging Agreement for Sale and Purchase, Chinese property market. Places visited value in the accreditation itself. GST issues and a leaky homes update. included Goodman New Interlink As this is the last journal for 2012, Registration numbers continue to climb (distribution) Centre in Hong Kong, as I am taking this opportunity to thank for webinars, particularly as members well as a very good meeting with the my fellow Property Institute Board become more aware of the flexibility of Hong Kong Institute of Surveyors. members, Valuers Council members connecting in from remote locations. A meeting was also hosted by BOMA and all other standing committee China, which provided insight and members within the Property Institute models of Beijing’s development plans for their help and effort over the past 12 PROFESSIONAL PATHWAYS PROGRAM for the future. Stephen McCord of JLL months. A special thanks goes to David Good work has been done in terms in Shanghai provided an exceptional Clark and the team at National Office of progressing various modules for analysis of the market and explained the for running such a tight ship, improving completion. Several are in line for being drivers behind the local growth, while the delivery and service and making issued by the end of 2012, with reviews by Grant Massey from Richina provided an sure the books balance. various communities a part of this process. overview of the building practices in the To all PINZ members, I wish you a In this area, the Property Institute, also local market, as well as an outline of the safe and happy festive season and plenty of via its subsidiary Property Education and new building for NZ Central in Shanghai. rest for what promises to be a busy 2013. Training Limited, are an increasing force All in all, this was an exceptionally in the market for education generally valuable trip and continued to expand PHIL HINTON amongst members and to other outside the Property Institute’s horizon and PRESIDENT | PROPERTY property-related organisations. understanding of the Chinese economy. INSTITUTE OF NEW ZEALAND

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“GAINING – AND RETAINING – GOOD QUALITY PEOPLE IS VITAL. YOU MUST FIND PEOPLE WHO HAVE NOT ONLY THE RIGHT SKILLS AND EXPERIENCE, BUT EXCELLENT INTERPERSONAL SKILLS AS WELL” DAVID HAYTHORN

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API Chief Executive Officer, David Haythorn, sits down with the Australia and New Zealand Property Journal to discuss what great member associations do differently that sets them apart. He shares his insights and explains the approach being taken by the API for the benefit of members and the organisation as a whole. WHAT DO GREAT ASSOCIATIONS DO DIFFERENTLY?

WHAT DO YOU BELIEVE IS profession within Australia. We work members access to leading-edge AT THE HEART OF EVERY with government, industry and other services, advice, advocacy, research GREAT ASSOCIATION? professional associations, education and professional certifications At the heart of every great association stakeholders and the media to promote that are recognised worldwide. By is a ‘purpose’ – a common goal our standards and views. choosing from a menu of additional that unites every section of the subscriptions, members are given the organisation. The challenge for all of BUSINESS MODELS ARE VITAL benefit of ongoing CPD, training, us is to channel that purpose through TO GREAT ASSOCIATIONS. networking events, conferences and every aspect of the work that we do WHAT IS THE API’S VIEW ON publications to assist in furthering the so that this purpose is the common ITS BUSINESS MODEL? careers of members. thread linking every member of the Most importantly, financially, great association. The purpose needs to associations aim to increase the WHAT SPECIFIC BUSINESS be transparent and evident in every proportion of recurring revenue in AND OPERATIONAL INITIATIVES communication and face-to-face their businesses each year to deliver IS THE API HARNESSING TO interaction with fellow members, quality services. I know there is a DELIVER ITS GOAL OF ADDED elected association bodies and with commonly held thought that the VALUE TO MEMBERS? the wider community, including reliance on membership subscriptions We continue to achieve productivity the media. should be diminished. However, gains through enhanced technology The API’s purpose is leadership in reality the ever-expanding and improved processes. Key objectives and leading property professionals by: membership services, industry include staff successfully ‘living the advocacy and representation and values’ through greater awareness and • creating extraordinary people education need ongoing funding for the adoption of core behaviours and through professional learning and the association to continue to deliver technology, delivering operational continuing professional development member services year after year. efficiencies and productivity gains • pursuing excellence in all areas of the That said, I am not saying the which have been introduced through property industry API should not consider other sources improved processes. • being socially responsible and of revenue – quite the contrary. We In 2012 we adopted the Future working responsibly and ethically at need to maximise opportunities to Property Professionals (FPP) program. all times create new income streams, as well It has now grown to over 1000 modules as look at revenue prospects from being undertaken since July. We have Since inception, the Institute has existing services. also launched the Find a Property developed into the leading professional The Institute’s business model Professional module on the API body for standards, qualifications and relies on a reasonable annual website, which allows people to easily ethics across all facets of the property subscription to efficiently give find an API member online.

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This year we also ran the Risk Management Module (RMM) program of face-to-face training sessions across the country. The APIV capped liability scheme now also has more than 2000 members and has started to show the benefits of reduced premiums to the API’s valuer membership. Membership subscriptions are now also universally able to be paid online. This year we also saw the API launch the national website which unifies the Institute’s online services. WHY IS ATTRACTING GOOD PEOPLE SO IMPORTANT TO THE SUCCESS AND VIABILITY OF AN ASSOCIATION? Gaining – and retaining – good quality people is vital. You must find people who have not only the right skills and experience, but excellent interpersonal “THE CHALLENGE FOR ALL OF US IS TO skills as well. Securing the services CHANNEL THAT PURPOSE THROUGH EVERY of excellent people really can make ASPECT OF THE WORK THAT WE DO SO THAT or break an association – or any THIS PURPOSE IS THE COMMON THREAD organisation for that matter. You need LINKING EVERY MEMBER OF THE ASSOCIATION” to be out there looking for good talent DAVID HAYTHORN all the time. Putting the right people into your workplace can be like magic in changing the performance and culture. WHAT VALUE DO MEMBERS HOW IS THE API INVOLVED WITH RECEIVE IN BEING PART OF A ADVOCACY IN THE INDUSTRY? WHAT ROLE DOES THE EVOLVING PROFESSIONALLY RUN AND We will continue to promote NATURE OF LEADERSHIP HAVE ON UNIFIED ASSOCIATION? good public policy and effective AN ASSOCIATION? Great associations strive to deliver regulation through robust advocacy At the beginning of an association’s valuable benefits and excellent and strong working relationships lifecycle, volunteers are involved in service to members. The key with key stakeholders. Our key all aspects of the association. But as it objectives include ensuring member objectives include tabling strong grows it is vital to the ongoing evolution retention and member growth positions for parliamentary inquiries and strength of the association that through value and providing products and government reviews, including volunteers are able to defer power to and services that are really valued the COAG National Licensing specialists in their field in regards to by members. Review. We will also encourage complex and skilled operational matters. The key intangible here is the government to conduct a The point is to focus on the aspects the opportunity to network with wide-ranging review of compensation that will drive future growth, and that like-minded professionals, build issues, including Professional often means taking the volunteers out key commercial relationships and Indemnity Insurance. With the of their comfort zone. Volunteers will seek advice from the best property wealth of experience and expertise always have a valuable contribution to professionals in the industry. This we have within the API membership, make – it is their association – but for is so that if you have a question, we are well-positioned to be involved the growth of the organisation, their you can ask an experienced, in policy creation and we are input needs to complement the goals of certified professional through excellent at voicing our concerns and the association. the API network. making recommendations.

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WHAT ARE SOME OF THE CAN YOU EXPLAIN THE Other ongoing initiatives PROFESSIONAL PROGRAMS RUN IMPORTANCE OF ‘PROCESS’ include the creation of a service BY THE API THAT SETS IT APART IN ASSOCIATIONS? culture across all divisions, AS A MEMBER ASSOCIATION? Great associations are those that supported by our new-look journal Our focus will be on the CPP and are able to differentiate their and supporting education with CPV® Certification Program. Our key membership offer based on better the Future Property Professional objectives include increasing enrolments processes. What does that mean? (FPP) and Risk Management Module in the Certification Program and raising Associations should always be (RMM) programs. awareness of our certification programs developing new membership benefits, Further consolidation will be in the wider property community. The adding value to current processes, achieved by the more efficient growth of certification programs is also eliminating waste, re-engineering processing of applications and a reaction to the changing employment processes and standardising methods. assessments and enhancements market. Certifications are portable, since You have to be constantly designing to more targeted member they do not depend on one company’s processes that fulfil promises communications. We also look definition of a certain job. Certification to members. forward to full integration of the API also stands aside from the resumé and For example, in 2013 we look technology platform with our content the professional reference by being an forward to starting our Structure management system and finalisation impartial, third-party endorsement of and Governance Review which will of our online enterprise system. an individual’s professional knowledge look at our constitution, finances and The core driver behind all of and experience. The API Certification stakeholder needs. This will involve these initiatives and processes Program ensures this is available to only a comprehensive survey of members, is significant improvements to API members. volunteers and staff. member services.

Wholesale Investment Property

www.qpex.com.au

602-605_CEO_QandA.indd 605 12/6/2012 9:56:35 AM AWARDS SF WHITTINGTON MEMORIAL GOLD

FROM LEFT: PHIL WESTERN, API NATIONAL PRESIDENT; ROBERT HECEK – SF WHITTINGTON MEMORIAL GOLD MEDAL WINNER; AND BOB DUPONT, API NSW PRESIDENT

Robert Hecek FAPI has been presented the SF Whittington Memorial Gold Medal by Bob Dupont, API NSW President, at the Division’s annual Kiparra Day conference at the Sydney Hilton, 3 August.

he SF Whittington which now employs some 25 valuers. Memorial Gold Medal is The practice covers all facets of given at the discretion of valuation and consulting work a Divisional President to throughout NSW. During his many acknowledge and honour years in valuation, Mr Hecek has trained anT Institute member who has contributed many valuers and has demonstrated substantially to the API and the his commitment to raising standards advancement of the property profession. in the valuation profession. Robert Hecek joined the API in In 2000, Mr Hecek was a member 1983 as an Associate member and of the NSW GST Working Party became a Fellow member in 2000. which developed the API guidelines In 1980, he formed the valuation on GST and property. The various practice Valuecorp based in Gladesville, alerts developed by that Working Party

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were vital to provide guidance and on the Scheme has resulted in the protection to the API membership API having very close and effective by having a consistent approach to working relationships with the the GST and property matters. finance sector, mortgage insurers and In 2006 he was elected to professional indemnity insurers. the NSW Divisional Council, Mr Hecek continues to volunteer becoming Vice President in 2008 a substantial amount of time and and President in 2009 and 2010. expertise to ensure the success of the During his term as President, Mr Scheme. He was appointed to National Hecek enhanced the relevance of the Council this year and ensures that Council and grew the attendance at National Councillors are kept abreast the meetings of the API’s Banking of the implementation of the Scheme. and Finance Liaison Group. These He also steered the work on the latest meetings afford the opportunity for version of the PropertyPRO Supporting the API, the finance industry and Memorandum, which provides mortgage insurers to discuss and guidance to valuers and their clients Tracy Gornall from Jones Lang resolve issues related to property. in relation to residential valuations. LaSalle was a finalist in the 2012 Building on earlier work by Greg Mr Hecek was instrumental in Telstra South Australian Business Preston, in 2008 Mr Hecek became the development of the Residential Women’s Awards. Chair of the API’s National Professional Valuation Standing Instructions which Ms Gornall is the first female and Indemnity Insurance Committee were developed with the major four youngest person to be elected as and took on the mammoth task of banks, mortgage insurers, national State President of the API and was establishing the Limited Liability valuation firms and the API. This contesting the Hudson Private and Scheme for valuers. He continued as is the first time that all parties have Corporate Sector Award category. Chair of the Insurance Committee while collaborated on valuation instructions. Ms Gornall co-heads the he was API NSW President – to do both The Instructions and the valuations and advisory division jobs was an enormous undertaking. PropertyPRO Supporting Memorandum of Jones Lang LaSalle in Adelaide Mr Hecek also worked with the establish the baseline for quality, and has a Bachelor of Business Professional Standards Council to compliance and operational clarity in Property with honours. She establish the Scheme and have it for residential valuation reports. specialises in the valuation of CBD operational from 1 December, 2010. Mr Hecek also has plans to develop office buildings, shopping centres Throughout the past two years, instructions for other valuation types. and institutional grade industrial Mr Hecek, along with the API’s Mr Hecek’s passion, strong property. She also co-manages a National PI and Compliance Manager, commitment and voluntary contribution team of six staff, plus support staff, Betty Warner-Lehman, undertook for the benefit of API members is who were responsible for more an extensive series of briefings recognised and greatly appreciated by than $1 billion in property in the on the Scheme for API members the membership across Australia and past 12 months. and the insurance and finance his work has earned him the respect of “When I started my career, industries. He listened to feedback the insurance and finance industries. being a young female valuer from all parties and again worked He has contributed substantially to was challenging. I recall one with the Professional Standards the API though his unwavering service client asking why it was OK for a Council to make amendments and has contributed in an outstanding secretary to do the inspection rather to the Scheme to better cater for way to the advancement of the property than the valuer,” Ms Gornall said. members’ valuation work. profession in the world of commerce Ms Gornall aims to double Mr Hecek also developed the and in expanding the sphere of influence revenue performance and grow Scheme’s minimum insurance of the profession within industry. the team in three years. standards and its supervision guidelines Mr Hecek is a most worthy Accountant Kylie Bishop was the and has contributed to the audits of recipient of the SF Whittington eventual winner of the SA award. the supervision guidelines. His work Memorial Gold Medal.

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MERITORIOUS SERVICE AWARD – NORMAN JOHN HARKER FAPI Norman Harker has been presented a Meritorious Service Award by Bob Dupont, API NSW President, at the Division’s annual Kiparra Day conference at the Sydney Hilton 3 August, 2012.

Meritorious Service written and presented introductory, a great practical approach Award is presented to an intermediate and advanced • I learnt a lot. He made learning individual to recognise discounted cashflow programs over fun and very easy to understand their special and many years, catering for the divergent • the course exceeded meritorious service and levels of expertise in this area in my expectations contributionA that brings credit to and the API membership. enhances the reputation of the API. Delegate evaluations of Mr Harker’s Or, to sum up, as a number of Mr Harker commenced his courses are consistently positive, which delegates have stated: “Norman is an career in property in the United demonstrates the high regard in which excel legend”. Kingdom. Prior to joining the he is held by API members. Delegates’ Mr Harker has very generously University of Aberdeen, Scotland as comments have included: developed and presented his a lecturer in 1985, he had 16 years programs on a voluntary basis over of experience in a central London • possibly one of the most effective many years to assist API members property consultancy. and well-constructed courses and the property profession generally Upon coming to Australia in 1988, I’ve attended and is a most worthy recipient of the he became a senior lecturer in the • enjoyed learning from Norman – Meritorious Service Award. property program at the University of Western Sydney (UWS). After 24 years, Mr Harker announced that his last day at UWS would be 14 August A NUMBER OF DELEGATES HAVE STATED, and that he had established his own “NORMAN IS AN EXCEL LEGEND” consultancy firm. Mr Harker will be focused on practical issues and on developing innovative approaches to learning and practice for valuers, investment advisers, developers and other property professionals. Mr Harker joined the API as an Associate member in 1998 and advanced to Fellow membership in 2009. He now holds the API certifications of Certified Practising Valuer and Certified Property Practitioner, Education. Mr Harker commenced writing and presenting CPD events for the API in 1993 and has presented more than 42 programs on commercial leases, risk analysis and issues within FROM LEFT: PHIL WESTERN, API NATIONAL PRESIDENT; NORMAN HARKER – MERITORIOUS SERVICE AWARD WINNER; AND BOB DUPONT, API NSW PRESIDENT the property profession. He has also

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608_Awards.indd 608 12/6/2012 10:17:01 AM OPINION OPINION AUSTRALIA’S NEW REMUNERATION REALITY

Among strong signals that Australia is no longer the lucky country we are supposed to be, a new reality has set in, Rita Avdiev writes.

he slowing economy employed in the funds management But how are women faring in this continues to worry and property development sectors. It environment of austerity? A recent property companies was the lowest for retail management study by the Workplace Agency and measures are being and real estate agency and advisory found that women in the general taken to ride out falling companies. The overall median workforce earn 17.0% less than male businessT conditions. remuneration increase was 3.0% for counterparts – then there is the While Australian statistics senior staff and 3.5% for mid-level usual hierarchical plateau. Among are not showing the true level of staff and junior staff. the unrest created in the property the unemployment, the property Where short-term incentives were community by the replacement of industry is well aware of the problem. paid, they have remained stable since a male CEO with a woman, it is Self-employed contractors, often last year. The average short-term reported that the newcomer’s first- victims of the growing failure of incentive paid was 18.0% of total fixed year salary has been matched to the building companies, are not counted remuneration. However, forecasts are for severely reduced final year pay of in the official statistics, nor the newly lower levels for the next year and for an the outgoing executive. Austerity retrenched consultants and executives overall median remuneration increase measures bring resentment of rewards not eligible for government welfare. of 3.6%, varying in each property paid at the top of the company. A survey conducted among market sector. Lavish CEO pay is now being property industry employers questioned. Is it effective in its intent produced the findings in the Avdiev of attracting and retaining the best? Remuneration Report October Update. How is it set? Why is it so high? It showed that as a result of business Bonuses and other incentives are conditions in slow decline, a variety under review by boards hoping to of austerity measures have been appease angry shareholders and the introduced. These measures were aimed bonus versus malus debate is back. at reducing the cost of operations and Remuneration budgets have been directed at corporate expenditure such squeezed and aligning expectations as reducing travel spending, axing with reality is proving hard. business or division operations and However, a company in crisis will reducing employee benefits. pay whatever it takes for a CEO who Head count reduction has been can restructure it, pay down debt, most frequent among property motivate the remaining team, restore development and property finance cash flow and improve its brand and companies, with some companies market image. reducing staff by up to 20%. Property Ultimately, a good price needs to consultants and funds management be paid for a good result. staff fared best. Those who managed to keep their Rita Avdiev is Managing Director jobs were rewarded with pay freezes at property industry management or modest salary rises at best. Pay consultancy The Avdiev Group and increases were the highest for staff still Fellow of the API (FAPI).

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SIR DAVID TWEEDIE CHAIRMAN OF THE IVSC The Australian Property Institute’s (API) President Phil Western has welcomed the appointment of Sir David Tweedie as Chairman of the International Valuation Standards Council’s (IVSC) Board of Trustees.

ir David Tweedie will be “Sir David has been one of the most This experience will further support responsible for the strategic influential players on the global financial the IVSC in its work to spread effective direction of the IVSC and stage over the last 10 to 15 years. valuation standards globally and to driving the organisation’s “It is a significant achievement for the reduce diversity in the way in which they key priorities, which include IVSC to have attracted someone of Sir are applied in different countries. theS promotion, recognition and adoption David’s standing and prestige to chair the Sir David said he was pleased to be of the International Valuation Standards organisation. He built the International joining the IVSC at this important time (IVS) in the world’s major economies. Accounting Standards Board (IASB) for the valuation profession. Another high priority is leading the from the small organisation it was in While he was quick to note that development of the valuation profession 2000 to what it is today. Hopefully he can the IVSC has “done a great job”, he worldwide, bringing it together with do the same for the IVSC. said the issue for the profession was an users of valuation, regulators, legislators “He is absolutely committed to external one. and opinion-formers. It is hoped that helping the development of the valuation “The outside world wonders if Sir David’s appointment, which became profession globally and ensuring that the valuers have an actual profession, if effective 29 October, 2012, will help profession receives the recognition and they are like chartered accountants and build further confidence and public standing that it warrants.” have a set of regulated standards and trust in the valuation process. Sir David’s experience and prescribed rules,” Sir David said. Phil Western said the API international influence is extensive “The challenge for the IVSC is how wholeheartedly endorsed Sir David’s and highly respected. As former we can increase the trust and acceptance appointment and welcomed him to the Chairman of the International for the profession. We need to unite the role in what was sure to be a time of Accounting Standards Board (IASB) member bodies and there needs to be a dramatic change within the industry and and the UK Accounting Standards sense of being aligned with one another. the API itself. Board (ASB), Sir David led a 20-year It’s an issue of persuasion. We’ve got to “The API congratulates Sir David overhaul of UK and global accounting get people to believe in it, to buy-in.” Tweedie on his appointment. The standards, spearheading the adoption The way forward was through changes in the IVSC mirror an exciting of international financial reporting partnership, he said. time of rejuvenation occurring within standards (IFRS) in more than 100 “If they want it to happen, then the API,” Mr Western said. countries around the world. we can make it happen, but we need

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“WE NEED TO UNITE THE MEMBER BODIES AND THERE NEEDS TO BE A SENSE OF BEING ALIGNED WITH ONE ANOTHER. IT’S AN ISSUE OF PERSUASION” SIR DAVID TWEEDIE

to change hearts and minds. The benefit capital markets and contribute BACKGROUND challenges the ISVC faces are change, to the growth of strong economies Sir David was educated at Edinburgh cost of change and control. The national around the world,” he said. University (BCom 1966, PhD 1969) leaders of these professional bodies need Sir David succeeds Roel Campos, and qualified as a Scottish Chartered to ask, how can we do this together? who has served as Interim Chairman Accountant in 1972. After qualifying “Cost is also a big issue. The since Michel Prada stepped down as he taught accounting for six years at IVSC has funding issues – there are Chairman in December 2011. Edinburgh University. only two staff members. We need Mr Campos welcomed Sir David’s He was appointed Technical more funding.” appointment and said he was known Director of The Institute of Chartered Accountants of Scotland (ICAS) in 1978 and in 1982 moved to the position of national technical partner of the then SIR DAVID WAS EDUCATED AT EDINBURGH Thomson McLintock & Co. UNIVERSITY (BCOM 1966, PHD 1969) AND In 1987 his firm merged with Peat QUALIFIED AS A SCOTTISH CHARTERED Marwick Mitchell & Co and he was ACCOUNTANT IN 1972 appointed national technical partner of the merged firm – KPMG. Sir David also said that the global and respected by regulators worldwide. During this period he was also Vice financial crisis highlighted the crucial “Having led the IVSC search for a Chairman and then Chairman of the role of valuation and its impact on permanent Chair, I and the entire Board UK’s Auditing Practices Committee financial markets. of Trustees are delighted and honoured (the committee charged with setting “Standardised valuation practice that Sir David has agreed to become the UK’s auditing rules) from 1986 to across all business sectors is now vital in chairman of the IVSC,” Mr Campos said. 1990 and the UK’s sole representative order to provide a consistent approach “He is someone who will be on the International Auditing Practices to portfolio and asset valuation and committed to promoting global Committee from 1983 to 1988. to improve the confidence of both valuation standards and guidance In 1990, in response to national investors and users of valuation and the development of the valuation concerns about the state of British services. Improved confidence will profession globally.” financial reporting, the government and

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About the International Valuation Standards Council The International Valuation Standards Council (IVSC) is an independent, not-for-profit, private sector organisation. As the established international standard setter for valuation, the IVSC develops and maintains standards for the reporting and disclosure of valuations, especially those that will be relied upon by investors and other third-party stakeholders in financial statements or other published documents. It also supports the need to develop a framework of guidance on best the accounting profession instituted the ministers and senior officials in practice for valuations of the Accounting Standards Board to reform Australia, China, the EU, Japan and the various classes of assets and the UK’s accounting standards and Sir US. He appeared on several occasions liabilities and for the consistent David, an outspoken critic of the then before ECOFIN (the committee of EU delivery of the standards by accepted accounting practices, was Finance Ministers), the EU Parliament, properly trained professionals appointed its first full-time Chairman – the US Senate Banking Committee and around the globe. a post he held for 10 years while revising the UK Parliament’s Treasury Select The governance structure UK standards. Committee. He was also a member of of the IVSC includes two As a result of his success in the the Financial Stability Board. independent technical UK, in January 2001 he was selected He is a Fellow of the Judge Business boards – the International by Paul Volcker, Chairman, and the School at Cambridge University and Valuation Standards Board and other international trustees of the IASC a visiting Professor of Accounting in the International Valuation Foundation to be the first Chairman the Management School at Edinburgh Professional Board – and a global of the International Accounting University, having previously Board of Trustees responsible for Standards Board (IASB) and CEO of held visiting professorships at the the overall strategic direction and the Foundation. He led the Board for 10 universities of Lancaster and Bristol. He funding of the IVSC. years until his term ended in June 2011. has received honourary degrees from In 2001 only a handful of countries eight British universities. used international standards (IFRS), Sir David was knighted in 1994 Outstanding Achievement Award at the but by 2011 more than 120 countries and has been awarded The Institute of Scottish Accountancy Awards – all for (including those in the EU, most of Chartered Accountants in England and services to the accounting profession. Latin America, Australasia, Canada, Wales’ Founding Societies Centenary Sir David became President of the Korea and Japan) required or permitted Award in 1997; the Chartered Institute Institute of Chartered Accountants of their use. of Management Accountants’ Award in Scotland, the world’s oldest professional The US is expected to announce a 1998; and the International Federation accountancy body, in April 2012, and path to adoption of IFRS in the next of Accountants’ (IFAC) Gold Service chairs the Royal Household Audit few months – a decision awaited by Award for 2011. Committee for the Sovereign Grant. China, India and Japan before they This year he was awarded the He also chairs the board of trustees move to the mandatory adoption of the International Accounting Bulletin of Leuchie House, a Scottish charity international standards. Lifetime Achievement Award; the which gives respite care to those with During his tenure at the IASB he Japan Institute of Certified Public degenerative diseases. met on a regular basis with government Accountants’ Special Award; and the – Kelli Wells

612 ANZPJ DECEMBER 2012

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iPad_ANZPJ_Sept2012.indd 1 8/28/2012 2:25:30 PM RESIDENTIAL PROPERTY VALUATIONS

WHAT’S THE ADDED MARKET VALUE OF A VIEW?

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John Leeson ur instruction was investigations of the analysis revealed to assess the added that the improvements on the properties assesses what the market value of a concerned were single residential value is in a view, view associated with dwellings that had significant variation residential property in in size, construction materials and what the market will OBrisbane in 2004 – what was the value overall quality. The researchers applied pay for that view and that the market would pay for a view their own adjustments to the sales data and what was the quantum? in an endeavour to reflect the variations. what the quantum is. We analysed sales evidence in two As a consequence, it was considered that new high-rise residential buildings the outcomes were less reliable due to the where the unit sales occurred in a various adjustments applied and were relatively narrow timeframe and were not considered a true reflection of added identical units, other than the variation market value of a view. of the view. Sales analysis revealed that there was a noticeable change in value SUBJECT PROPERTY HISTORY when the quality of the view changed. The property was located in South The variations in added market value in Brisbane approximately 2km (radial) 2004 ranged from 6% to 21.1% when the south of the Brisbane GPO. The property quality of view changed from impeded was contracted for purchase in mid-2004 to unimpeded. The lower range was during construction (roof on stage) with for secondary suburban views and the no internal fitout. Settlement occurred on upper range was for superior quality practical completion towards the end of river/CBD views. 2004. The property was improved with a Further sales data analyses was new three-level home. undertaken in 2010-2012 on the Accommodation to the upper level same buildings to establish if the comprised two bedrooms, an ensuite, outcome was stable in a different two walk-in robes and a balcony. market environment. Accommodation to the middle level comprised an entry, living area, kitchen, INSTRUCTION TO ASSESS THE dining room, one bedroom, an ensuite, ADDED VALUE OF A VIEW toilet, office, media room, store room, a We were approached in 2011 to balcony and a terrace. undertake an assessment of the added Accommodation to the ground level market value of a view in relation to a comprised two bedrooms, two ensuites, litigation claim that had been lodged in a family room, a terrace, a gymnasium the Supreme Court of Queensland. The and a four-car lock-up garage. claim revolved around the variation in The property was considered a new value of ‘as is’ with restricted views and (to be completed), superior quality the ‘as if’ unimpeded city views. We three-level dwelling as at the date were requested to assess the quantum of of contract. On entering the subject the ‘added value’ of the city view. dwelling on the middle (living) level, During our preliminary research this floor was a split level with six steps we were unable to find any relevant down to the kitchen, dining, lounge and market analysis of the added market terrace/balcony area. This level of the value of a view. We did locate two house was open plan. From the kitchen, theoretical analyses by way of regression dining and lounge areas of the dwelling, analysis of sales data by two university there was no view/outlook, other than academics in the United States in the the rear wall of the dwelling on the late 1980s and mid-1990s. However, adjacent lot (rear).

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COMMENTS had a width of 6.9m with a 1.5m side DEFINITION OF VIEW As at the date of contract the adjacent boundary clearance. QUALITY/VARIATION property (rear boundary) incorporated As a consequence, the view from All the unit sales analysed had a view, an existing older dwelling at the street the balcony of the subject property including the low rise units which had frontage and the rear of the site had was limited to suburban views to the restricted/impeded views between and been excavated and cleared. Approved north-west and north-east. There around nearby buildings. plans from council records, indicated were no northern views towards the The variation in view quality by elevation plans of the proposed Brisbane CBD. resulted where the higher up the dwelling, showed the roof height was We sighted a street view north from building, and in the same vertical to be approximately in line with the the subject property prior to the subject plane, the views changed from impeded floor level of the middle (living area) dwelling being constructed, with the to unimpeded as a consequence of of the property. street view showing a full city view. exceeding the height of the building in The ‘as constructed’ dwelling We also sighted photographs taken front that restricted the view. roof height varied somewhat from from the lounge areas of the subject The secondary/lower quality view the approved plans provided to the property prior to practical completion was considered to be a suburban view purchaser prior to going to contract. of the dwelling showing available city with a western outlook. Suburban The subject property had a 6m views in the background. views to the north-west, east and

AN EXPLANATION AS TO THE WIDE VARIATION IN THE PERCENTAGE OF ADDED VALUE APPEARS TO REFLECT THE VARIATIONS IN THE QUALITY OF THE VIEW, WITH THE LESSER QUALITY SUBURBAN VIEWS TO THE WEST ADDING THE LOWEST ADDED VALUE

setback from the rear boundary. We also sighted the city view that south-east were considered lesser The rear wall of the rear property was available from the middle balcony quality views than city and/or river had approximately a 3.8m set back (similar level to the subject) of the views. Unimpeded wide angle city and from the rear boundary alignment. adjacent dwelling. That city view was full-length city reach river views were Consequently, the rear wall of the partly impeded by the rear wall of the considered superior quality. offending dwelling was approximately offending dwelling. 9.8m from the northern edge of the The subject property retained its ANALYSIS subject’s terrace/balcony. The width city and suburban views from the In an endeavour to arrive at the ‘added of the rear wall of the offending upper level balcony. The outlook from value’ of the city view to reflect the property was approximately 11.9m the ground level of the subject was variation between the ‘as if’ unimpeded with a 2m side boundary clearance. always to be restricted by the dwelling city views and the ‘as is’ restricted/ The subject property’s deck/balcony on the rear lot. impeded view, we analysed sales of

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properties with restricted/impeded and city/river views. The only variable in when the view changed. The view full views. The analysed sales occurred the analysis was the variation in views from levels 24/25 down was restricted, in late 2002, 2003 and 2004 to find what on the same vertical plane. Sales of while the view from level 27 up was the market’s ‘added value’ for a view at units with comparable floorplans unrestricted with 180 degree views. The that period of time was. in three different vertical planes improvement in the view was Storey We analysed sales in high-rise were analysed. Bridge/suburban views to the east. residential buildings on the Brisbane The Skyline Apartments is located The variation between lots 274 and city fringe. Units with the same one building back from the Brisbane 254 when the view changed was a 9.3% floorplan, size and located within the River frontage. Units on the lower levels reduction in value for the restricted view same vertical plane within the building have impeded or restricted views by the (view restricted by Admiralty Quays, but were analysed. river by the front buildings (Admiralty over Admiralty Towers). City reach river Additionally, the buildings were Towers and Admiralty Quays). views existed below level 27 but there new and it was assumed that the units Sales of units with comparable were no Storey Bridge/suburban views were to be finished to a similar standard floorplans in two different vertical plans to the east. of fitout. were analysed to reflect the variations in The buildings that we analysed value from units with impeded views to AURORA TOWER were the Aurora Tower – 420 Queen those with full unimpeded views. The majority of units had an eastern

JOHN LEESON

Street, Brisbane – and the Skyline SKYLINE APARTMENTS outlook/view and unit ‘eight’ (back Apartments – 30 Macrossan Street, The variation between lots 142 and of the building) had a western Brisbane. Aurora Tower was actively 132 (levels 14 and 13) when the view suburban view, which was considered a marketed off-the-plan in late 2002 and changes from an unimpeded view to an secondary/inferior view. The variation 2003, with a substantial quantity of impeded view was a 21.1% reduction in the restricted (lot 88) and unrestricted sales occurring in a relatively narrow in value. The unimpeded view was full view (lot 98) reflected a 6% reduction timeframe. length river city reach/CBD views. The in value. We are of the opinion that the Units in the same vertical plane impeded view was a restricted river view smaller variation in value reflects the had restricted views, impeded views between buildings. secondary/lower quality view. and unimpeded views. Further analyses of sales evidence Unit ‘five’ had impeded river and Additionally, units had secondary/ on the eastern end of the building city views on the lower levels. The western suburban views and superior reflected a more subtle change in values variation between lots 285, 295 and

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365 when the view changed was 10% Apartments were sold off-the-plan in car parking, retail and residential. The and 6% respectively. 2004, with the building completed in units on the south-east of the building Unit ‘six’ was a corner unit with 2007. The valuer analysed sales in 2004 had impeded views on the lower levels, impeded city and river views on the of units with identical floorplans on the while the units on the western side of the lower levels. Variations in values same vertical plane within the building, building had an impeded view (restricted between lots 306 and 286 when the view such as unit two on various floors (not by an adjacent mid-rise commercial changed was a 9.2% reduction in value all unit ‘twos’ were pre-sold in 2004). building) outlook on the lower levels. from an unimpeded to an impeded view. Analysis of sales reflects the variation in values from an impeded/ Western outlook – unit eight OUTCOME restricted view (behind Admiralty Variation between lots 88 and 98 when As a consequence of the sales analysis, Towers) to those units with unimpeded the view changed was a 6% reduction in it is apparent that there is a noticeable views (above/over Admiralty Towers). value for a secondary view. variation in values for a comparable (Note: the prefix of unit/lot number property with impeded and unimpeded reflects the floor level within the Eastern outlook – unit five (impeded river views. The variations range from a 6% building. For example, lot 32 is on the views on the lower levels) reduction for the secondary lower quality third floor.) Variation between lots 285, 295 and 365 view to a 21.1% variation when the view All units have a living area of 87 sq. when the view changed was a 10% and changed from a full 180 degree city/river/ m and balcony area of 15 sq. m. We have 6% reduction, respectively, in value from suburban view to an impeded view. assumed all units are completed to a an unimpeded to an impeded view. Note that we only analysed sales similar quality of fitout. The only known evidence that occurred in the specified variable is the level within the building South-eastern outlook – unit six time period so that the evidence was not and the view. Variations between lots (corner impeded city and river views on distorted by market value movements. 132 and 142 when views changed was the lower levels) Sales evidence that occurred beyond the a 21.1% reduction in value from an Variation between lots 286 and 306 relevant timeframe was disregarded for unimpeded to an impeded view. when the view changed was a 9.2% our assessment purposes. Additionally, Additionally, we analysed sales of reduction in value from an unimpeded two sales were disregarded as evidence units on the eastern side of Skyline to an impeded view. for being ‘out-of-line’ and confirmed as Apartments. The sales evidence unreliable sales. reflects a similar variation, albeit at a FORMULA The analysis reflects that there is a higher level, when the view became Sales data for identical units in greater variation in values when there unrestricted by the Admiralty Quays the same vertical plane within the are superior/good views. building. The sales analysed were of building and that sold within a unit four on the various floors. Units relatively narrow time band were SALES ANALYSIS INFORMATION comprised a living area of 101 sq. m and listed on a spreadsheet. Not all Skyline Apartments – 30 a balcony area of 18 sq. m, all located on units in the vertical plane sold in Macrossan Street, Brisbane eastern corner of the building. the specified timeframe and as a The property comprises a high-rise The view from levels 24/25 down consequence, these were not included residential tower of 53 levels, including was restricted, while the view from level in the analysed data. basement car parking, retail and 27 up was unrestricted 180 degree views. Sales data of units above and below residential. The property is located The variation between lots 274 and where the changes in the quality of view one lot back from the Brisbane River 254 when the view changed was a 9.3% occurred are listed to show that there are frontage, with lower level units having reduction in value from unrestricted to only minor sale price variations other restricted/impeded river/city/Storey restricted (view restricted by Admiralty than when the quality of view change Bridge views between two buildings. Quays, but over Admiralty Towers). is apparent. The building adjacent to the east The percentage variations were is Admiralty Quays – 32 Macrossan Aurora Tower – 420 Queen arrived at by subtracting the difference Street – and the building to the south is Street, Brisbane in sale prices and this resulting figure as Admiralty Towers – 35 Howard Street. The property comprises a high-rise a percentage of the higher value unit. A significant proportion of Skyline residential tower of 72 levels, including The analysis reflects the conservative

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reduction in value of the restricted Eight number ‘four’ unit resales view. If the variation in value was occurred in the period. Three resales applied against the lower valued unit, were identical units to those analysed the percentage change would reflect its in 2004. The variation in value increase in value and would be slightly from unit 343 to 274 was 7.2% in the greater. In Skyline Apartments the 2010/2011 period. increase in value from lot 254 to 274 The variation in values for the view would be 10.2% when analysed against declined on resale from 21.1% to 8.3% the lower value unit, rather than a 9.3% for number ‘two’ units and from 9.3% to reduction in value when applied against 7.2% for number ‘four’ units. the higher value unit. For analysis purposes we have AURORA TOWER: RESALES adopted the conservative approach and 1 JANUARY, 2010 TO 30 analysed the variation as a reduction SEPTEMBER, 2012 in value from unimpeded views to Unit ‘eight’ impeded views. There were no sales evidence of unit ‘eights’, which were considered to have FURTHER RESEARCH: SALES inferior suburban view, within the ANALYSIS 2010-2012 nominated period. Unit ‘five’ resales – Our theory was not tested in court as unit 365 – occurred in both data sets. the claim was settled prior to the hearing The variation in values from unit 365 commencing. We undertook further and 155 when the sales occurred within sales data analysis in an endeavour to a five-month period in 2010 was 8.25%. substantiate that the original outcome Unit ‘six’ resales had three sales which was stable or varied at a different time were identical units to the 2002 data. For and market sentiment. analysis purposes we have utilised the We analysed sales data for the resales of unit 316 to 236 which occurred period 1 January, 2010 to 30 June, within a seven-month timeframe and 2012 for the same two buildings and reflected an 11.6% variation. the same unit numbers. All sales in Sales of lots 236 and 316 occurred in the later research were resales and for both study periods, with the variation research purposes all units in the same in 2011/2012 11.6% and 12.7% in 2002. vertical plane were considered to be of Variation between lots 316 and 266 a comparable standard. when the view changed was a 9.9% One sale was included in the data reduction in value from unimpeded to but rejected for analysis purposes as it an impeded view. was considered out-of-line and appears The variation in values for the view to be a ‘forced sale’. for unit ‘five’ was 8.25% in 2010 and in 2002 the variation ranged from 6% to SKYLINE APARTMENTS: RESALES 1 10% in value. For unit ‘six’ the variation AS A CONSEQUENCE OF JANUARY, 2010 TO 30 JUNE, 2012 in values for the view change was 9.9% THE SALES ANALYSIS, Six number ‘two’ unit resales occurred in 2011/12 and in 2002 the variation IT IS APPARENT THAT in the period. Three resales were was a 9.2% reduction in value from an THERE IS A NOTICEABLE identical units to those analysed in our unimpeded view to an impeded view. VARIATION IN VALUES 2004 data (one sale was rejected for FOR A COMPARABLE analysis purposes). The variation in ASSESSMENT AND PROPERTY WITH values from unit 182 to unit 92, which CONSIDERATIONS IMPEDED AND occurred within a 3.5 month period, We were instructed to provide a UNIMPEDED VIEWS was an 8.3% reduction. ‘historical market valuation’ as at

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mid-2004 – ‘as if’ unimpeded city views has been possible to assess the quantum considered a stable outcome, albeit a from the middle level of the living/ of the added market value of a view. slight decline in added value. This may balcony area of the dwelling and ‘as is’ The majority of variations were in be reflective of marketplace sentiment with restricted/impeded city views from the mid-range of 10% plus added value which was more sombre in Brisbane the middle level of the living/balcony for the variation in view. between 2010 and 2012. area of the dwelling. However, there was a noticeable An explanation as to the wide The middle level of the dwelling variation in the view (from full view variation in the percentage of added was considered the main living and to restricted view), at the upper end of value appears to reflect the variations entertaining area and the views that are/ the market range. Also, for secondary in the quality of the view, with the were available from the living room quality views (suburban to the west), lesser quality suburban views to the and balcony were thought to have the added value was at the low end of west adding the lowest added value. considerably added value to the property. the variation range. The upper range added value The property was purchased We considered that the study needed reflects the quality of the unimpeded mid-2004 for $1,845,000. The purchaser to be repeated at a different time to city reach river and CBD views. The advised that the contract price was assess if the added value percentage was added value changed in the mid-range arrived at by negotiation and was a stable outcome or varied depending on views, although at higher floor levels an ‘arms length’ transaction. Full market sentiment at the time of the sales the improvement in the quality of consideration for the property was cash evidence study. views was predominately river/Storey on the date of settlement. We inspected comparable style/ quality properties that sold in 2004 to confirm that the contract price was THE ANALYSIS REFLECTS THAT THERE IS A in line with the market. The contract GREATER VARIATION IN VALUES WHEN THERE price was also confirmed by the sale of ARE SUPERIOR/GOOD VIEWS the adjoining property for $1.9 million in October 2004 – a new similar style/ quality dwelling on the same size land Our original study was conducted Bridge/suburban to the east, away from and with similar city and suburban views. in the period 2002 to 2004 and our the CBD and therefore the added value follow-up study was in the period 2010 was more subtle. CONCLUSION to 2012. The increased timeframe for Note, our analysis was not tested Analysis of the market sales evidence the later study was to achieve sufficient in court as the claim was settled by reflects a change in values for a variation sales data to enable an analysis to negotiation/mediation shortly before the in view ranging from 6% to 21.1%. As be completed. hearing was set to commence. a consequence of analysing sales data The extreme 21.1% variation in of identical properties (same floorplan, the added value may be a result of size), new (assumed similar standard of marketing by the developer of the See www.leesonvaluers.com.au/recent- fitout), same vertical plane in the building ‘advantages’ of the view. news.html for detailed data analysis on and occurring within a relatively narrow The resales analysis between 2010 the properties. timeframe so as not to be distorted by and 2012 reflects a minor reduction market movements, it was apparent that in ‘added value’ for the variation in Acknowledgements: sales data from the market place was prepared to pay for the quality of the view. The later data RPData.com variations in quality of a view. reflected a variation in value from As property professionals, we are 7.2% to 11.6%, while the majority of John Lesson is a director and principal all aware that a view has value, but it is variation for the earlier data was in the valuer of Leeson Valuers. He is also difficult to quantify its value. mid-range of 10% plus added value for a licensed auctioneer and real estate However, by directly analysing the variation in view quality. agent. His main area of practice in comparable sales evidence where the only The later analysis that indicates a recent years has been litigation and real variable is the quality of the view, it range of 7.2% to 11.6% for resales is resumption compensation claims.

620 ANZPJ DECEMBER 2012

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Contact Contact us to find out how PriceFinder can help your business or request a free trial today! Call 1300 665 177 Email [email protected] Visit www.pricefinder.com.au A DAY IN THE LIFE OF A REAL ESTATE AGENT

A typical day for a sales agent can range from dealing with clients and long hours to the thrill of a sale. Kelli Wells spoke to Matthew Shepherd, director at Belle Property Beecroft, about his typical working day.

WHAT LED YOU TO A CAREER IN WHY DID YOU WANT TO WHAT DOES YOUR TYPICAL THE PROPERTY SECTOR? BE A DIRECTOR OF A DAY LOOK LIKE? I joined the industry working in my REAL ESTATE AGENCY? I’m up at 6am, mainly to help my wife family’s real estate agency in 1992 at After spending time in the family get our three girls ready for the day. I Hunters Hill. It was never my intention to business I could see why my family was usually head into the office around 8am. get into real estate – I initially wanted to so passionate about it. I loved the thrill I finish work anytime between 6pm and be a PE teacher. But after a serious injury of negotiations and the satisfaction I 7pm – the days are varied, with time I took a role in the industry as an interim gained from helping people achieve their spent in and out of the office managing job. I loved it and haven’t looked back. dreams of buying and selling property. staff and vendors.

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WHAT ARE SOME OF THE BIGGEST DO YOU HAVE A MENTOR? WHAT’S THE FIRST THING YOU DO CHALLENGES FOR YOU IN YOUR JOB? Yes, I call on several key people from WHEN YOU GET HOME? Now that I have a team of people different industries for guidance and It’s usually late and with my wife, Kristy, working for me, I need to balance feedback on the various aspects of working three days per week, I like staff management and my clients. growing my business. I have met all to spend as much time with my three Obviously, the right mix and having of my mentors through my career, daughters and my wife as possible. the right team and the right culture including people I’ve sold property to, is important. Knowing how to but also in corporate real estate. I did a WHAT IS YOUR GUILTY PLEASURE contribute to the culture of a workplace brief stint in corporate real estate where AFTER A HARD DAY’S WORK? has to be within someone already. I was actually a franchise manager for Family! Honestly, family time is what I That’s probably the hardest thing – two large franchise groups. During that want and need at the end of a busy day. having the right team and people time I met a lot of people whom I built that complement each other. close friendships with. They’re people I WOULD YOU CONSIDER JOINING can call that have more life experiences AN ORGANISATION LIKE THE API? HOW DO YOU DEAL WITH and business experiences than myself. Yes. I am a member of the Real Estate DAY-TO-DAY CHALLENGES? I call on them when I’m lost or in need Employers Federation (REEF) and an Effective time management. You’ve got of help or guidance. active member of Rotary. I see the API to have a set routine wherever possible. Without a doubt, mentors as a great resource and networking That’s the ideal, but within that there is have been essential to my career tool. I would be very proud to belong obviously prospecting, meeting clients development because a mentor to a member association such as this. It and one-on-one time with staff. Being won’t tell you what to do. They’ll would be great to see the API offering organised and prioritising really is the give you a little bit of enlightenment certifications for real estate directors, key to running a smooth ship. In terms and encourage you to look at the big licensees, owners and sales people. Real of culture, the people you work with picture. They actually make you sit estate is a large sector employer of the have to be team players – team players back and look at what you’re trying to property industry and a higher level of create the right culture. I’ve got a sales achieve and possibly give you different professional certification would be a person who’s very successful but also alternatives of how to achieve that. great step forward. loves to help people that are struggling. That’s the sort of behaviour I want in my team as everyone benefits. THE INDUSTRY IS NOT A SHORT-TERM CAREER. WHAT IS THE BEST REWARD FOR IT SEEMS DAUNTING BUT PUT THE HARD YEARS YOU IN YOUR JOB? IN EARLY ON AND IT WILL PAY OFF AND SEND YOU The satisfaction from a job well done ON A SUCCESSFUL AND LONG-TERM CAREER PATH and having both my vendor and purchaser happy with the outcome of their transaction, as well as building my WHAT’S THE MOST IMPORTANT business based on referrals. It’s great that LESSON YOU’VE LEARNT? I’m getting ahead from word of mouth. Honesty – be honest and truthful with people and advise them accordingly. WHAT IS THE BIGGEST DOWNSIDE? Sometimes you need to be frank, which The hours can be long and there’s no is not really what people like to hear, but such thing as a day off in the property in the long run they will respect your industry. But it’s all worth it. position as an industry leader. DO YOU KEEP IN CONTACT WITH WHAT ADVICE DO YOU HAVE FOR ANY OF YOUR CLIENTS ONCE A THOSE WHO ARE JUST STARTING SALE HAS BEEN FINALISED? OUT IN THE PROPERTY INDUSTRY? Yes, absolutely. They are my biggest The property industry is not a short- referrers. Staying in touch with past term career. It seems daunting at first clients is the best way to grow a business. but if you put the hard years in early I have made some great friends with on, it will pay off and send you on a whom I regularly keep in contact. successful and long-term career path.

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DISPELLING THE MYTHS ABOUT HOTEL INVESTMENT

Glen Boultwood looks at some of the long-held preconceptions about investment in hotels and aims to test whether or not they hold true.

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any of the preconcep- HOTELS ARE MORE tions about investment Six preconceptions about SUSCEPTIBLE TO in hotels have been hotel investment 2 SUPPLY SHOCKS formed on the basis of THAN OFFICE BUILDINGS their relativity to the This paper covers off six History is not always a precursor to the traditionalM core property asset classes of preconceptions about hotel future, but what history has shown office, retail and industrial. investment, including: us is that office markets are more The discussion around hotels in susceptible to supply stocks than hotels this paper refers solely to what I term Hotels are highly sensitive to (see graph 1). ‘institutional grade hotels’. That is, 1increases in the Australian dollar So what does the immediate future hotels that are predominantly corporate- look like for office and hotel markets? It is focused and located in major CBDs. Hotels are more susceptible expected that increases in the supply of These hotels are not dependent on only 2 to supply shocks than of f ice bu i ld i ngs w i l l ga i n moment u m i n a one or two demand sources. They also office spaces few years’ time due to the release of do not incorporate leisure assets, such government land for redevelopment as resorts or islands, as I do not consider Hotels have significantly more in major CBDs such as Barangaroo these institutional grade assets as they 3 volatile returns than other in Sydney, Southbank Brisbane and are higher risk assets due to their reliance traditional core property markets Perth; and the retreat to prime office on only one or two demand sources. The property by A-REITS, Australian definition is very similar to that used by Hotels are more capital superannuation Funds and offshore Investment Property Databank (IPD) in 4 intensive investors post the GFC. the traditional core property sectors. It is extremely difficult to acquire Hotels have demand levels prime quality office stock in major HOTELS ARE HIGHLY SENSITIVE 5 that are extremely volatile CBDs at present and many of these TO INCREASES IN THE and sensitive to one off events investors are now starting to develop 1 AUSTRALIAN DOLLAR prime stock to meet their allocation There has been a long-term misconcep- Hotels are valued at similar requirements. This is expected to lead tion that inbound arrivals are particularly 6 capitalisation rates to office to an increase in office stock. sensitive to increases in the Australian properties but carry greater risk On the flipside, despite close to dollar. This belief is still prevalent today, record occupancy levels in most major even within the hotel industry. CBDs, hotel supply is unlikely to gain However, the majority of demand traction due to: for hotels in corporate CBDs is GLEN BOULTWOOD is the domestic-based – only 25% of stays fund manager for Eureka Core • a lack of feasibility – the majority in Sydney are driven by international Property Fund 3, which holds a of hotels are currently worth sources. This reduces in Melbourne and mixture of office, retail and hotel significantly less than replacement Brisbane to 19% and 10% respectively investments. He has over 12 years value. Across Eureka’s hotel portfolio, (Tourism Research Australia – National of experience in the Australian the market value of combined hotels Visitor Survey, 2012). funds management and property is 71% of the replacement value. This Increases in the Australian dollar industry and has been responsible excludes the cost of land, which can are actually negatively correlated to a for implementing fund and be quite expensive in major CBDs reduction in inbound arrivals, contrary capital management strategies. • hotels don’t come close on a highest to popular opinion. and best-use basis. As an example,

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for a prime hotel asset in the core Sydney CBD with water views, the value represents about $5,000 to $6,000 per sq. m of gross building area. Compared to a premium office 1 Annual % Change in Total Stock - All Major Markets at $10,000 to $13,000 per sq. m and residential at $21,000 to $25,000 per sq. m, it becomes quite apparent that hotels are less favorable from a development perspective • historic spikes in hotel supply have typically been as a result of one-off events, such as the Sydney Olympics, or retail investor interest in serviced apartments. The latter of these one-off events is a model that no longer works as purchasers were buying these properties on residential prices, but the resale value was significantly less • banks have been burnt numerous times through financing hotel developments. Due to the difficulty (Source: Jones Lang LaSalle Hotels and Jones Lang LaSalle REIS) of obtaining pre-commitments for hotels due to their nature, obtaining development finance for hotels is extremely difficult to come by

Annual Indexed Net Effective Rents and Average Daily Rate (ADR) HOTEL RETURNS ARE 2 SIGNIFICANTLY MORE VOLATILE 3 THAN OTHER TRADITIONAL CORE PROPERTY MARKETS There is a perception that hotel average room rates are more volatile than office rents due to the fact that hotels are considered to be priced on a daily basis, as opposed to office rents, which are under long-term leases. It should be noted that a significant proportion of room nights in a hotel and their associated room rate is actually locked down under one-year contracts with corporate clients, air crews and wholesalers. Therefore the volatility of average room rates is not as high as is generally perceived. Graph 2 indexes hotel average (Source: BIS Shrapnel and Jones Lang LaSalle REIS) room rates for 4 and 5 star hotels in the

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Sydney CBD against effective rents for downturns. To an extent that is true, through one of the most volatile prime office space since 1987. however, if a major tenancy becomes periods in history, being the GFC. If the There are two key messages that are vacant during a downturn period, rents perception that hotels are significantly portrayed by this graph. will revert. more volatile than offices and other Office effective rents have been More importantly, due to the property assets classes were to be true, more volatile than hotel average room long-term nature of leases, locking in it would have surely played out during rates. It could be argued that the early leases during a downturn also prevents this period. 1990s was an exception for office the ability in many cases to benefit from Interestingly, when IPD first launched buildings due to a massive glut of office the subsequent improvement in market the hotel returns index in February space combining with a significant rents. With a hotel, there is the ability 2011, hotel returns had the exact same economic downturn. At the time office deals were being agreed at Governor Phillip Tower, which had been built THERE HAS BEEN A LONG-TERM MISCONCEPTION speculatively, with no rent and purely THAT INBOUND ARRIVALS ARE SENSITIVE TO outgoings recovery. The same can’t be INCREASES IN THE AUSTRALIAN DOLLAR. THIS said about the global financial crisis BELIEF IS STILL PREVALENT TODAY, EVEN WITHIN in 2008 and 2009. However, it is clear THE HOTEL INDUSTRY that office effective rents decreased at a much faster rate than hotel room rates. The second important insight that can be gleaned from this graph is that to quickly recover from a downturn. volatility as office returns. The reason hotel room rates have performed much This has been evidenced post-GFC for the slightly increased volatility in better over the past 26 years than office whereby hotels in Sydney, for instance, graph 3 is due to the fact that hotels effective rents, resulting in around a are trading well above their 2007 peak have significantly outperformed other 50% growth differential. In fact, office trading levels. property asset classes over the past two effective rents have barely changed This paper is not advocating that years, reflecting positive volatility. over this period of time. The question hotels are less risky. It is purely designed is, is this purely a Sydney phenomenon to encourage the thought that all or does the same trend hold true in property classes have different risks and HOTELS ARE SIGNIFICANTLY other markets? each risk has to be considered in context. MORE CAPITAL INTENSIVE Jones Lang LaSalle Hotels Graph 3, produced by IPD, 4 THAN OTHER PROPERTY undertook a study in 2003 whereby it measures the annual return over a ASSET CLASSES looked at a comparison between office seven-year period to September 2012 One of the biggest deterrents to and hotel markets around the globe for for the traditional core property investment in hotels is the perception the period between 1994 and 2002. The sectors and hotels. that they are significantly more findings of this report were that the What it demonstrates is that over capital intensive than other property same trend was evident. European hotel the past seven years hotels have not asset classes, such as office and retail. room rates had outperformed European only provided the best absolute return Graph 4 has been compiled by IPD office rental growth; US hotel room at 12%, but they have also provided the detailing the capital expenditure of the rates had outperformed US office rental best volatility adjusted return, with IPD traditional core property sectors and growth; and Asia Pacific room rates measuring volatility based on quarterly hotels as a percentage of capital value. had outperformed Asia Pacific rental rolls (IPD Research, 2012). The graph demonstrates on the growth (Jones Lang LaSalle Hotels, A Many will argue that seven years surface that hotels have in fact been Global Comparison of Hotel and Office is not a long enough timeframe to marginally more capital intensive over Real Estate, July 2003). accurately measure this and that a one-, three- and five-year period. One argument that is constantly the results should be measured over However, it is important to understand raised against a chart like this is that a minimum 10 years to produce some major influences of this. office buildings have long-term leases statistically reliable results. However, Firstly, the five-year period and therefore can ride through these I would argue that we have just gone coincided with the acquisition

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of a significant number of hotel 5 shows that demand for Australia’s capitalised. Under the capitalisation properties by Eureka Funds nine major CBD hotel markets has only rate approach the present value of Management and Mirvac, which declined once in the past 23 years. This the first couple of years of capital were long overdue for refurbishment. was during the GFC where it declined expenditure is then deducted from the These were all refurbished shortly a mere 1.4%, significantly less than the resulting value. after acquisition, which has inflated, increase in sub-lease space across these Conversely, with a hotel it is to some degree, the five-year capital office markets (Jones Lang LaSalle actually the net operating income expenditure number. As such, Hotels Research, 2012). (profit) less typically 3% of revenue (a anecdotally I would suggest that the At the time, occupancy levels in the proxy for capital expenditure), which is one-year and three-year numbers are Sydney CBD fell from a record of 82% to capitalised. This gives a very different more towards the norm. 80%, the previous highest occupancy level result than taking the present value Secondly, during the GFC most recorded for the Sydney CBD office market of the first couple of years’ capital expenditure and arguably deflates the real capitalisation rate on a hotel. Office buildings are capitalised ONE ARGUMENT THAT IS CONSTANTLY RAISED on a face market rent basis. IS THAT OFFICE BUILDINGS HAVE LONG-TERM Technically, office buildings never LEASES AND THEREFORE CAN RIDE THROUGH receive that rent as they pay incentives THESE DOWNTURNS. TO AN EXTENT THAT IS to generate that level of rent. Over the TRUE, HOWEVER, IF A MAJOR TENANCY BECOMES past 10 years incentive levels in the VACANT DURING A DOWNTURN PERIOD, RENTS Sydney CBD have averaged 24.2% WILL REVERT (Jones Lang LaSalle REIS). In effect, the capitalisation rate on office buildings is inflated by the fact that market rents, major real estate fund managers were (Jones Lang LaSalle Research, 2012). excluding the impact of incentives, required to reduce their debt levels. As Demand in hotels has continued are being capitalised. With a hotel a result, incentives paid on office and to sustain continuous annual growth, capitalisation rate, the real income you retail space moved from historically despite the short-term impact of one-off receive is being capitalised. being largely provided as fitout events like SARS, the Asian Economic Office capitalisation rates also incentives (and therefore included in the Crisis in 2007 and the September 11 don’t take into account leasing fees above capital expenditure amounts) to terrorism attacks. This would arguably or vacancy allowance. Again, this rent abatements or rent frees (which are place hotels as having a much more arguably inflates the capitalisation rate not included). In addition, significant stable demand base than any of the on office buildings. capital expenditure upgrades have been other traditional core property sectors. deferred to improve balance sheets and hold up distribution amounts. This CONCLUSION has skewed the office and retail capital HOTELS SHOULD HAVE HIGHER If the gap between the capital expenditure numbers. CAPITALISATION RATES THAN expenditure on hotels and office 6 OFFICE BUILDINGS and retail closes over time, One of the things that confound which I expect it will, then why HOTELS ARE many investors that invest in the office should hotel valuers treat capital EXTREMELY SENSITIVE sector and not the hotel sector is why expenditure differently to retail 5 TO DEMAND SHOCKS hotel capitalisation rates for prime and office valuers? Instead of One of the largest misconceptions hotels mirror that for prime office capitalising net property income around hotel investment is that hotels are buildings. The reality is that hotels are less furniture, fixtures and fittings subject to the vagaries of major demand valued differently to office buildings. reserve (capital reserve), should shocks such as epidemics, economic With office buildings, the net they be adopting the same approach downturns and terrorism events. Graph operating income of the asset is as office and retail valuers? For

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example, capitalising the net property income and then taking the present value of future capital expenditure. This would create a more consistent approach across the property industry. Further, in calculating interest cover ratio covenants for finance purposes, office, retail and hotels should use the same methodology. Banks should not deduct the capital reserve from the net property income in calculating the interest cover ratio. Capex (incl development) across property sectors Given hotels have provided the 4 Average as a share of capital value to June 2012 best volatility adjusted returns over the past seven years, has there been a mispricing of hotel investment risk relative to the other traditional core property sectors? If they have, it means banks have charged too high a margin on hotel debt due to misunderstanding their inherent risk profile. Also, has the treatment of incentives in office, retail and industrial property valuations artificially reduced the volatility of returns across these property sectors? If instead of capitalising face rents and then deducting the present value of incentives and effective rents were capitalised, it would likely result in a much greater volatility of returns. Should the valuation industry adopt a consistent approach to valuing 5 Australian Major Markets - Hotel Demand hotel assets and the traditional core property sectors? The majority of institutional investors in property have been deterred from investing in hotels because of long held misconceptions around hotel investment. However, these preconceptions don’t always hold true. I do not suggest that hotels should take precedent over investment in the traditional core property assets classes of office, retail and industrial. Instead, hotels should secure a place in an institutional investor’s portfolio ahead of riskier strategies, such as development or offshore investments.

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HOTEL VALUATION PRINCIPLES: WHEELS WITHIN WHEELS

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Increasing investor interest and transaction activity within the Australian hotel sector has underlined the importance for a deep understanding of this sector, as well as individual hotel property and market characteristics. Julian Whiston explores the evolution of valuation methodology as applied to the hotel accommodation sector and places it into the context of the prevailing market environment.

he preparation of business-related demand, while resort OWNERSHIP valuation assessments hotels are orientated towards leisure- In addition to having a firm grip on and appraisals of hotel related demand. the plethora of different hotel offerings, accommodation has While a point of contention for an assessment of a property’s market long been an area of some industry participants, owing positioning, as well as specific physical theT property market that requires to perceived inconsistencies when and market characteristics, also needs specialist skill and expertise. The sector applied across markets and product to consider ownership and operating is diverse and far from commoditised types, a hotel’s star-rating remains an structures. Again, these are varied and and incorporates ‘wheels within wheels’ important benchmark. Star-ratings may enhance or encumber a property. in terms of product offering, market are a simple representation of a hotel’s Traditionally, hotel properties have positioning and ownership structure. market position and is intuitively tended to be held on an ‘in-one-line’ This complexity and the impact on understood well by end-users. While basis. On this basis the entire property trading potential and underlying appeal the appropriateness of star-ratings will and its associated facilities are held by to the investment market needs to be undoubtedly be debated, at the very a single entity. Under this structure considered with great care. least these ratings provide guidance an investor will typically enter into a Hotel accommodation property when short-listing accommodation management agreement with a hotel incorporates products ranging from options. To this end, even where an operator. The management agreement motels and serviced apartments through to boutique operations and upscale and luxury accommodation. A hotel’s market positioning and service HOTEL PROPERTIES INCORPORATE PRODUCTS offering is equally varied. Operations RANGING FROM MOTELS AND SERVICED can be tailored to provide full service, APARTMENTS THROUGH TO BOUTIQUE limited service and select service OPERATIONS AND UPSCALE AND LUXURY offerings while concurrently positioned ACCOMMODATION as budget/economy, mid-scale, first class or luxury. operator may opt out of formal ratings, is not a property interest but rather a Definitions are extended further there remains a tendency to self-rate. service agreement between the owner by reference to location and market More recently, Internet-based and a hotel operator. While the owner’s orientation. For example, city-centre forums and social media have cemented responsibilities with regards to ‘day-to- hotels will tend to be focused a place in terms of understanding a day’ operations is generally limited, this predominantly on corporate and hotel’s offering and quality. is not a passive interest.

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The owner will typically retain an operational involvement to some extent and active asset management is often required. Where an owner is sufficiently skilled, a manager may not be appointed. In some cases an owner may also benefit from their own brands and reservation/distribution systems. However, if this is not the case the owner may elect to enter into a franchise arrangement. Such an arrangement provides access to branding and operational systems but facilitates greater autonomy in terms of the hotel’s day-to-day operations. As the market has evolved and the needs of a broader range of hotel owners are to be accommodated, ownership and operational structures have become FIGURE 1 increasingly sophisticated. For example, AUSTRALIAN TRANSACTION VOLUMES (+$5 MILLION) 2000 TO 2012 in Australia there has been a need for (SOURCE: JONES LANG LASALLE HOTELS) some investors, particularly trusts and funds, to maintain a position as property owners rather than as hotel business owners or operators. Under these increasingly active both in terms of aftermath of the GFC in 2008 and 2009, circumstances there is a need to enter investment activity and development. transaction volumes now appear to be into a lease agreement with a tenant In many cases investment activity returning to pre-GFC levels. or leasee rather than a management and development was fuelled by both It is important for a hotel valuer agreement with a service provider. anticipated demand growth and the to understand the underlying market The requirement is typically desire of numerous hotel operators and dynamics at any given time and addressed by way of hybrid agreements franchisors to extend their reach and the motivation behind each hotel such as ‘management leases’. While a market share. transaction that might be considered lease, this structure maintains many of The weight of capital available prior as comparable evidence. A hotel the key characteristics of a management to the GFC was also a key driver for transaction comprises many moving agreement and typically the landlord’s increased investment and development parts and a great deal is reliant on the return remains directly linked to activity within the hotels space. quality of interpretation. trading performance. Although activity declined following Hotels are assessed having regard Despite the need amongst the GFC, the hotels accommodation to their future trading potential as fully institutional property investors sector sustained its position as an equipped and operating entities (i.e. as a for a lease structure, conventional investment-grade property class and ‘going concern’). It is therefore vital that occupational leases remain a rarity for we are currently witnessing a period a valuer also understands the business large-scale hotels. Investors within the of increased sales activity. More characteristics of the hotel being valued, hotels sector tend not to take a passive recently investors of Asian origin have as well as its competition and recent position. Rather, they are inclined to re-emerged to be particularly prevalent comparable sales. actively participate with the intention of and the sector is an established Hotel property valuation enhancing operational performance. component of Australia’s property methodology has become increasingly investment market. sophisticated as the sector has THE MARKET LEADS Hotel transaction volumes peaked established itself as an investment-grade Prior to the global financial crisis in 2007. Following a shared period of property class. While the core valuation (GFC), the hotels sector became diminished liquidity in the immediate methods remain intact, as liquidity

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SUSTAINABILITY

has improved there is an increasing by the strength of the Australian dollar, some variance in terms of the level of requirement for the detailed analysis which makes overseas holidays more detail that might be provided, a typical of transactions to support discounted appealing to the domestic market but financial statement will provide a cash flow and capitalisation investment discourages overseas visitation to the summary of each of the main revenue parameters. For these two methods to country. It is anticipated that as the drivers by department. be effective it is equally important to global economy improves, investors Core departmental revenue will include rooms, food and beverage (F&B) and minor operating NEW SUPPLY IS MONITORED BY ALL INDUSTRY departments (MOD). In some cases an PARTICIPANTS AND IT IS CRITICAL THAT A operator will also include an amount VALUER IS AWARE OF NEW SUPPLY for rental and other income (ROI). Each of the departments have an associated operational cost as well, including payroll. Those costs that are accurately represent historic trading may consider leisure-orientated hotel not considered a part of an individual and forecasting accordingly to ensure assets in a more favourable light, department will be treated as an that what is capitalised is reasonable. especially if there is the potential for undistributed operating expense. These The steps required prior to the extraordinary cash flow growth or costs include administration, sales and application of investment parameters acquiring at a very strong yield return. marketing, energy/utilities and repairs can be broken down into critical steps: and maintenance. 1. Market review PERFORMANCE REVIEW Where a property is subject to 2. Performance review A thorough review of historic, budgeted management, further deductions 3. Benchmarking and forecast and forecast performance is essential. will be made to reflect the associated construction Anticipated and actual performance management fee structure. Most is to be reviewed against both historic common is a base management fee, MARKET REVIEW trading, as well as experiences with which is usually a percentage of the An assessment of a hotel property’s similar hotel operations. This process hotel’s total revenue, as well as an trading environment is critical. In of analysis and comparison will provide incentive fee, which is typically a addition to identifying transactions, a direction in terms of how reasonable percentage of gross operating profit valuer is to understand the underlying an owner’s expectation is, as well as following the deduction of the base market characteristics within which the provide a firm basis from which to management fee. property is located and assess its relative prepare a cash flow forecast. Under a management agreement, performance against the wider market Typically financial statements the operator will tend not to be and competitive set. will be prepared in line with the responsible for those costs associated The first step of the market review uniform system of accounts for directly with the property ownership. process will typically be to establish the lodging industry. Where this is Such costs would include insurance, demand trends and understand how it not the case, it may be necessary to property rates and taxes and a reserve is segmented. In recent times, demand re-cast financials into a format that for the replacement of furniture, for hotel accommodation has tended will broadly facilitate comparisons fixtures and equipment (FF&E reserve). to be stronger in markets that are between different hotel operations. largely oriented towards business use. Financial performance is to be BENCHMARKING AND Corporate demand has generally been discussed with key operational FORECAST CONSTRUCTION strong within Australia’s gateway cities, personnel such as a hotel’s financial Benchmarking will ordinarily be particularly those benefiting from the controller and general manager. completed by reference to a hotel’s mining resource markets. Trading performance is to be primary competition and similarly Conversely, in the post-GFC period considered on an annualised basis positioned hotel operations with which when discretionary spending was in order that seasonality trends the valuer is familiar. Of particular tempered, those markets focused on experienced by a property are importance is the benchmarking of leisure demand have performed at a less adequately reflected and compared the average daily rate (ADR), being the optimal level. This was compounded to the wider market. While there is net annual rate received and the hotel’s

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occupancy, which is represented as a percentage of total room nights sold and total room nights available over a given period. The function of both these statistics provides the valuer with a room yield or RevPAR. ADR, occupancy and RevPAR can all be benchmarked against market- wide performance so as to establish whether a property is achieving its fair share. Benchmarking a property’s top line performance (ADR, occupancy and room yield) is relatively straightforward as market-wide performance is often readily available. However, reviewing operational performance beyond these criteria is a more involved process requiring a line-by-line assessment of revenue performance and operational costs relative to both the property itself and comparable operations. A valuer is in a privileged position with regards to access to trading data and it is important to respect the confidentiality of clients as well as wider industry sources. To this end, unless consent to do otherwise is provided, findings should always be presented on a market-wide basis and in a controlled manner that does not compromise confidentiality or result in an unintended disclosure of sensitive operational data. The benchmarking process AN ASSESSMENT OF A HOTEL REQUIRES against the wider market, historic CAREFUL CONSIDERATION OF BOTH DEMAND trading and similar properties trading AND SUPPLY AND A VALUER CAN REFLECT provides significant depth in terms of THIS EXPLICITLY WITHIN THE CASH FLOW understanding a hotel’s characteristics, MODELLING, IMPLICITLY WITHIN THE ASSUMED as well as past and current demand. INVESTMENT PARAMETERS OR BOTH However, a hotel’s performance is sensitive to supply and the impact of new supply on a market and hotel supply is such a critical consideration developers, as well as appeal to the is immediate and in some instances for the industry that its effects will be finance sector. profound. felt well ahead of a project’s completion. The introduction of additional New supply is monitored by all At an operational level, operators hotel rooms will tend to destabilise a industry participants and it is critical will tailor their trading strategy in market until its effect is understood that a valuer is aware of new supply and anticipation of new supply and forecast once complete. In some instances, where forms a view as to the extent to which accordingly. On the property side, there is strong underlying demand, new any new supply will compete with the the effects of new supply in a market hotel stock will be quickly absorbed. property being assessed. In fact, new will also influence the strategy of However, where substantial additions

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are made concurrently to a market’s course, this is always completed room inventory, there are often lengthy with due regard to a property’s periods of heightened competitive historic performance. tension at an operational level and hence Typically, a DCF will be sub-optimal trading performance. Small prepared over a five- or 10-year markets are particularly sensitive to new cash flow period at the end of supply and result in heightened volatility which a sale is assumed. The owing to profound changes following investment parameters that the introduction of new hotel supply. drive this form of analysis An assessment of a hotel requires include the terminal yield a consideration of both demand and which is applied at the end of supply. A valuer can reflect this explicitly the cash flow period as well as within the cash flow modelling, a discount rate. implicitly within the assumed The discounted cash flow investment parameters or both. approach is to be supported Finally, it is worth commenting by the capitalisation approach. that a hotel property valuation assumes This is a far more straightforward competent management by a reasonably efficient operator. Consequently, personal goodwill is excluded. When A YIELD FROM A SALE IS RELATIVELY preparing a forecast, the benchmarking STRAIGHTFORWARD, BEING THE HOTEL’S NET process will help identify whether INCOME FOR A FULL TRADING YEAR DIVIDED BY a property is trading at either THE CAPITAL AMOUNT ‘sub-optimal’ levels or at ‘above normal’ levels of efficiency. Where performance is a consequence of the quality of the management and not the property process of analysis and it is far easier transactional amount by the number of or market, adjustments to a trading to make an assessment on this basis. rooms and allowances and adjustments forecast may be required. While it is reliant on detailed sales may be made to bring it into line with analysis, the availability of required the subject hotel. The result is then THE CORE METHODS data is more forthcoming and subject simply multiplied by the number of It is well established that there are three to less interpretation by the valuer. In rooms available at the subject. core methods of valuations that will the case of most sales it is possible to Clearly, given the heterogenic ordinarily be applied to the valuation establish the previous year’s net income character of property and especially of a hotel accommodation property: to derive a passing yield and in many hotels, this method needs to be applied discounted cash flow, capitalisation and cases a trading projection may also be with great care and each sale needs direct comparison. available from the parties from which to be qualified by the valuer in terms The weighting that a valuer may an initial yield can be derived. of its relevance. give to each of these methods may vary In addition to the primary hotel It is clear that all three of these depending upon the circumstances of the valuation methodologies (discounted methods are reliant on an accurate property and the market in which it is cash flow and capitalisation), a interpretation of transactional activity, situated. Each of these approaches are to direct comparison with available whether that is to help establish be considered by a valuer when preparing sales provides an important cross investment parameters or to make more an opinion of value. check that enables the valuer to direct comparisons. Traditionally the greatest both reflect further on the findings weighting has tended to be placed from the proceeding analysis as well INVESTMENT PARAMETERS on the discounted cash flow (DCF) as provide a range within which a AND TRANSACTIONAL ANALYSIS approach, a method that allows the hotel’s likely capital value might sit. A It is assumed that the reader is valuer to explicitly model operational direct comparison of sales is usually familiar with the underlying process performance and anticipated trends. Of completed by way of dividing the and mathematics involved with the

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preparation of assessments using each in the transaction as well as their benefited from heightened demand of these methods. Rather than discuss own knowledge and expertise in the driven by the resources sector, where this process in detail, the following are market/sector and will prepare a cash extraordinarily strong revenues are several points of interest relating to flow forecast. being achieved. investment parameters and aspects of The analysis of the sales is to be on The valuer needs to consider very the sales analysis process. a consistent basis with the cash flow carefully the impact of a property being During periods of low levels of analysis being prepared for the subject sold out of receivership or distress and transactional liquidity or in markets property. For instance, where a five-year whether a resultant sale is no longer where sales are infrequent or rare, a cash flow is assumed for the purposes optimised as a consequence of these valuer might employ various supporting of the valuation, the same is to be circumstances. A view also needs to approaches to establish a view with assumed when analysing transactions. be established with regards to the regards to discount rates and terminal This consistency between sales analysis likelihood of an operation’s return to capitalisation rates. Such approaches and the valuation needs examination at normalised trading needs. might include reference to the weighted several other levels within the cash flow. Conversely, where extraordinary average cost of capital or perhaps This is particularly important when levels of revenue are being achieved, the building up from a defined risk-free comparing hotel transactions that may valuer needs to consider whether the rate and making allowances for matters have differing operating or ownership level of income is sustainable over the such as liquidity, property sector risk, structures in place. medium- to long-term. In the first case, tourism volatility and the specific Understanding the basis of a sharper yield might be warranted that characteristics of the hotel property and management fees, the application of progressively returns to normalised the market within which it operates. the FF&E reserve, extraordinary capital levels. In the latter case, the initial While these approaches have their expenditure and the availability of yield may be relatively soft, but again place, they are challenged during vacant possession on sale are several progressively normalise in line with periods when the availability of debt of many critical assumptions that need cash flow. Alternative methods might is constrained and also carry high to be considered by the valuer in order also be applied by way of capitalising levels of subjectivity. Also, if applied to ensure a like-for-like comparison. what might be considered ‘super incorrectly, an investment assessment In some instances, hypothetical profit’ at a different yield. Against or calculation of worth might be assumptions might be required as part this background it is not advised derived rather than market value. of the analysis in order to normalise an in-depth understanding of each While the findings of these approaches and facilitate comparison. transaction is essential. provide a useful reference and support, In the case of each transaction, the primary approach for deriving it is also important to understand CONCLUSION investment parameters should be from the intention of the purchaser and The valuation of hotel accommodation transactional evidence that is well the motivations of the vendor. The property remains a specialist area of understood and qualified by the valuer capitalisation rates derived will represent valuation and the assessment process in terms of its relevance. ‘all-risk’ yields. These yields implicitly requires dedicated expertise. While For the purposes of preparation reflect the appeal of the asset overall, the increased sales volume goes some way of a capitalisation approach, deriving security of income, anticipated income to provide clarity, it is essential that a a yield from a sale is relatively growth and all other risks associated valuer has an intimate understanding straightforward, being the hotel’s net with the subject property. of the sector, the market and income for a full trading year divided In more recent times, the valuer transactional activity. by the capital amount. However, for might be required to consider the the purpose of a discounted cash flow, impact of extreme circumstances. In Julian Whiston is executive vice a more involved analysis is required. Australia we are currently witnessing a president at Jones Lang LaSalle Hotels. To derive a discount rate by reference broad range of experiences. There are He has worked across multiple markets to sales, the preparation of ‘ghost’ or instances of sub-optimal performance over the past 22 years, providing ‘shadow’ analysis is required whereby in some of the leisure markets or where valuation and related consultancy the valuer, based on information owners have been unable to service services for hotels and resorts made available for the purpose of the debt obligations. Conversely, there are throughout Australia, New Zealand, sale, speaks with the parties involved markets, particularly those which have South Pacific, Europe and Asia.

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REALTHE GREEN ESTATE REVOLUTION

While green buildings are rapidly emerging as a global ‘mega-trend’, do they give organisations a competitive edge against near or close rivals? Paul Anderson considers the question from an Australian and United Kingdom perspective.

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or the past 12 months I have emissions, which became effective COMPETITIVE ADVANTAGE travelled across the United from July 2012. Strategic management and the focus Kingdom and Australia in This policy will have a significant on competitive advantage form the an attempt to determine if impact on the way that organisations staple diet for any reputable global green buildings can create a carry out business activities in Australia, MBA and executive management competitiveF advantage for organisations. raising the profile of the green agenda. course. The traditional approach to I have attended green building The carbon tax will also ensure that the business strategy, which most MBA conferences, listened to speakers from measurement of carbon emissions will students and executives will learn, is international green building councils become as important for corporate boards that competitive advantage is attained and visited some of the best examples of as the liability to pay corporate taxes. from a business strategy that focuses green buildings that exist. I have also had There is no doubt that the UK on either a position of cost leadership the opportunity to interview some of the government and others will be keen or differentiation. However, critics of thought leaders in the green building and observers of the carbon tax and its the traditional approach to business real estate sectors to canvas their views impact on the Australian economy. strategy have long argued the relevance on the subject. This article shares some Even though commercial real estate and impact of broader macro factors, of my findings from my personal journey forms the structural aesthetic of our such as environmental considerations, to destination sustainability. cities, it is so often taken for granted by which are now beginning to impact and organisations. Buildings are frequently influence the way that organisations taken as a given without further conduct their business activities. THE GREEN REAL consideration towards the value that real In real estate practice, the ESTATE REVOLUTION estate can add to an organisation’s worth. traditional approach to facilities and Australia and the UK have been exposed The development and construction asset management has been to focus to very distinct economic and political of buildings is also very important to primarily upon cost reduction via the factors in recent years. The Australian governments as governmental economic implementation of cost leadership economy, with its strong growth in indicators are often measured by strategies through upward pressure the minerals and resources sector and construction activity output. on supply chain partners. Facilities its robust financial regulatory regime, In addition, the energy performance managers, asset managers and has been somewhat protected from the characteristics of buildings are businesses leaders have often overlooked harsh effects of the global financial intrinsically linked to government the importance of real estate as a crisis, which has significantly impacted energy and environmental policy, as source of competitive advantage for an the UK, bringing it to the brink of a buildings are widely recognised as being organisation. However, the shift towards ‘triple dip recession’. responsible for a significant proportion of green real estate presents financial and While the UK government has global carbon emissions directly through symbolic benefits from a strategic been embroiled in internal political natural resource consumption and cost leadership and differentiation wrangling in its attempts to implement indirectly through power consumption. perspective which organisations can a set of meaningful environmental In both the UK and Australia, the exploit to their benefit. policies, Australia has advanced to increased political pressure on reducing In their often-debated strategic the forefront of global environmental greenhouse gas emissions and the wider management book, Blue Ocean Strategy, policy. Australia was also the first emphasis on environmental concerns W. Chan Kim and Renee Mauborgne1 country in the world to implement have raised the green agenda and the identify the ‘reconstructionist’ the highly political tax on carbon focus on green real estate. approach as an alternative to traditional

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strategies to attain competitive advantage. In this book the authors outline the basis of a reconstructionist strategy, which is the alignment of the following three propositions:

1. A value proposition that attracts buyers. 2. A profit proposition that enables the company to make money out of the value proposition. 3. A people proposition that motivates those working for the company to execute the strategy.

In contrast to the traditional approach to the strategy, W. Chan Kim and Renee Mauborgne present the rationale that high performance is achieved when all three strategy propositions target both differentiation and low cost. There is also an argument to suggest that the reconstructionist approach provides organisations with a more flexible approach to the attainment of competitive advantage in contrast to the rigidity which exists within the traditional approaches to strategy. In addition, it could be argued that a failing of the traditional approach to strategy is the lack of consideration towards a ‘people proposition’. The reconstructionist approach to strategy, in contrast to the traditional strategic approaches, focuses upon the motivational characteristics of the employee, in spent at the workplace. Therefore, there Green Building Council of Australia3, addition to the needs of customers. This is a valid proposition to suggest that there provides an interesting analysis between is due to employee engagement in green is a likely link between the quality of the the differing views of employers and buildings potentially having a significant working environment and the relationship employees that occupy green buildings. impact on productivity and collaborative to employee performance. A compelling This research found that while 89% engagement, which is not usually argument in support of green buildings of employers considered that green highlighted in traditional approaches to is that they provide a superior working buildings had a positive impact upon competitive advantage. environment in contrast to non-green productivity and health, less than 50% buildings, and as a result generate more of employees were in agreement that productive and satisfied employees and green buildings had such an impact. HOW DO GREEN BUILDINGS MAKE A therefore provide building occupiers with This suggests some disparity between DIFFERENCE FOR ORGANISATIONS? added value. the value of employer and employee Based upon findings from the Organisation However, recent research carried perceptions of green buildings and for Economic Co-operation2, people out by the Institute of Sustainable illustrates that an organisational ‘state of spend 90% of their lives in buildings, on Development and Architecture and readiness’ for change is required to ensure average, a large proportion of which is Bond University, in association with the high levels of employee engagement. The

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transition for an employee working in a The emergence of strong lobbying Furthermore, green building owners that non-green building to a green building groups, such as the World Green Building are in a position to react to changes in the should be managed as an important Council, and the implementation of macro environment towards sustainable and fundamental change management green rating tools such as Green Star strategies will be well placed to attain project within an organisation to ensure in Australia and BREEAM rating tools first mover advantage in meeting the that premium employee engagement in the UK have brought the credibility changes in building occupier demand. and performance is attained. of green buildings to the attention of While reputational risk management As highlighted, the cost saving mainstream organisations. has always been an important focus of facilities and asset management While there may also be demand for consideration for organisations in an professionals is to reduce operating costs energy efficient green buildings from ever-changing external environment, the across real estate portfolios through small to medium sized enterprises (SMEs), importance of business risk mitigation supply chain efficiencies. Therefore, as well as larger organisations, developers and opportunity risk towards corporate a green building that is capable of often overlook the green building needs social responsibility takes high priority providing greater energy efficiency of SMEs and its market segment. on organisational risk registers. For example, from an opportunity risk perspective, an organisation EVIDENCE OF A BENEFICIAL ‘GREEN PREMIUM’ can seek alignment and reputational HAS EMERGED FROM RESEARCH CARRIED enhancement with a carbon reduction or OUT BY THE RECENT AUSTRALIAN PROPERTY carbon reporting strategy by occupying INSTITUTE’S BUILDING BETTER RETURNS a green building. REPORT WHEREBY RENTAL RETURNS WERE The immediate impact of occupying HIGHER FOR GREEN BUILDINGS a green building can be even more significant for an organisation in the services sector seeking to reduce its savings in contrast to a non-green However, this market could prove to carbon emissions, whereby the use of building becomes highly attractive. be a profitable for property developers. its commercial property facilities may There is also enormous symbolic Evidence of a beneficial ‘green be the organisation’s primary source value for organisations that occupy premium’ has emerged from research of carbon emissions. Therefore, where green real estate. Traditional oil carried out by the recent Australian environmental considerations are companies, such as Royal Dutch Shell, Property Institute’s Building Better Returns important to an organisation, green have successfully incorporated green Report4 whereby rental returns were buildings can assist in a business real estate within their corporate image higher for green buildings. strategy to attain competitive advantage. and brand transformation. In Perth, its While 8% and 4% green premiums Australian subsidiary Shell Australia were determined in the Sydney occupies a 6 star Green Star-rated suburban and CBD mainstream markets, THE ‘SUSTAINABILITY EQUILIBRIUM’ building, Victoria Avenue, which was respectively, a noteworthy 21% green Given the lengthy incubation and developed by Stockland. premium was observed in the Canberra construction period of commercial This example is not exclusive and office market, which is home to major building projects and the long-term big businesses are recognising the federal government departments commitment both building owners and significance of a corporate and business in Australia and are bounded by tenants make to a commercial property strategy that aligns with green real accommodation strategies that value high asset, the risk of obsolescence in real estate. Similar examples exist across green building ratings. estate is an important business risk. The the globe where organisations that One explanation for the higher ‘sustainability equilibrium’ is therefore take carbon reduction and corporate green premiums in the Canberra office an important consideration. social responsibility seriously are market is that green building owners The sustainability equilibrium is incorporating a policy of occupying operating in an environment where where rival companies are at an equal green real estate within their corporate tenants value high green building ratings stage of sustainability management and business strategies. Gone are the can attain a competitive advantage maturity and therefore any competitive days when green real estate was just against non-green building owners advantage attained by an organisation for government departments and the and therefore demand a higher rental through its sustainability initiatives public sector. premium against non-green buildings. have been cancelled out.

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From a green building perspective, be reused by a new occupier. Often the construction of the carbon neutral unnecessary ceiling, plasterboard and Pixel building by Grocon in Melbourne carpet waste ends up in landfill. This is is an example of how an organisation can generally perceived as an unjustly cost to break the sustainability equilibrium by a business occupier and an even higher creating a product that has an additional cost to the environment. differentiator as a carbon neutral building. Again, more equitable approaches This does not currently exist elsewhere to property leasing such as green “This sure does provide plenty within the competitive marketplace. dilapidations should be considered and of food for thought, looking from a agreed at the outset of a lease. foreigner’s perspective comparing The general perception in the the Australian property industry’s ANALYSIS BETWEEN THE UNITED UK seems to be that green buildings sustainability credentials to the KINGDOM AND AUSTRALIA do not provide an increase in rental United Kingdom’s apparent inaction. A key part of my journey has been to or investment value in contrast to Mr Anderson identifies corporate understand the approach and attitudes of non-green buildings. drivers for sustainable property and property professionals, building owners In Australia, however, the general makes the arguable point that green and tenants in the UK and Australia perception is that green buildings do delivers productivity improvements. towards green real estate. provide an increase in both rental and “There are advantages in While there are some fine examples investment value and are also considered delivering green office buildings, of green buildings in the UK, it is really to be a source for competitive advantage. and we do it well in Australia, but Australia where building owners, One theory behind this is research into how you break up what drives and developers and consultants are pushing the value of green real estate in the UK, what delivers productivity advances the boundaries in green real estate. which is very limited and as such is why that provides competitive advantage This pioneering approach to real estate scepticism exists towards green buildings will be a debate for a long time. The in Australia is, in turn, captivating the in the mainstream UK commercial real fact is that right now, here in our imagination of both large corporate and estate markets. office markets, to improve returns SME occupiers. While in the future international you have to be in the top section of The increasing availability of green commitment to reduce climate change green ratings. I must say that it’s not buildings in Australia, the levels of will continue to influence and motivate encouraging to hear that the United which do not appear to exist in the world governments to destination Kingdom is so far behind. UK, has also stimulated both building sustainability, a key difference to resonate “To provide one final comment, owners and occupiers towards a more from my experiences over the past 12 we were not the first country with equitable type of lease arrangement, most months is that in the UK, sustainability a carbon tax, but it is the widest commonly referred to as a ‘green lease’. and green buildings in the mainstream industry encompassing a carbon The key benefit of a green lease from an have been parked on the ‘hard shoulder’. pricing market mechanism.” environmental perspective is that it goes a Due to the poor economic climate in long way to transforming the behaviours the UK, it is clear that business survival Roger Walker, AAPI of both building owners and occupiers has taken priority above other factors and On behalf of the towards a more collaborative approach to has caused organisations to look internally Australian Property Institute property asset management. rather than to the external environment. In contrast to Australia, green lease From my journey, the unexpected Chair – NSW API Sustainability in awareness appears to be very low in the view from the mainstream in the UK the Built Environment Committee UK and heavy reliance is made upon appears to be that green buildings will more traditional lease arrangements become relevant – but at some point in which incorporate inequitable obligations the future. This should be a cause for and wasteful practices upon tenants. concern for the UK government and One such practice is lease expiry construction industry leaders when dilapidations, whereby building occupiers organisations in Australia are using are requested by building owners to strip green real estate and green technologies out an internal fitout which can often to attain competitive advantage now.

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investa.com.au Investa is one of Australia’s largest > owners and managers of quality real estate controlling assets worth more than AU$8 billion across the commercial, industrial and residential sectors.

Investa is committed to responsible property investment and the ongoing pursuit of sustainable building ownership, management and development. With a high quality portfolio of offi ce buildings located around Australia, our integrated property platform and continual innovation in sustainable building development and management practices allows us to maximise the potential and performance of each of our properties. In 2012, offi ce assets in Investa’s two primary funds were ranked fourth in the world in the Global Real Estate Sustainability Benchmark (GRESB). Investa was also a fi nalist in Australia’s prestigious 2012 Banksia Awards in the Clean Technology and Built Environment categories.

INVESTA. LEADING THROUGH INNOVATION. SUSTAINABILITY

DO GREEN BUILDINGS that the operating environment in the the forefront of corporate social PROVIDE COMPETITIVE UK is currently very different to its responsibility, but it also enables the ADVANTAGE FOR ORGANISATIONS? Antipodean counterpart. Economic and organisation to make money from In summary, businesses in Australia political demands are without doubt the value proposition by facilitating are far ahead of businesses in the UK out-playing environmental pressures significant cost savings and provides a in recognising that green buildings can at the current time, which is having an people proposition to enhance employee assist in achieving competitive advantage impact on the influence of the green engagement and motivate the workforce for building owners and occupiers alike. agenda in the marketplace. to execute the strategy. Businesses in Australia are realising the The current survival focus in the In Australia and the UK there financial benefits of cost savings and UK is having a significant impact on is compelling evidence to suggest enhanced differentiated value through the ability for green building owners that green buildings as sustainable reconstructionist strategic approaches. and occupiers to achieve competitive solutions in corporate real estate These benefits are evidenced through advantage through traditionalist can provide organisations with a green premiums, which are enhanced strategic approaches. While green competitive advantage. even further when the operating buildings undoubtedly enable cost There is no doubt that the ‘green environment is ‘super-focused’ towards savings and can contribute towards real estate revolution’ is upon us and the green agenda, such as that seen in a cost leadership strategy, it is more the physical presence of green buildings the Canberra office market. difficult to see how, in the current can play both a tangible and symbolic Furthermore, the fact that six economic and political environment role in underpinning an organisation’s property investment organisations from in the UK, green buildings can achieve corporate and business strategy. Australia are identified within the top competitive advantage through a The essential question that 10 as world leaders in green real estate traditionalist differentiation strategy. organisations must answer in seeking that in the Global Real Estate Sustainability There is, however, a very strong competitive advantage is: “How can we (GRESB) Report 20115 illustrates proposition to suggest that building afford not to occupy a green building?” the importance that large property owners and occupiers in the UK have organisations in Australia place upon the opportunity to achieve superior Paul Anderson is an experienced green buildings to attain competitive competitive advantage to exceed that business consultant spanning a advantage. In contrast, Hammerson even currently being witnessed in career over 25 years, with expertise is the only UK property company to Australia. That opportunity arises from in property, construction, sustainability feature in this survey. the ability to apply a reconstructionist and carbon management. He is a The results of the GRESB 2012 approach and to obtain first mover qualified property professional and report in September 2012 will make advantage by offering a value proposition has an MBA from Manchester Business interesting reading on the progress of through green buildings. School. Mr Anderson is the founder UK property firms. The value proposition not only of leasegreenbuildings.com and he is From my personal journey across attracts buyers through its symbolic a director of CRE. (Copyright © 2012 Australia and the UK, it is very clear value, putting the organisation at Paul Anderson. All rights reserved)

References

1 Kim, W. C. and Mauborgne, R. (2005). Blue 3 Institute of Sustainable Development and 4 Australian Property Institute (API) and Ocean Strategy – How to create uncontest- Architecture, Bond University in Association Property Funds Association (PFA). (2011). ed market space and make competition with Green Building Council of Australia Building Better Returns - A study of the irrelevant. USA: Harvard Business School (2010). Performance and Perceptions of Financial Performance of Green Ofﬁ ce Build- Publishing Corporation. green Buildings 2010 - A study based upon ings in Australia. Australia. the experiences of working, renting and 2 Organisation for Economic Co-operation owning Green Star certiﬁ ed buildings. 5 Global Real Estate Sustainability (GRESB) and Development (OECD) 2003. Environ- (2011). Benchmark Research Report 2011. mentally Sustainable Buildings: Challenges GRESB Foundation. and Policies. Paris, France: OECD.

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In retirement, many Australians relocate to a less onerous form of home occupation. Some downsize their house or move to a strata title complex. Others, attracted by lifestyle perceptions, move into a retirement village. However, research shows retirement village documentation is complex and more analogous to commercial leasing than home ownership. Lucy Cradduck and Andrea Blake identify the current retirement village tenure models generally available in Australia.

eflecting an international reside in retirement villages are usually with the analyses of litigated disputes trend, Australians aged 55 elderly and sometimes anxious to due to the mandatory dispute resolution years or over account for speedily finalise their new residential provisions that are in place in the sector 25.6% of the population arrangements ... The requirements of the for each state and territory of Australia. (ABS, 2011). Act, the public information document While the mandatory dispute resolution RMany Australians look to change and contracts may appear daunting to process and voluntary mediation process their home in retirement by down-sizing prospective residents.” may encourage early resolution of either in house size, garden size or Difficulties in understanding RV disputes, the processes themselves raise both, or moving into a strata title unit documentation and processes are issues. The confidentiality of mediation, complex to enable them to continue further exacerbated by the fact that in particular, as opposed to the openness to enjoy lifestyle benefits, without the property laws, including RV laws, of litigation, limits the public data associated maintenance obligations. are state and territory-based. While available to prospective residents. Others look to move into a conveyancing and RV practice and retirement village (RV) as many of the protocols across the various jurisdictions CURRENT LITERATURE lifestyle benefits offered by a RV usually are similar, there are differences. Although there are examples of are not present in a strata title complex. In addition, there is no consistency academic writings in the area of RVs, Age, however, is no longer a relevant across the states and territories as to the the extent of academic attention over the factor for determining who will seek the preferred tenure type (Cradduck & Blake past decade has been limited. To date, benefits of RV living. 2012). These differences lead to a level much of the academic writing in the As Western Australian data shows, of confusion which is exacerbated when area of RVs from a property perspective many retirement villages throughout retirees choose to relocate to another has been focused around appropriate Australia welcome or are specifically state/territory, either to be closer to valuation methodologies and the targeted to those aged 55 years and over, rather than those at retirement age (ABS, 2006b). As such retirement villages are increasingly being designed WITH AN AGEING POPULATION, APPROPRIATELY to satisfy a particular standard of living. ADDRESSING CONSUMER PROTECTION ISSUES Many prospective residents, IS A PRIORITY however, fail to appreciate that RV tenure is not the same as their existing family or because of the warmer climate valuation process for RVs. This includes home ownership or that the fees (ABS 2009-10) and consequently move studies by Elliot, Earle & Reed (2002) associated with RV living are not the away from the land tenure system with and more recently McAuliffe (2010). same as those of a strata title complex which they are familiar. The Australian Housing and Urban (Cradduck & Blake 2012). The potential Disputes occurring within the sector Research Institute (AHURI) has also for confusion was commented upon by have also been analysed to determine maintained a focus on aged care and McMurdo J in William v Carlyle Villages the most commonly contested issues for the role of self-contained independent who observed that: residents against village proprietors. It is living units within the context of public “[T]hose entering into contracts to acknowledged that there are limitations housing and rental accommodation

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(NcNelis, 2004). More recently Csesko and Reed (2008) focused on the ability of residential aged care facilities in Victoria to meet long-term demand and Cradduck and Blake (2012) considered the impact of tenure-related issues on the desirability of RV living in Australia (Blake and Cradduck, 2010). Other studies examined the push/pull factors influencing prospective residents’ decision-making processes (Earl 2004). Stimson and McCrea (2004) identified that the most common push factors were health issues and the need for greater assistance; death of a spouse; problems in maintaining the home; the need for a lifestyle change; and a desire to be close LUCY CRADDUCK (LEFT) AND ANDREA BLAKE to family. The pull factors were identified to include the built environment and participants. The most recently enacted a lease is granted back to the village affordability; location and convenience laws are those of the ACT, which were operator in exchange for a licence of location; and maintenance of existing enacted in August 2012. to occupy or sublease to the SCILU lifestyle and familiarity. The definition of ‘retirement village’ occupant. In this instance some form Studies have also considered is used consistently throughout Australia of documentation and/or consent from consumer issues for residents. These have to mean a complex of dwellings the village operator is required. In any included evaluations of issues relevant where older or retired members of the event, most acquisitions occur at a for independent senior living (Jones et community reside or that which is used discount when compared to the market al, 2003), and satisfaction with village for the purpose of a retirement village value for similar accommodation in a lifestyle (Kennedy and Coates, 2008). scheme (Sec. 10 ACT; Sec. 5(1) Qld; Sec. more traditional non-RV environment. There has been very little academic 5 NSW; Sec. 3 NT; Sec. 3 Vic; Sec. 3 SA; In exchange for the discounted price attention and analysis of retirement Sec.3 Tas; Sec. 3 WA). While there is no the residents agree to pay an exit fee, village contracts and other legal statutory definition of a resident’s unit or also known as a deferred management obligations on the RV proprietor. The self-contained independent living unit fee (DMF), to the village operator when recent NSW review and (impending) (SCILU), in practice these include stand- they leave the village for whatever adoption of a mandatory standard form alone villas, duplexes, townhouses, units reason. The DMF may be calculated RV contract has provided the impetus to and apartments (Cradduck & Blake either as a percentage-of-entry fee or the consider this issue and the possibility of 2012). Where the purchaser is a couple, achieved resale figure. an Australian uniform standardised RV rights of occupancy generally are joined, Residents also may be able to contract and law. with an ongoing right to the survivor of participate in any capital gain or losses the two after which time, generally, the that have accumulated during their OVERVIEW OF THE RV SECTOR SCILU forms part of the survivor’s estate residence upon ‘sale’ to a new resident, Each state and territory has enacted for succession law purposes. as well as being liable to pay other specific legislation relevant to the As McAuliffe (2010) describes, approved fees and charges (McMullen establishment and operation of RVs, an RV typically operates by residents and Day 2007, as cited in McAuliffe with the various laws seeking to promote ‘buying’ their SCILU from the village 2010). Where the residents have passed consumer protection and best-practice operator. In freehold villages, this on, these fees and gains/losses vest in standards. This is achieved by providing usually occurs by direct purchase from their estate. Professional experience a statutory framework within which the the current resident or village operator. shows that it is only during the RV industry may operate in an attempt However, this may also be tied to administration of the deceased estate of to provide greater certainty to all a licence-back arrangement, whereby the last surviving parent that many adult

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children realise their parents did not not take the opportunity to mandate for own their SCILU. the standardisation of RV documents. It opted instead to introduce a two-stage RECENT LEGISLATIVE REVIEWS disclosure process (one for those who Across Australia the RV industry has merely expressed an interest in the RV been subject to several governmental and the other for those serious about reviews in the last three years. A becoming a resident) (WA 2010, p. 14) consistent theme resulting from those and to encourage industry “to develop reviews is that irrespective of legislated more comprehensible and readily disclosure requirements, RV contracts comparable contracts” (WA 2010, p. 25). need to be more user-friendly (WA 2010; CVA 2011; NSW 2012; Qld 2011). STANDARDISED CONTRACTS As submitters to the various reviews Although Sec. 67 of the Australian identified, some of these issues could Capital Territory Act enables a standard be resolved through the adoption of form contract to be prescribed by standard form contracts. regulation, no regulations as yet exist. Although other sectors of the Previously Consumer Affairs Victoria, property market, such as commercial noting – “prescribed contracts would be leasing, are without standard form too complicated and could restrict the contracts, the distinction between this market” – elected not to consider the sector and the RV sector is significant, adoption of standardised contracts as with participants in the commercial part of its review (CAV 2011, p.15). leasing market generally possessing The South Australian review also does a superior level of business acumen not consider the possible standardisation and documentary literacy. There is a of contracts, with its issues for review significant gap between the level of being restricted to matters relevant to documentation presented to prospective the vacation of units, certain specific RV residents and the low level of management practices, offences and documentary literacy of the average tribunal jurisdiction and auditing Australian (ABS 2006). standards (SA 2011). The Australian Capital Territory’s specific RV legislation, COMPULSORY which is yet to be enacted, also does not DISCLOSURE REQUIREMENTS mandate standard conditions, prescribing Compulsory pre-disclosure instead only the minimum requirements requirements in each Australian for RV contracts (The Retirement jurisdiction do not lessen the Villages Bill 2011 (ACT) Sec. 19(1)). complexity of the documentation. Tasmania only introduced its Professional practice and judicial current legislation in 2005. This is observation (Williams’ case) shows similar to the other states/territories in these requirements merely provide that while it prescribes the matters that additional paperwork which the resident must be addressed in an RV contract is required to understand. Keogh (2002) (such as type of occupation, ingoing noted that the nature of contracts contribution, fees and charges and between residents and operators/owners termination) (Sec. 6(1) Tas, 2005), it accounted for between 80% and 90% of states that “residence contract should, all matters litigated in the RV sector. It so far as is reasonably practicable, be is therefore interesting to note that as a expressed plainly” (Sch. 1, Tas 2005) and result of the Western Australian review it does not mandate the adoption of a in late 2010, the WA government did standard form contract.

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AUSTRALIANS AGED 55 YEARS OR OVER ACCOUNT FOR 25.6% OF THE POPULATION (ABS, 2011)

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In Queensland the Transport, not conflict with the NSW Contract. the freehold resident will be responsible Housing and Local Government Further, the NSW Contract itself, for payment of the statutory and utility Committee is currently undertaking including the first five pages, is only charges and the purchase transaction will a review of the Retirement Villages Act 14 pages long and in comparison with attract state stamp duties and transfer fees. 1992. The responsible committee was existing PDSs and contracts, it appears A pure freehold RV, however, is rare. scheduled to report the findings of its to be straightforward and written in Even when the SCILU is freehold tenure, review on 30 November, 2012. plain English. As the consultation only the RV is usually operated on the basis The review commissioned by the closed 18 May, 2012, the consultation that as a condition of the purchase the former Bligh government, which called report and final version of the NSW resident must lease the SCILU to the for submissions in August 2011 (DOJ Contract is not yet available. However, RV, which then sub-leases it back to the 2011), has not produced a report and anticipating that the final version will resident. It is envisaged that this sublease now appears to be subsumed by the not differ greatly from the draft, it is safe arrangement may be useful for asset current review. It appears that the to say that NSW is taking the lead in its protection in later marriages. Queensland review was not focused on regulation of RVs and protection and The sub-lease may be to both issues of the standardisation of contracts promotion of consumer rights. partners while the freehold is held only but rather was concerned with issues by the original purchaser and, while arising about the deregistration and CURRENT RV TENURE MODELS permitting the survivor to remain in closure of an RV. Pre-disclosure as an Although subject to jurisdiction-specific their home for the rest of their life (or issue was raised but done in the context laws, across Australia the primary tenure as long as they otherwise choose to of raising awareness of residents’ rights, types for SCILUs are generally leasehold, remain there), it ultimately becomes the obligations and responsibilities and how freehold, loan/licences and rentals. property of their estate with distribution this may improve their understanding of as per their will after the death of both. matters related to an RV closure. FREEHOLD It is suggested, however, this can be In late March 2012 the NSW Freehold interests in SCILUs are confusing as the sub-lease can impose Office of Fair Trading (NSW OFT) established under strata titling conditions more commonly found in commenced a targeted and specific legislation. In Queensland this is RVs but not in strata title complexes but review of RV contracts when it released the Body Corporate and Community the RV is marketed on a ‘freehold’ basis. a standard form contract for public Management Act 1997 (QLD) (BCCM). Further confusion can arise in respect of consultation (NSW government 2012). Under the BCCM separate titles are the retirement-style villages. The outcome of this review by way of issued for each SCILU. Residents have amending legislation was not available at indefeasible title upon registration of LEASEHOLD the time of submission of this paper. their transfer (Section 184). Under this arrangement the resident Consultation for this review was Cradduck and Blake (2010) note is granted a long-term lease (i.e. for specifically targeted to considering that indefeasibility offers protection by 99 years) following the payment of a and addressing issues relevant to the way of a state guarantee of title backed lump sum amount (lease fee) that is standardisation of RV contracts and by a state compensation system. This the equivalent of the market value of proposed a model contract (NSW system will, in specified circumstances, the SCILU. In all other respects this Contract 2012). A noticeable step provide compensation to parties deprived scheme is similar to the loan/licence forward is the proposed prescribed of their interest in land which would arrangement in that upon exit or resale cover pages, which in five pages specifies include interest in a SCILU (Part 8, Div. the RV operator (the lessor) pays the the key elements of the contract, 2, Subdivision C, Land Titles Act 1994). resident (the lessee) for the balance of including financial matters, fees and The essence of the state guarantee of title their leasehold interest. This payment, charges. Most importantly, the NSW is not that the rightful owner of land who however, is generally offset by a DMF. Contract details the tenure interest is wrongfully deprived of it will have it In addition, the resident may share relevant to the SCILU and whether this returned, but that they will be monetarily in any capital gains or losses. In contrast is registered in the Titles Office. compensated for their loss. Although to the loan/licence agreement, payment While additional terms will be the benefits of the security of a title are to the outgoing resident is usually permitted, proposed amendments to the evident, McGovern and Baltins (2002) dependent upon and subject to receipt NSW RV law will stipulate these must note that it is not without cost. That is that of monies from the incoming resident.

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McGovern and Baltins (2002) This is also the case with the loan consumers, which may partly explain comment that registration of the lease arrangement which features in New the low adoption rate in comparison to with the State Land Titles Office does South Wales, Victoria and South international models. According to the offer the resident an additional level Australian RV offerings. ABS only 2.7% of people aged 65 years of security in addition to that which is While the potential cost and time or over live in RVs, compared to 6-7% in provided in the Act. In Queensland, savings related to the LTO tenure the United States (ABS 1996, as cited in and similarly throughout Australia, structure are evident for some prospective Stimson 2004). registration of the lease in the Titles residents, it is difficult to ignore the lack of Although this participation level in Office would offer the resident the security of tenure of the residents’ interest. RVs has increased it has not done so security of indefeasibility of their Generally an LTO would not accrue an proportionally to the ageing population. leasehold title upon registration interest in land and therefore in the case Of the models identified, the leasehold (Section 184, LTA). of being dispossessed of their rights there structure is still under relatively high will be no rights in rem but only rights usage in Queensland at 17.87% and is LOAN AND/OR LICENCES in personam accruing to the resident the most common tenure structure in Under this arrangement the residents (Cradduck & Blake 2010). A dispossessed New South Wales (46.21%) (Cradduck make a payment to the RV operator in resident/licensee will have no right of & Blake 2012). the form of an interest-free loan when recovery of the property but merely a Newell and Peng (2006) noted that taking up residence in the SCILU. right to be compensated monetarily in 2006 there was an increased level In exchange for this the RV operator following legal action. of institutional investment in the RV grants the resident a licence to occupy sector and identified that 12 property the unit and permission to access RENTAL funds included retirement facilities as common facilities. The loan is repaid In some instances residents occupy their part of their portfolio. These accounted to the resident (or their estate) upon SCILU under a rental arrangement. A for 99% of all RVs with a total value of departure from the village on the unit rental arrangement, however, is purely $528 million. While the composition being resold. The departure generally a tenancy arrangement and does not of investments may have changed also attracts a DMF which is offset give the tenant an interest in the land significantly in the last few years, the against the repayment of the loan. as would be the case in a leasehold fundamentals of this sector, particularly There also may be an apportionment of offering. This occurs when, for example, with respect to population growth, capital gain, or alternatively a share in the capital loss to the resident. In some instances the loan is linked to a licence to occupy. In others the licence to ALTHOUGH SUBJECT TO JURISDICTION occupy exists independently. This is the SPECIFIC LAWS, THROUGHOUT AUSTRALIA most common tenure structure in many THE PRIMARY TENURE TYPES FOR states, such as Queensland. SELF-CONTAINED INDEPENDENT LIVING With Queensland having the largest UNITS ARE GENERALLY LEASEHOLD, share of the RV market, accounting for FREEHOLD, LOAN/LICENCES AND RENTALS 45% of all those villages with a presence on the Internet (Cradduck & Blake the residents become tenants under would suggest that the RV sector will 2012), the license to occupy (LTO) the Residential Tenancies and Rooming continue to grow in the future. model has a significant place in the RV Accommodation Act 2008 (Qld). One of the primary sources of market. In an LTO village, residents are However, very few RVs operate litigation in the RV sector occurs as able to occupy their SCILU upon receipt on a purely rental basis and many do a result of the contracts signed by of a Certificate of Occupancy. From the not provide rental accommodation at residents when they enter into self-care resident’s perspective their ingoing costs all. As such, rental accommodation of accommodation. Disputes also occur in are reduced as there is no requirement SCILUs has not been considered for the respect of SCILUs. While litigation more to pay transfer fees or stamp duty on purposes of this article. recently is in respect of village operation the transaction because they are not in The variety of tenure offerings (Filmer v Carlyle, [2001]), disputes also receipt of an interest in land. for RV occupation may confuse occur in relation to issues arising from

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the financial arrangements residents title as they offer no registrable interest capital gains or losses or in respect of entered into when they joined the village in land, the resident is not without approved, or not approved, pets. and the imposition of DMFs when protection. The resident has rights both they seek to leave. Keogh (2002) noted by virtue of the common law in contract DEFERRED MANAGEMENT FEES that some of the major points of legal and more importantly, as with all RVs, Generally freehold tenure will not have conflict arise from the wide variety of through the relevant RV law. DMFs as this is not generally applicable contract and tenure structures or alleged This area of land tenure is complex to freehold title. Although disclosure unconscionable conduct on the part of and may be a source of confusion to of all chargeable fees, including DMFs, the owners and developers of villages. potential residents. This situation is is a general requirement of each state/ exacerbated by the lack of clarity of territory’s legislation, 63% of villages CHOICE OF TENURE STRUCTURES publicly available information concerning nationally have no information Although not finding empirical evidence the transaction structure and specifically publically available via their website to confirm why the specific tenure regarding the tenure arrangements. as to the applicability or quantum of structures are used, it is likely that the Despite the legislative requirement for DMFs. This appears to be most acute frequency of use of the leasehold and a public information document to be in states/territories such as the ACT, licence to occupy models may be due given to all prospective residents prior to NT and WA where not a single village to the fact that the RV operator retains entry into a residence contract (Section proprietor had any publicly available the ownership of the land. This provides 84 of the Act), and the fact this document information pertaining to DMFs on the operator with long-term flexibility must include information regarding any their website (Cradduck & Blake 2012). to redevelop if, at a future point in statutory charges or securities applicable The DMF contributions have time, an RV is no longer considered the to the RV land (Sections 74 and 80 of been found to range from 20% to 40% highest and best use of the site. This the Act), the information is generally not over any period from five to 10 years structure may also enable streamlining easily available in the public domain or (McMullen & Day 2007 and Gelbert & of the development process due to the easily understood. Harris 2008, as cited in McAuliffe 2010) fact that separate titles do not need to “Tenure also can have a significant to a period of up to 12 years (Cradduck be issued over each SCILU. Further, any impact upon tenants’” rights if an & Blake 2012). Although DMFs may be minor future alterations to services do RV closes (DOJ, 2011) as licences to calculated as a percentage of the original not require body corporate approval occupy and leasehold interests attract purchase price it is more common that as would be deemed necessary by the lesser protection than freehold tenures. DMFs are calculated as a percentage of BCCM in a freehold context. The newly enacted changes to the the resale figure. Without an industry By contrast, with an LTO or rental Queensland RV legislation (CPA, 2011, standard in terms of industry offerings, SCILU, the tenure structures offered Section 242), although making future this may create a level of confusion by leasehold and freehold interests are calculations of exit fees fairer, does not amongst prospective residents. capable of registration in the states’ Land assist in making available information Rightly or wrongly the calculation Register, with freehold tenure accruing any clearer. Despite recognition of the of exit entitlement is one of the primary the highest possible bundle of rights impact of tenure, the current scrutiny sources of disputes within the RV available under the land tenure system does not extend to an examination of sector. The exit entitlement generally in Australia. However, the disadvantage tenure types per se, nor their impact includes the ingoing contribution less of these structures is that transfer fees upon desirability (DOJ 2011). any deferred management fees or exit or stamp duty will be payable by the Interestingly, of the disputes that fees and any other applicable fees such resident, albeit the stamp duty on a lease have proceeded to court, most do as reinstatement fees. This figure is then is generally less than to transfer freehold. not involve tenure arrangements or adjusted against the resident’s portion of Further, residents with a freehold what residents thought the tenure the capital growth or loss of the dwelling. interest in land will be liable for all arrangement was to be. Disputes It seems that disputes may arise from a the costs of local government fees and are generally more focused on the lack of understanding of the intricacies charges and utility charges which are calculation and application of DMFs or of the residence agreement with respect likely to be exempt from LTOs. While the exit fees (Taylor v Mistern, [2001]) and to the calculation of the fees. personal rights associated with the LTO the calculation of the market value of The variations across villages and are not protected by the indefeasibility of SCILU for the purposes of calculating operators and the likely capability

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of many of the residents to interpret consumer awareness regarding However, moving forward, it these variations may lead to confusion aged care issues by inter alia and the should be easier for prospective RV about the product that is actually being development of a national assessment tenants in NSW to understand what purchased. One such example is the framework and My Aged Care website occupying their ‘home’ will entail Queensland decision in the Williams have been envisaged to provide easy before they make their choice and for case. The court held that Mr Williams access to quality indicators for aged NSW RV operators to have the comfort was not entitled to a portion of the care services (Australian Government, of that knowledge. appreciation of his leased unit when the Budget Paper No. 1). This may go some Adoption of these measures subsequent lessee paid a considerably way to addressing certain consumer Australia-wide would see a significant increased in-going contribution. The protection/awareness issues faced by improvement to consumer protection disturbing element of the Williams older Australians as it will enable access for residents, as well as provide case was the misinterpretation of the to relevant information via the Internet operational certainty for RV operators. situation by Mr Williams when the and so may assist prospective residents in Valuing either the retirement village residence agreement was silent on the understanding the available products and operator’s or resident’s interest in a issue of the allocation of capital growth. offerings (Cradduck & Blake 2012). retirement village is complex due to It is clear that the current legislative However, this will not address the the myriad of potential retirement approach to disclosure currently issues raised in this paper. Aged care village offerings with respect to tenure applying throughout Australia does is not the same as RV living and in types, deferred management fees and not aid in consumer understanding of any event the steps proposed are not apportionment of capital gains or losses. the intricacies of RV tenure. Nor does a substitute for a national scheme and In the absence of standardised it enable a better understanding by legislation and user-friendly non-legal- retirement village offerings, valuers consumers as to the differences between speak documentation. need to be alert to the differences in RV tenure and ‘traditional’ home With an ageing population, individual villages and the variability of ownership. In our consumer-aware appropriately addressing consumer cash flow that this creates. For valuers society it is time this changed. protection issues is a priority. However, working in the retirement village addressing issues arising from sector, pending finalisation of current CONCLUSION jurisdictional differences is not the reviews, there will be the need to be Not every retiree who wishes to move exclusive focus of residents. Most RV aware of transitionary matters for some to an RV is able to do so. The effects of operators own villages in more than one time to come. Although these reviews the GFC and the ongoing down turn jurisdiction and, similar to complaints are designed to simplify matters for in the property market, coupled with regarding jurisdictional idiosyncrasies in residents, they are likely to make the anticipated reduced retirement income respect to retail shop leasing, are required valuer’s job even more complex. (ABS 2009), may make relocation to maintain a bank of different state/ impossible. However, the global territory RV documents and educate staff Dr Lucy Cradduck is a lecturer in the financial crisis is but part of the problem accordingly. For the benefit of all parties, law faculty at Queensland University of facing the industry. The peculiarities of now is the time to look to both simplify Technology (QUT). She lectures in property RV tenure (Cradduck & Blake 2012), and standardise RV documents and to law and IP law, with a special research interest combined with potential negative introduce a national RV legislation scheme. in the interrelationship between high-speed publicity from disputes regarding The NSW proposal, if implemented, broadband and its impact for property use. RV operations and complicated is a step in the right direction, although documentation, complete the triad issues may still arise, considering existing Andrea Blake is a senior lecturer in of issues facing RV operators in the tenure documents will continue to property economics at QUT. She has more marketing of their villages. operate, as will the legislation that was than 10 years of academic experience Addressing issues relevant to the current at the time those documents were teaching in the areas of property valuation RV sector at a national level remains entered into. These existing RV residents and property law. As a registered valuer she some way off. The current Federal may still need specialist advice should any has a strong research interest in property Government’s proposal to increase dispute arise in respect of their tenure. valuation and valuation practice.

References For a full list of references, refer to: www.api.org.au/folder/journal/references-retirement-villages

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professionals.api.org.au

Untitled-2 1 6/5/2012 11:38:38 AM MEMBER PROFILE VALUER PROFILE GARMONY PROPERTY CONSULTANTS’ MATT GARMONY, FAPI YPP

WHAT IS YOUR CURRENT ROLE and understanding for the whole development seminars and associated AND WHO DO YOU WORK FOR? property industry. Being a valuer you networking, which enables us to keep I am the managing director of Garmony obtain an understanding of the whole abreast of changes in the industry Property Consultants in Perth, WA. I property industry, which enables you to and reinforces the standards and concentrate mainly on commercial and specialise in various areas of valuation methodologies required for many industrial, as well as specialist property or diversify into many other associated complex property matters. Being types, including service stations areas of the property industry. an API member provides me with and road houses. I also manage and a feeling of professionalism by oversee our team of valuers. WHAT DO YOU THINK THE belonging to a professional body which BIGGEST ISSUE IS FACING THE is recognised by many associated HOW DID YOU COME TO VALUATIONS INDUSTRY NOW? industries, including the banking and BE IN THIS ROLE? The valuation industry has changed legal professions. I also encourage I grew up with a family valuations significantly over the past 10 to 15 years. API members to join one of many business established by my father, John In the 1990s there was a strong shift state committees, which as a younger Garmony, in 1984. At an early age I for many valuers to obtain jobs with a property professional, gives excellent undertook a Bachelor of Commerce residential mortgage valuation focus as it exposure to other peers in the industry. degree at Curtin University whilst enabled efficient licensed valuers to earn working full-time as a trainee valuer significant salaries during a strong era of WHAT IS YOUR INVOLVEMENT at the then John Garmony and the residential property market. However, WITH API COMMITTEES? Associates. Once I completed my over the years valuation fees, particularly I joined Young Property Professionals degree I started work with Stanton for residential mortgage work, have (YPP) in the late 1990s before becoming Hillier Parker (now Burgess Rawson) been declining due to the finance licensed. In the early 2000s I chaired the in 1998 as a trainee commercial valuer industry cutting costs and the quality of YPP committee in WA and sat on the and became a licensed valuer in 1999. work, as well as the emergence of large WA Divisional Council for two years. I was subsequently admitted as an national valuation firms which focus on Since stepping down as Chairman of Associate member of the Australian volume finance work. With increased the YPP, I have maintained involvement Property Institute (API). In 2003 competition in this area, valuation fees on numerous committees for the WA I returned to John Garmony and have declined. This has seen a shortage division, including CPD and marketing. Associates as a senior valuer and in of younger generation valuers having Recently I was involved with the first July 2006 I took over the company exposure to commercial and industrial YPP national meeting where members and changed the name to Garmony and ‘thinking type’ specialist valuations. of each state committee met in Sydney to Property Consultants. With many experienced commercial discuss the future of the API and the YPP. valuers nearing the age of retirement, my I found this to be a great way to improve WHY DID YOU DECIDE TO PURSUE concern is that there will be a shortage of the standard of the API and the YPP A CAREER IN VALUATIONS? experienced commercial valuers coming from a younger member’s point-of-view. From my younger years I could see through to replace them. that the property industry was very WHAT CAN PROPERTY dynamic, providing a range of career WHAT DO YOU LIKE MOST ABOUT PROFESSIONALS GAIN FROM BEING paths and exposure to various people, BEING AN API MEMBER? INVOLVED WITH THE YPP? industries and professionals. The As an API member I enjoy the Being involved with the YPP provides valuation industry provides the catalyst benefit of the continuing professional you with an insight at an early stage

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in your career into the operation of committees and the hard work that is involved in providing successful events. It also provides you with exposure to high-profile professionals, industry leaders and more experienced members of the API. HOW HAS THE API HELPED YOUR CAREER? A membership of the API is highly recognised in the world of finance and commerce. Membership is necessary for admission to most Bank Valuer Panels and to obtain professional indemnity insurance cover. My involvement with the API has opened doors and has enabled me to contact other members to discuss complex valuation matters and to obtain important information to assist with valuation assignments I am undertaking. Being involved in API committees keeps you in contact with industry leaders, which assists with obtaining new leads and generating future work. WHAT WOULD YOU SAY TO UPCOMING PROPERTY PROFESSIONALS? The property industry provides exposure to a wide range of property types and personalities in a range of industries. I would advise property professionals to gain experience across a range of property types, not just residential, as the property industry continues to evolve. HOW IMPORTANT IS CONTINUING EDUCATION FOR VALUERS? The property industry is ever-changing due to market cycles, community and industry needs and legislative and taxation changes. Continuing education provided by the API is industry- focused and an important facet of keeping up-to-date and reinforces the professionalism that is expected and required by our industry.

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FUNDING SOLUTIONS FOR INFRASTRUCTURE The role of public private partnerships has always been a topical issue attracting comment. Martin Locke, partner infrastructure advisory at PriceWaterhouse Coopers, examines the role of PPPs in infrastructure funding.

he Business Council of EVOLUTION OF reflected in asset sales and user pays Australia (BCA) recently INFRASTRUCTURE FINANCE pricing. These themes have particular released a report on These themes are generally consistent relevance for the property sector. infrastructure, Pipeline or with the recent findings of the Pipe Dream?, suggesting Infrastructure Finance Working Group IMPLICATIONS AND someT scepticism towards actual activity (IFWG) convened by the Federal OPPORTUNITIES FOR in the infrastructure sector. The Government. I was particularly PROPERTY DEVELOPERS report identified some $921 billion of interested in certain parts of its recent I have identified the following key areas committed and prospective investment report suggesting that the “focus of of infrastructure that represent potential opportunities in large-scale projects government reforms should be to opportunities for the property sector: and some $96 billion of public private attract additional private sector funding partnerships (PPPs). This supports by commercialising some part of the • health campuses the notion that PPPs are not overly project … [The] most effective way to • student housing dominant as a procurement approach. do this would be for user charges”. • transit-oriented development Moreover, the BCA identified There is a growing recognition • civic centres Australia as a high-cost investment around the world that infrastructure • ports/logistics location with significant cost premiums must be paid for either by users or by • affordable housing for infrastructure development – government. PPPs structured around the cost of developing hospitals is availability payments do not contribute some 62% higher than international additional funding and the IFWG best practice and shopping centres suggested that availability payments some 43% higher. This suggests (for economic infrastructure) be tied that Australia could do better. to the imposition of user charges. The BCA also argued that private Moreover, the IFWG advocated ownership of infrastructure should be for capturing more value from preferred where an appropriate and land development associated with transparent price can be established infrastructure (evidence provided either through a market price, regulated suggested the development of new price or contract price. Government rail corridors led to a 20-25% value should try and avoid locking-up scarce uplift) through mechanisms like capital in long-term ownership, it said, tax increment financing and joint and the private sector is best placed to property development. Finally, the deliver savings through innovation and IFWG proposed linking future efficiency. This all suggests a higher level infrastructure expenditure to of activity around PPPs is warranted. government balance sheet reform, as MARTIN LOCKE

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Private financing forms an The car park and retail facilities This highlighted some of the important procurement tool for driving were not only to be funded by the obstacles to combining commercial efficiency and innovation but should private sector, but the scope for deriving development alongside a PPP such not be seen as a silver bullet in solving a payment to NSW Health was tested as the need to quarantine the PPP the availability of infrastructure finance. and proponents needed to assess the financing structure from the risks Availability-payment PPPs are still on prospective revenue streams and work out of the commercial development. the balance sheet and do not represent how much could be paid to NSW Health. Moreover, it demonstrated additional finance to government. In the case of the car park, the need to attract other parties Moreover, there is currently much this was relatively straightforward into a consortium, including a greater difficulty in achieving value as proponents could gauge the property developer with a different for money given stubbornly high historical level of patronage revenue skill set and return criteria than debt margins since the GFC. based on car park tariffs and the the core hospital PPP project. While there is no shortage of equity number of visitors. Surplus cashflow looking for long-term stable returns could then be paid in the form of STUDENT HOUSING from infrastructure, it is becoming a licence fee, with the Royal North Increasingly, universities have been more and more difficult to access debt. Shore PPP subject to an innovative turning to build-own-operate-transfer The fundamental rationale for using securitisation structure. (BOOT) project finance structures to deliver student accommodation. The modern day student requires good quality accommodation with A NOVEL APPROACH BY ONE UNIVERSITY IS decent kitchens and bathrooms and CURRENTLY SEEKING TO ATTRACT A FUND current housing stock is often outdated MANAGER TO BE ITS DEVELOPMENT PARTNER and in need of refurbishment. AND FINANCIER. THIS SHOWS THAT THE Cash-strapped universities can SECTOR SEEMS TO COMING BACK TO LIFE ill afford to divert funding away from core education so the answer PPPs relates to value drivers such as The retail facilities were also is to utilise private sector finance. cost efficiencies, improved quality relatively simple and structured around Moreover, specialist developers and of service delivery and whole-of-life a head lease, with a lease payment to service providers have emerged to integrated build-and-operate solutions. NSW Health. Proponents needed to meet this market demand and a Each property development needs to develop a retail solution consistent well-structured BOOT scheme allows be considered on a case-by-case basis. with the requirements of a hospital a university to transfer significant However, the fundamental challenge campus but run commercially. construction and operational risk. is how to raise supplemental off The commercial development The success of this model depends balance sheet funding for government proved more challenging. The on financial viability as represented through the commercialisation of concept was to invite proposals by the ability of rents to amortise third-party revenue streams. for the development of new capital and operating costs. Higher commercial buildings for purposes debt margins and a more risk adverse HEALTH CAMPUSES which were related to the hospital approach from bankers in the In the case of the Royal North Shore campus and would not interfere post-GFC environment represent Hospital (RNS) redevelopment, the with the core hospital services. hurdles and there has been a call scope of the PPP project embraced Proposals were submitted with for a balanced commercial stance the full redevelopment of the campus innovative ideas, such as wellness towards risk allocation, which is around the construction of a new facilities, clinical suites and nursing reflected in requests for demand hospital. The private sector was invited accommodation. However, this underpinning flexible lease terms and to respond with commercial proposals aspect of the project did not proceed, a floor for the termination price. for taking over the car parking and reflecting the uncertain lead times Developers have needed to work retail facilities on the site, as well as for development and insufficient with universities to provide student scope for commercial development. value for money being realised. support services. A novel approach

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by one university is currently CIVIC CENTRES assumptions around sale prices and seeking to attract a fund manager Civic centres are generally not easy rentals be consistent with the prevailing to be its development partner and to finance, given council desires conditions in the property market? financier. This shows that the sector to obtain ‘free community space’ These financial assumptions are critical seems to coming back to life. effectively subsidised by higher in making social housing developments density developments. Unless the site feasible and fit well with a growing role TRANSIT-ORIENTED DEVELOPMENT is strategic, these mixed-use projects for community housing associations. Transit-oriented projects, such as the will most likely struggle to attract If urban regeneration is supported, Gold Coast Rapid Transit PPP, also additional finance in the current the government can benefit from have the potential to attract commercial gloomy economic environment. economic externalities, such as development in transit corridors, reduced crime and unemployment particularly around stations. However, PORTS/LOGISTICS rates and improved healthcare. I have found the key question to be Ports can be viewed as a specialised whether the commercial development property asset typically structured as THE WAY FORWARD should be bundled with the delivery of a head lease which is sub-leased to a Property solutions that can raise transport services or tendered separately stevedore. The public sector, through additional private finance are a by government. The Gold Coast City port authorities, has traditionally acted key way to enhance infrastructure Council chose to do it separately. as the landlord. There is now a question funding sources around PPPs. Aside Moreover, the project had a strong of whether the public sector needs to from the sales of brownfield assets, focus around ‘city building’, with the continue to own the port or whether it the commercialisation of third-party council raising capital through a City can restrict its role to the regulation of revenue streams and user charges are Transport Improvement Charge, which tariffs, charges and setting policy. This the only funding alternatives open to was incurred by all ratepayers. This could opens up opportunities for divestment government. This will require more be considered a form of tax increment as reflected in the proposed lease of creative structuring of true joint financing whereby revenue generated Port Botany. Moreover, there is plenty of ventures around PPPs. We can expect by infrastructure development, such as scope for the private sector to participate to see more complex hybrid revenue rates, is used to fund new infrastructure. in intermodal terminals like Moorebank. and value capture funding structures Other third-party revenue sources Critically, the public sector needs to in the future. include advertising revenues and this address supporting infrastructure The NSW government is responding is being actively explored within the and consider the full supply chain. to the changing market with the transport portfolio across Australia. establishment of an Infrastructure Another example is the upgrade AFFORDABLE HOUSING Financing Unit with the explicit of North Sydney train station, which State governments around Australia mandate to explore the development of represented the successful application have been looking at how to increase new models to harness private funding. of developer contributions to accelerate the supply of affordable housing. Increasing sophistication on the part development. A larger openplan The common approach has been to of the public sector will be helpful to facility was required to cater for combine private development rights market developments and the private increased passenger movements and an to cross-subsidise public housing sector should respond positively. At a additional 250,000 sq. m of commercial and interlinked social infrastructure time when the rest of the world seems to floor space was permitted, bringing within the one ‘masterplanned’ estate. be retreating from PPPs, Australia is at forward the potential for property The Bonnyrigg project is a good the forefront in providing a pipeline of owners to develop their properties. example of what can be achieved. opportunities – and the property sector The Chatswood Transport There are two principal challenges is well placed to benefit from this trend. Interchange also involved substantial to be overcome in making this approach retail and residential development financially viable. Firstly, can planning Martin Locke is a partner with alongside the reconstruction approvals be obtained to permit the PwC, leading the Infrastructure of the public transport facility, increased level of density necessary to Advisory practice in Sydney, which included new platforms, provide cost effective development of and is one of Australia’s leading concourses, lifts and escalators. an estate? Secondly, will the required financial advisers on PPPs.

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REITS RECOVERY CONTINUES BUT FUTURE GROWTH STILL A CHALLENGE

Real estate investment trusts (REITs) around the world continue to show signs of recovery, but they still face some challenges, especially in raising fresh capital, Chris Lawton writes.

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n Australia, REIT management AUSTRALIA Some offshore commentators believe teams are focused on Over the past few years, Australian that Australia’s property values are high strategies to enhance returns REITs (A-REITs) have restructured relative to other global property markets following a two-year period of their balance sheets by paying down and therefore contribute to the NAV strengthening balance sheets debt and selling assets worldwide. From gap. But perhaps the primary reason byI restructuring debt and selling assets, the end of 2009 until early March 2012, is that investor confidence in A-REITs especially assets held offshore. A-REITs covered by SNL, a provider of has been slow to return and A-REIT According to Ernst & Young’s Global business intelligence services, sold 1039 share prices have been slow to recover perspectives: 2012 REIT report, of the six properties worth US$16.2 billion1. after some A-REITs moved beyond the REIT jurisdictions examined in this year’s A large component of this sell-down traditional passive income model to take report, Singapore had the best return has been a retreat from offshore on higher-risk investments, mainly in performance in the year to June 2012. The investments. In one of the most recent overseas properties. As long as A-REITs’ one-year rate of return for Singaporean examples, Tishman Speyer Australia, shares continue to trade at discounts REITs (S-REITs) exceeded 21.8%, a in its capacity as the responsible entity to NAV, any property acquisitions they performance which put the country’s of Tishman Speyer Office Fund (TSO), make will likely dilute their earnings. US$30 billion REIT sector ahead of Japan announced in March this year that In an ongoing effort to restore (17.4%), Australia (15.6%), the US (15.6%), TSO shareholders had approved an investor confidence, A-REITs continue the UK (14.8%) and France (11.85%). agreement for it to sell 100% of the to de-risk their business models by IPO activity across all sectors of fund’s investment in its US subsidiary reducing their offshore exposure or the global economy was hit hard by the to a joint venture led by an undisclosed narrowing their strategic focus to those downturn. There was a 40% decrease pension fund2 (the subsidiary owns property classes where they have a in global IPO activity in 2011 and this a portfolio of properties in the US). core competency, for example. They trend continued into 2012 – during the Shareholders also approved the winding are also looking to improve operating first quarter of 2012, of the six countries up and termination of TSO. efficiencies through investment in analysed, only the US registered any Some A-REITs are buying back upgrading IT systems and transforming IPO activity reflecting the discount to their shares with proceeds from their back-office processes. The reduction net asset values of security prices in the asset sales. For example, in February in the discount to NAV at which many other REIT markets. this year Westfield Group announced A-REITS are trading suggests that these The GFC had a severe and lengthy a buyback of 10% of its stock. It also initiatives, together with the impact impact on security prices relative to net said it was selling a Canadian pension of share buybacks, are starting to asset values in the REIT market, but fund, a stake in 12 US malls, for about pay dividends. the prevailing trend is clearly upward. US$1.85 billion, and an interest in three Larger players report that financing But even as the cost of capital improves, shopping centres in the UK for US$256 today is more available from a wider the challenge remains for REIT teams million3. Proceeds will be used to fund range of financiers at lower margins and to drive future growth through astute the buyback and future investment. for longer durations. However, diversity acquisitions, careful asset management While domestic investors are cautious of debt sources is still a concern to the and well-timed dispositions – all within about investing in A-REIT equities, and approximately one-half of Australia’s an appropriate capital structure. some domestic and foreign banks have REITs that are not rated and therefore Coming out of a period of pulled back from lending to A-REITs, do not have access to bond markets as recessionary pressure, the big challenge Australian pension funds are showing a funding alternative. In earlier times, for REITs now is how to grow again. some initial interest in providing debt as an alternative or supplement to Many will focus on internal growth – financing to A-REITs to fill the gap left by borrowing, A-REITs could raise equity finding ways to operate more efficiently, retreating banks. Some offshore investors capital in secondary stock offerings cutting costs and improving property have also demonstrated an interest in to help finance property investments. fundamentals. Acquisitions will again capitalising on the NAV discount that But the fact that A-REIT shares have be a focus, and a challenge will be to has been implicit in A-REIT share been trading at discounts to NAV has find appropriate opportunities in a prices. In the last 12 months, two precluded this option. competitive market that is also seeing large A-REITs have been acquired by Some smaller A-REITs have higher continued interest from offshore buyers. consortia that include offshore players. debt loads and among these, some are

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struggling to service their debt. For early days of Australia’s public REIT continue to benefit from opportunities the major REITs, the issue is more market, when newly minted REITs to acquire properties, raise capital about loan maturities. In the course were just starting, A-REITs are now through new IPOs and merge with or of refinancing existing debt or, if they experienced in operating through acquire other REITs. But to achieve so decide, taking on new debt, REITs boom times and hard times, at home sustained growth, J-REITs need to are trying to stretch out the maturities and globally – and they will apply that develop long-term growth strategies, over a longer period of time to mitigate experience in making strategic decisions such as diversification into property the maturity risk. In the past, REITs about how to grow in 2013 and beyond. sectors other than offices. sometimes have had several loans Growth will benefit not only reaching maturity within a relatively JAPAN individual J-REITs, but also the J-REIT short time period. When debt markets Although Japan’s REITs (J-REITs) did market as a whole. For example, by began to dry up, this increased the not have significant property exposure increasing market liquidity. Over time, a larger, stronger and more diversified SOME OFFSHORE COMMENTATORS market could emerge. BELIEVE THAT AUSTRALIA’S PROPERTY SINGAPORE VALUES ARE HIGH RELATIVE TO OTHER Turbulence in global financial GLOBAL PROPERTY MARKETS AND markets, an uncertain global economic THEREFORE CONTRIBUTE TO THE NAV GAP outlook and the European debt crisis contributed to the volatility in the pressure on them to pay off or refinance in the region decimated by the country’s Singaporean REIT (S-REITs) market in the loans, leading to some of the highly March 2011 earthquake, share prices fell 2011 and the first quarter of 2012. dilutive capital raisings that occurred at as a consequence of investor concern Although S-REITs have reported the peak of the financial crisis. about the earthquake’s effects on Japan’s improved earnings, their units Today, a few well-capitalised economy and real estate markets. have underperformed the broader A-REITs experienced in investing Today the picture is much brighter. Singaporean market and sponsors have overseas continue to invest in global For much of 2012, the J-REIT share been cautious about starting REITs. Only markets, but most A-REITs are focused price index has been trading at about one initial public offering of an S-REIT on the Australian market. They have 1000, up from a post-earthquake was completed in 2011, although a real gone back to basics by concentrating low of 838. Japan’s economy is slowly estate business trust also listed during on clearly defined sectors of the recovering and its property markets 2011. No IPOs were launched in the first market that complement their core are attracting more domestic and quarter of this year, although IPO activity competencies and generate reliable foreign investment. has increased as the year progressed. income streams, mainly from rentals. J-REITs are expected to continue Some market analysts say that if Australia’s commercial property raising equity and debt capital for the global economic outlook improves, markets are reasonably healthy and property investment in the near term. Singapore’s stock market could stabilise are generating stable cash flows for Office properties account for more and S-REITs could start to attract A-REITs and other owners. The than half the value of the properties more investment4, and recent IPOs industrial property sector is improving owned by J-REITs and office REITs seem to indicate increasing interest in and attracting more investment are starting to buy assets in Tokyo equity offerings. interest. Some retailers are struggling, where vacancy rates have begun to Improving S-REIT market conditions but this has not yet had a significant decline and the office property market could presage the listing of more S-REITs impact on the market for investment in may have bottomed out. Some foreign in the next year and draw more equity institutional retail properties. investors are starting to buy shares of capital into the market. While existing While the ability of A-REITs to grow J-REITs, among other reasons, because REITs are limited in their ability to externally through property acquisitions returns may be higher than in other raise equity and debt capital, they have or development has been limited, they global markets and J-REITs provide opportunities to grow both internally are finding internal opportunities to stable cash flows. and externally and, in the case of enhance returns. In contrast with the In the short-term, J-REITs will hospitality and healthcare S-REITs, to

664664 ANZPJANZPJ DECEMBER 20122012

662-667_ErnstYoung.indd 664 12/6/2012 10:48:40 AM To learn more about this and other property investment opportunities, call 1300 CROMWELL (1300 276 693) or email [email protected] Well versed. Well timed. Well considered. www.cromwell.com.au

* Past performance is not an indication of future performance and is subject to the risks and assumptions set out in the PDS. Any investment is subject to risk, including an investment in this Fund. Capital growth, distributions and tax consequences cannot be guaranteed. An investment in the Fund is subject to risk and if a particular risk eventuates it may result in reduced distributions and/or a loss of some or all of the capital value of your investment. Examples of key risks include: manager risk, market risk, security specific risk and liquidity risk. See section 4 of the PDS. Cromwell Funds Management Limited ABN 63 114 782 777 AFSL 333 214 (“CFM”) has prepared this advertisement and is the responsible entity of, and the issuer of units in, the Cromwell Phoenix Property Securities Fund ARSN 129 580 267 (“PSF”). The PSF’s product disclosure statement dated 1 November 2012 (“PDS”) is issued by CFM and is available from www.cromwell.com.au/ phoenix or by calling Cromwell on 1300 276 693. This information has been prepared without taking into account your objectives, financial situation or needs. Therefore, in deciding whether to acquire or continue to hold an investment in the Fund, you should consider the PDS and assess, with or without your financial or taxation adviser, whether the product fits your objectives, financial situation or needs. INVESTMENT

expand within the Asian region. Overall, portfolios. In 2009, by comparison, debt Singapore is continuing to evolve and US: IT’S UNCERTAIN levels were at around 55% of the total grow into a mature REIT market. WHETHER AS value of their aggregate holdings. MANY REITS WILL UK REITs now seem to be on the path UK RAISE DIVIDENDS to recovery. However, a potential barrier Thus far, UK-REITs have predominantly I N 2012 AS I N 2011. to this recovery might exist in the form of invested in office, retail and other SOME MAY ELECT mergers and takeovers and new entrants commercial property. They have not TO TAKE CAPITAL coming into the market. Because certain invested in residential property in any THAT WOULD HAVE UK REIT shares are currently trading at material way for a variety of reasons, the GONE INTO HIGHER significant discounts to NAV (the market most significant being that UK residential DIVIDEND PAYMENTS average discount was 10% at the end of yields have traditionally been lower than FOR INVESTMENT 2011), this has led to speculation that they commercial rental yields and the UK’s REIT IN PROPERTY could become targets for both private rules created structural barriers to entry. IMPROVEMENT investors and other REITs from the UK The majority of residential property ACQUISITIONS and other countries. in the UK tends to be owned by owner- occupiers and around 70% of UK US residential property available for rent is The total returns of public equity REITs fragmented into small portfolios owned by in the US increased more than 8% in private individuals or private companies. 2011, compared with around a 2% gain A notable exception is Grainger Plc, for the S&P 5006. REITs raised US$37.5 a listed (non-REIT) company that is a billion of equity last year – the most leading residential property specialist since the US$32.7 billion of 1997, and in the UK. With this as a backdrop, in total market capitalisation increased to its March 2011 budget, the government US$632 billion, the highest since 2006, announced a range of measures to when it reached US$412 billion. address the barriers to entry and REITs also continued to reduce their investment by new and existing REITs5, debt. As of September 2011, the listed US with the measures implemented in the REIT industry’s ratio of debt divided by 2012 Finance Act in July 2012. total market capitalisation stood at 41.6%, While the measures are intended to approximately its historical average7. promote growth across property types, US REITs continued to outperform the government is particularly focused the broader equity market throughout on REITs as a vehicle for achieving the first seven months of this year. Of 140 growth in the residential property sector REITs tracked by SNL Financial, about to meet the demands of population one-third raised their dividends in 2011, growth and the housing needs of the compared with 17% the previous year8. public. Commercial property markets are However, although there is some continuing to improve, although the evidence of UK residential rents recovery has been uneven. Occupancies increasing, the underlying commercial and rents generally are rising in the barriers may still restrict the growth of strongest markets and REITs’ property REITs in the residential sector. cash flows are increasing. The measures come at a time when Chris Lawton, Asia-Pacific real estate Even so, it’s uncertain whether as UK REITs have shifted their focus from leader at Ernst & Young, has been with many REITs will raise dividends in debt reduction to the growth of rental the company for over 30 years and is 2012 as in 2011. Some may elect to take yield and NAV. For the past several an experienced real estate industry capital that would have gone into higher years, UK REITs have concentrated audit partner. He is chairman of the dividend payments for investment in on reducing their debt, now roughly Asia Pacific Real Estate Association’s property improvement acquisitions. 42% of the total value of their property (APREA) Best Practices Committee. Despite their strong performance

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in 2011, REITs did not launch as many analysts that they are able to match the and owning properties vary considerably IPOs as had been expected9. Five equity performance expectations of established across geographic markets and property REITs completed IPOs, raising about REITs. As of the end of February 2012, sectors. Demand is strongest for US$1.8 billion, compared with nine IPOs only one of the REITs that completed institutional-grade assets in metro in 2010 that raised about US$2 billion10. IPOs in 2011 or 2010 had managed to markets on both coasts. Japan’s tsunami and earthquake, the outperform the SNL US REIT Equity The office market has also been European debt crisis and other global Index on a total return basis12. recovering in fits and starts. In the events created turbulent stock market Seeking additional sources of capital, second quarter of 2012, sales of US conditions worldwide, and some more REITs are raising equity in at-the- office buildings fell 10% from a year sponsors were hesitant about taking market (ATM) transactions, which earlier to US$14.8 billion, according to REITs public. enable REITs to access capital relatively Real Capital Analytics. While fewer IPOs were launched quickly and at lower costs than with IPOs. in 2011, REITs raised a record US$37 However, ATMs account for only a small CONCLUSION billion in secondary offerings11. slice of REITs’ capital-raising13. The REIT industry has been able This year, some market analysts A challenge for public equity REITs to weather the storm of the global say IPO activity could increase because is to make investment decisions and recession and financial crisis. That raising equity in the public market is manage assets in an uncertain economic experience has reinforced for REITs the less expensive than raising it privately environment. High unemployment, a slow importance of sound risk management and REITs are offering relatively high rate of hiring and high petrol prices have in investing and managing assets. yields that are attracting investors. raised concerns about the durability of the REITs will put that experience to Some sponsors remain cautious about US economic recovery. good use in 2013 as they manage in an taking REITs public as new REITs face Tenant demand for space is uneven uncertain economic environment and challenges in demonstrating to REIT and the risks for REITs in investing in an uneven property market recovery.

References

1 Faraz Ahmed, “The A-REIT Road to Consultations & Legislation, http://www. reit.com/Videos/Healthy-Pipeline-ofREIT-IP- Redemption,” SNL Data Dispatch, 8 March hm-treausry.gov.uk/consult_reits_measures. Os.aspx. 2012, http://www.snl.com/InteractiveX/Arti- htm; “Overview of Tax Legislation and Rates,” cle.asox?cdid=A-14387509-133. HM Treasury, Chapter 2, “New tax changes 10 Joe Gose, “REIT IPOs Struggling to Pick announced in Budget 2011,” 3.22 Real Estate Up Steam,” Investors Business Daily; Yahoo 2 Tishmaan Speyer Offi ce Funa website, Investment Trusts (REITs), http://cdn.hm-trea- Finance, 19 January 2012, http://fi nance. http://www.tsof.com.au/irm/content/home. sury.gov.uk/2011budget_taxation_overview.pdf yahoo.com/news/reit-ipos-struggling-pick- html, accessed on 9 March 2012. steam-224300043.html. 6 “2011 Returns Are Four Times Those of 3 Eriko Amaha, “Australia’s Westfi eld sells S&P 500,” National Association of Real Es- 11 Matt Bechard, “Healthy Pipeline of REIT U.S., U.K. malls; to buy back shares,” Reu- tate Investment Trusts news release, 4 Jan- IPOs”, REIT.com, 5 April 2012, ters, 15 February 2012, http://www.reuters. uary 2012, http://www.reit.com/portals/0/ http://www.reit.com/Videos/Healthy-Pipeline- com/article/2012/02/15/us-westfi eld-idUS- PRF/NAREIT-2011-REIT-Market-Report.pdf of-REIT-IPOs.aspx. TRE81D20120215. 7 Ibid. September 2011 debt ratio is latest 12 Jennifer Popvec, “new REITs Struggle to 4 “Singapore REITs could see more fund- available from NAREIT. Match Performance Levels of Established raising – CIMB,” Reuters, 23 March 2012, Players,” National Real Estate Investor, http://www.reuters.com/article/2012/03/23/ 8 A.D. Pruitt, “REITs Keep Raising the Ante 21 March 2012, http:/nreionline.com/ stocksnews-asean-singaporereits-idU- on Dividends in Strong Market,” The Wall fi nance/reit/new_reits_struggle_perfor- SL3E8EN1T220120323 Street Journal, 20 January 2012. mance_03212012/.

5 “Informal Consultations on REITs Measures 9 Matt Bechard, “Healthy Pipeline of REIT 13 Lynn Cowan, “REITs Hit the ATM for Funds,” Announced Budget 2011,” HM Treasury, IPOs,” REIT.com, 5 April 2012, http://www. The Wall Street Journal, 22 August 2011.

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Recent cases, headline issues and new legislation

AUTHORS

LINDSAY JOYCE JAMES MORSE [email protected] [email protected]

Mr Joyce is a partner at DLA Piper Mr Morse is a senior associate Australia (formerly DLA Phillips at DLA Piper Australia who Fox) and practises extensively also practises in the area in the area of professional of professional negligence, negligence as it affects property including with respect to claims professionals, including valuers. for and against valuers. Mr Morse Before commencing practice regularly advises on valuation in 1979, Mr Joyce practised liability issues and is a guest as a valuer for 10 years, being lecturer at the University of admitted as an Associate of Western Sydney, addressing what has become the Australian students from the school of Property Institute in 1973. He economics and finance on legal advanced to Fellow in 1989 and issues and professional liability Life Fellow in 2005. arising from property valuations.

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RUBENSTEIN V HSBC BANK PLC bank to invest £1.25 million into Withdrawals from the PAB [2012] EWCA CIV 1184 a fund known as the Enhanced were subsequently suspended Variable Rate Fund (EVRF), part temporarily. When the claimant Snapshot of an investment product known was eventually able to withdraw Readers of ANZPJ may recall the as the Premier Access Bond (PAB). his investment, he suffered a loss judgment of Adrian Rubenstein v The PAB was issued by AIG Life, of capital. The claimant alleged HSBC Bank Plc [2011] EWHC 2304 which was part of a wholly-owned an entitlement to damages, (QB), which we covered in the Legal subsidiary of the American representing such capital loss, on Notebook section of the December International Group (AIG). the basis that he was negligently 2011 edition (pages 269 to 273). The claimant had previously advised by the bank to enter That judgment provided some informed the bank that he required into the investment. considerable support for the an investment that would protect proposition that a professional (such his capital outlay. In response, the At first instance as a valuer) may not be found liable for bank advised that the risk associated Following a detailed review of the ‘negligent’ advice if the actual cause with the subject investment was akin factual circumstances giving rise to of any loss and/or damage suffered to that of cash in a deposit account this case, the trial judge concluded by a claimant was due to the global (clearly a critical and persuasive that the advice given to the claimant financial crisis (GFC) (or some such representation by the bank). by the bank was ‘negligent’. However, other event) which was not reasonably However, this was not the case. the trial judge also found that the foreseeable at the time that the The claimant’s investment in the bank was not liable to the claimant ‘negligent’ advice was provided. EVRF continued until September (in terms of substantial damages) That judgment has since been 2008. This was the time when the given that the ‘negligent’ advice overturned by the English Court financial position of Lehman Brothers did not cause the loss suffered by of Appeal in Rubenstein v HSBC (which had earlier in the year the claimant. Bank Plc [2012] EWCA Civ 1184 reported huge losses arising from the The trial judge found that the (Rubenstein). However, as we outline United States sub-prime mortgage events of September 2008 and herein, ‘all is not lost’ for valuers market crisis), became untenable and following (now known as the – or other professionals. clients and shareholders of Lehman global financial crisis) were not Brothers withdrew their money. reasonably foreseeable by the bank Facts Other major financial institutions in or any prudent financial advisor at The claimant alleged that in and the United States were coming under the time when the investment was prior to September 2005 he had been similar pressure, including AIG (the recommended and/or made in or wrongly advised by the defendant world’s largest insurer). prior to September 2005.

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The trial judge stated: the turmoil/loss and the event of a equipment, or of the weather, collapse in the value of the market always unpredictable but “[T]he test of what was securities in which the EVRF was inherently so – is always, reasonably foreseeable must invested. Whilst the extent of the loss more or less, but readily be applied as at September may have been unforeseeable, the foreseeable. However, the 2005: and not at any time event of a collapse was the true cause doctor is responsible for the thereafter. Since the [northern of the loss and was clearly foreseeable. mountaineer’s knee, but not hemisphere] autumn of 2008, Put another way, whilst the losses for the weather, the equipment, we have become accustomed may have been unforeseeably high or sheer bad luck. to economic bombshells of (which is the nature of markets a kind not seen since the at a time of stress), that merely “But what does the Great Depression. We are represents an unforeseeable extent mountaineer’s example teach now reconciled to the fact of loss of a kind or type which is us in the present case? … The that a sovereign state within – nevertheless – foreseeable. doctor did not advise, let alone the eurozone has defaulted. Reference was made to Lord recommend, his patient to go We have now witnessed Hoffmann’s example of a mountaineer mountaineering: he merely told the downgrading of the in his speech in South Australia Asset him that his knee was in good AAA credit rating of the Management Corporation Respondents shape. [The investment adviser United States. v York Montague Ltd [1997] AC 191 from the bank], however, not (SAAMCO). only advised [the claimant] on “The suggestion that either of The example was given of a the investment of his capital, these events was going to occur mountaineer about to undertake a he recommended a particular would have been regarded as difficult climb who is concerned about investment. He, so to speak, fanciful in September 2005 the fitness of his knee. He goes to a put him in it. If such an ... I find that the loss was not doctor who negligently pronounces the investment goes wrong, there caused by any negligence knee fit. The mountaineer goes on an will nearly always be other on the part of [the bank] in expedition which he would not have causes (bad management, making the recommendation undertaken if the doctor had told him bad markets, fraud, political [to invest in the EVRF]. I the true state of his knee. He suffers an change etc): but it will be an also find that the loss was injury which is an entirely foreseeable exercise in legal judgment to not reasonably foreseeable by consequence of mountaineering but decide whether some change [the bank] and is too remote has nothing to do with his knee. in markets is so extraneous to in law to be recoverable The Appeal Court noted: the validity of the investment as damages for breach of advice as to absolve the adviser contract or in tort.” “Although the mountaineer for failing to carry out his would not have gone on the duty or duties on the basis that On appeal mountain unless he had been the result was not within the The English Appeal Court undertook given the all clear from the scope of those duties.” a detailed and extensive analysis of all doctor, we would not select the of the trial judge’s findings. However, doctor’s negligent advice as Ultimately, the Appeal Court relevantly, with respect to those the cause of the mountaineer’s found that the ‘correct selection’ findings as to reasonable foreseeability, injury unless the injury had of the cause of the claimant’s loss the Appeal Court examined the trial been contributed to in some was the loss in value of the assets judge’s observations that the loss was material way by the unfitness in which the EVRF was invested. caused by the “extraordinary and of the knee. This is despite Given that, in this case, it was the unprecedented financial turmoil which the fact that an accident on bank’s duty to protect the claimant surrounded the collapse of Lehman the mountains – whether from exposure to market forces Brothers”, then asked the question: it is due to something (given that the claimant had made “what was unforeseeable about it?” entirely fortuitous such clear that he wanted an investment The Appeal Court drew a as an avalanche, or is the which was without any risk – and distinction between the extent of result of some faulty piece of this was a significant impediment

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in this case), unlike the case of the by a claimant is due to the GFC (or prospects of such an argument. mountaineer’s knee – the advice and some such other event), which was not Indeed, where a loss on a valuation the loss were not disconnected by an reasonably foreseeable at the time that flows from a cause in respect of which unforeseeable event beyond the scope the ‘negligent’ advice was provided. a lender has clearly sought the valuer’s of the bank’s duty. This potential defence (that is, advice, such a loss may be recoverable the unforeseeability of such a loss) in damages. However, the valuer may Impact could therefore still be raised in be able to achieve some (potentially As soon as the claimant made it clear claims against valuers by lenders considerable) success when, as outlined that he wanted an investment without who have suffered losses as a result by the Appeal Court: “some change any risk of losing his capital, it was the of loans entered into prior to the in markets is so extraneous to the bank’s duty to protect the claimant GFC (allegedly in reliance upon a validity of the … advice as to absolve from exposure to market forces. The ‘negligent’ valuation) where the cause the adviser for failing to carry out bank breached that duty by placing the of the loss is the significant reduction his duty or duties on the basis that claimant in an investment which was in the market value of the security the result was not within the scope subject to market forces (which were property for that loan due to the of those duties”. clearly foreseeable) and became liable in effects of the GFC. The Appeal Court also drew a damages when that investment suffered Strength for this defence will distinction between the claimant loss as a result of the market forces still be gained from the decision in this case (a mere ‘consumer’) associated with the GFC (the severity of of SAAMCO (although not and those people who seek advice which was arguably not foreseeable). followed in its entirety in Australia), in respect of areas in which they However, on that basis, would wherein the court held that the are “familiar, even expert”. We the result have been different had the damages flowing from a negligent therefore question the application claimant not made it clear that he valuation should ordinarily be that the comments of the Appeal wanted an investment without any risk? limited to the consequences of the Court may have in any event where In our view, the answer is ‘yes’. valuation being wrong. This is, of a valuation is provided to a lender In our respectful opinion, course, conditional upon the valuer – who is no doubt a sophisticated industry participant and, in our view, sufficiently placed to protect itself from the effects of the GFC by AS SOON AS THE CLAIMANT MADE IT CLEAR reason of its extensive knowledge and THAT HE WANTED AN INVESTMENT WITHOUT resources, but more relevantly as to the lending transaction and the amount of ANY RISK OF LOSING HIS CAPITAL, IT WAS THE risk it is prepared to take by entering BANK’S DUTY TO PROTECT THE CLAIMANT FROM into a loan. EXPOSURE TO MARKET FORCES In that light, should a court accept that a valuer is liable in damages for losses arising from the GFC, we would certainly argue the Appeal Court’s judgment not having assumed any additional that such damages should be in Rubenstein still supports or more extensive responsibilities, reduced (significantly, potentially the proposition that in certain obligations and/or duties. entirely) to reflect issues of causation circumstances a professional (such as A consideration of the specific and/or the lender’s contributory a valuer) may not be found liable for instructions received by each negligence in failing to protect ‘negligent’ advice if the actual cause particular valuer will therefore be itself from that same – apparently of the loss and/or damage suffered critical to the determination of the foreseeable – loss.

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For example, lenders always given the comments of the Appeal of one valuation may differ (potentially determine what risk they are prepared Court in Rubenstein – should not be significantly) from the instructions to take by deciding what to lend upon made by valuers. given in relation to another valuation. the security of the property. This is In our experience, most cases in the form of a loan to value ratio A reflection on risk management: involving allegations of negligence (LVR). In our view it appears that snapshot and ‘top tips’ against valuers include an allegation lenders invariably ‘price’ their risk Both Mr Morse and Mr Joyce – along that the valuer failed to comply with a by usually allowing a percentage applicable to the equity they require from a borrower, married with their own assessment of the likely market THE CLAIMANT ALLEGED AN ENTITLEMENT TO fall into the future so as to allow, DAMAGES, REPRESENTING SUCH CAPITAL LOSS, ON absent something unforseen, recovery if loan default occurs. THE BASIS THAT HE WAS NEGLIGENTLY ADVISED It therefore remains that each BY THE BANK TO ENTER INTO THE INVESTMENT case will ‘rise and fall’ on its own facts, including the basis upon which the valuer has been instructed, the with the wider DLA Piper Australian term or condition of the instructions representations made in the valuation team – have been presenting various provided. In most of those cases, this and the LVR on a loan. Risk Management Modules (RMMs) was not a deliberate or conscious In that light, we again remind for the Australian Property Institute in decision by the valuer. Rather, it was valuers of the judgment in Kenny & recent months. merely an inadvertent oversight which Good Pty Ltd v MGICA (1992) Ltd The following is a brief discussion had not been appreciated at the time. (1999) 199 CLR 413 (Kenny & Good). of some of the common themes – Nevertheless, inadvertent oversights In that case the valuer stated that the and ‘top tips’ – that arise in those of this nature can – and do – give rise property was “suitable security for modules, namely: to significant potential liability on the investment of trust funds to the extent part of valuers. of 65 per cent of our valuation for a 1. Know your instructions Put simply, the instructions term of three to five years”. The lender 2. Do not cut corners provided to a valuer will form the ultimately suffered loss when the 3. Keep accurate records basis upon which their conduct will be borrower defaulted and the lender was assessed and measured. We therefore unable to recoup the loan funds via the Know your instructions encourage all valuers to take the time sale of the property due to a fall in the It almost seems too simple to be a ‘top to review and consider, in detail, the market. The valuer argued that the loss tip’. However, time and time again we basis of their instructions. was caused, at least partially, by a fall see any number of professionals – not Importantly, for anyone in the value of the property caused by just valuers – providing a product that, undertaking PropertyPRO valuations, market fluctuations. for one reason or another, does not we strongly encourage you to However, the fatal twist for the match what the client has requested. familiarise yourself (if you have valuer in Kenny & Good was largely The practice of valuation is diverse. not already) with the Residential due to a representation in the valuation Valuations can be undertaken of Valuation and Security Assessment that the property was “suitable security various properties, by various means, Pro Forma Supporting Memorandum, ... for a term of three to five years”. We at various times, on various bases, dated March 2012. As stated in the understand that representations of this for various purposes and for various judgments of Vero Lenders Mortgage nature are now far less common in the clients. It is therefore often the case Insurance Ltd v Taylor Byrne Pty valuation industry and – especially that the instructions given in respect Ltd [2006] FCA 1430 and Genworth

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WE STRONGLY RECOMMEND THAT ALL VALUERS RETAIN ACCURATE AND DETAILED Keep accurate records DOCUMENTARY EVIDENCE OF ALL THE Can you remember all of your valuation WORK UNDERTAKEN IN RELATION TO THE jobs from, say, December 2006 or earlier? PROVISION OF ANY VALUATION If not, then this is a clear indication that you will be heavily reliant upon your documents and records if questions are ever asked about such valuations. Financial Mortgage Insurance Pty Do not cut corners In most cases, claims against Limited v Hodder Rook & Associates We understand the significant valuers are not made until many years Pty Limited [2010] NSWSC 1043, the time pressures facing valuers. The after the valuation is provided. At that Supporting Memorandum “gives demands on a valuer’s time have only time, an examination of the valuer’s content to” the relevant duty of care increased in recent years. Whilst the conduct will usually be undertaken, owed by a valuer who undertakes a Australian Property Institute is doing including by reference to the material PropertyPRO valuation. considerable work in order to assist and information that is maintained in We also wish to draw attention to valuers in this respect, it is likely that the valuer’s file. the Australian Banking and Finance those demands will continue to be in Not infrequently, we are surprised Industry Residential Valuation place for the foreseeable future. by the lack of material/information Standing Instructions, dated (and We therefore also understand which has been retained. We therefore effective from) October 2012. why there may be a temptation to strongly recommend that all valuers The Standing Instructions ‘cut corners’ at times. We often see retain accurate and detailed documentary were developed in order to provide cases where valuers have rushed evidence of all of the work undertaken operational clarity for the valuation an inspection and not picked up in relation to the provision of any community and provide further characteristics of the property or only valuation. It may even be a condition of guidance, clarity and consistency skimmed some of the available data your insurance cover. Whilst the extent in the requirements of the before arriving at a value opinion. and detail of such documents may lending institutions. Further, undertaking a task reflective depend upon the specific valuation being It is also quite surprising that one of the fee will not usually satisfy a provided, as a general rule we recommend of the most common questions that court that the appropriate standard of that valuers retain all documents/ we get asked in the Risk Management care has been applied. information necessary to demonstrate (at Modules is, “what should I do Of course, in some cases, these a later time) to a third party the precise when…?” In our view, questions of acts may not ever result in any actual work undertaken and the basis upon this nature are best answered by going liability upon the valuer. However, they which the value opinion was reached. straight to the source. That is, if you certainly give rise to such a potential Without limitation, this includes are unsure about any aspect of your and should therefore be avoided. all field notes, file notes (including instructions (including what work Whilst it is a matter for each and file notes of any relevant telephone you should undertake in response to every valuer and/or their respective conversations), data and material a certain factual scenario), you should business(es) to decide how to best reviewed or considered or analysed and ask that question of your client and ensure the depth of quality in each any correspondence or communication seek ‘supplementary instructions’. A valuation that is produced, we with third parties (such as your client). two-minute telephone call or a quick encourage all valuers to consider this However, this list is not exhaustive email could save months – even years potential and take appropriate and and we again strongly recommend – of stress, had you proceeded on an proactive steps to achieve it. The time that all valuers explore the best way to incorrect assumption. Of course, it is spent defending a claim will be out of retain such documents – even if only also critical to record and retain those all proportion to the extra time to do in the hope that they will never again ‘supplementary instructions’. the job correctly. see the light of day.

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668-674_LegalNotebook.indd 674 12/6/2012 10:53:44 AM URBAN DESIGN GREEN SQUARE AN URBAN RENAISSANCE?

Green Square is one of Australia’s largest developments, representing $8 billion of urban renewal initiative and comprising 278 hectares of land between Sydney’s CBD and Sydney Airport. The development has promised to bring about an urban renaissance to South Sydney. Costa Argyrou looks at why has this great vision not been fulfilled more than a decade-and-a-half after Green Square was earmarked for urban renewal.

reen Square train station “We are 10 years into the [Green stands incongruously Square] project, with 10 years to go, and among vacant run-down we haven’t built a single dwelling”1. It industrial blocks and is, however, misleading to believe that shabby car sale yards. little progress has been made to realise However,G the City of Sydney intends to the vision for Green Square. transform Green Square into a “thriving The area was first identified retail, residential, and employment hub”. by South Sydney City Council for On completion, Green Square will redevelopment potential in 1991. Since be home to 40,000 new residents and then a number of milestones have been will provide a range of community achieved. In 1998, Stanisic Turner and and leisure facilities and improved Hassell Consultants completed the transport links. And, as the name Green Square structural masterplan, would imply, green space. At the which aimed to convert the industrial core of the development is the Green character of the new ‘suburb’ into Square town centre, which will include residential and mixed-use land areas. 410,000 sq. m of mixed-use gross floor The plan proposed land-use patterns, area comprising 2500 dwellings and a public domain structure, social 120,000 sq. m of commercial and retail infrastructure, ecologically sustainable COSTA ARGYROU IS A DIRECTOR AT REAL space. This will be built around a series strategies and movement networks ESTATE ADVISORY AND INVESTMENT FIRM, of public plazas, community halls, art to guide the urban renewal of Green TRIDENT REAL ESTATE CAPITAL. HE PREVIOUSLY workshops, meeting rooms and a $40 Square2. Importantly, the masterplan WORKED AS A CONSULTANT FOR THE EARLS million library. was used for the development of COURT REJUVENATION PROJECT IN LONDON. The chairman of Landcom, John the new planning controls for the MR ARGYROU IS AN ASSOCIATE OF THE Brodgen, recently said in a conference, town centre. AUSTRALIAN PROPERTY INSTITUTE.

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References The opening of Green Square train 2006 by the City of Sydney needed station for the 2000 Olympics was the to be reassessed as a consequence of 1 Carter, Bridget. “Landcom Boss Slams next giant step forward in providing the landowners demanding increases Housing Barriers.” www.theaustralian.com. infrastructure to support the project. in development floorspace, relaxed au. The Australian, 8 Sept. 2012. www. Some critics argued that the railway height restrictions and variations of the theaustralian.com.au/business/property/ was in fact the catalyst for council and land-use mix. landcom-boss-slams-housing-barriers/sto- state government to settle on a plan for Thirdly, the cost of infrastructure ry-fn9656lz-1226467584535. the redevelopment3. required to serve the project area has In the last 10 years, the City of been a major stumbling block. The 2 City of Sydney. “City of Sydney Green Sydney has adopted a package of new City of Sydney projected in 2005 that Square Urban Renewal Area Background planning controls for the town centre, infrastructure costs would amount Paper.” www.cityofsydney.nsw.gov.au. City which include key controls on land use, to $103.2 million for the town centre of Sydney, Sept. 2008. built forms and the public domain. Most alone5. Additionally, much of the recently, the City of Sydney has been infrastructure requires extensive 3 Endelman, Tessa. “Histories of Green revising these controls in an attempt technical investigations, design Square” www.cityofsydney.nsw.gov.au. City to respond to the evolving economic development and consultation as a of Sydney, 2004. www.cityofsydney.nsw. environment and to accommodate result of the complexity associated gov.au/aboutsydney/documents/history/ planning proposals by landowners4. with its implementation both on a local GreenSquare/HistoriesofGreenSquare.pdf. In March this year, demolition works and regional level. The integration of commenced at South Sydney Hospital, stormwater infrastructure within the 4 In April 2012 the new Town Centre Devel- which involves the conversion of several town centre and the broader catchment opment Control Plan 2012 came into force to hospital buildings to create community area is another case in point. support the LEP for the town centre. facilities in the heart of the town centre. These delays have meant that Although much progress has been Green Square has not attracted as 5 City of Sydney. Green Square Town Centre made, why has the realisation of the much business as hoped6, and thus Infrastructure Strategy. City of Sydney, Apr. Green Square project suffered delays? employment. Yet the recent completion 2006. Web, Sept. 2012. Firstly, complex land ownership has of Collins on Bourke, the largest mixed- www.cityofsydney.nsw.gov.au/council/onex- set back the development. Landcom, use development in Alexandria in the hibition/documents/73InfrastructureStrate- as one of the largest landowners in past five years, is the clearest sign yet of API Qtr Ad Final.ai 11/26/2012 11:23:41 AM gyFinalAsAdopted.pdf. the town centre, had to overcome a growing trend of demand from owner significant hurdles to consolidate the occupiers for better quality commercial 6 A. Davies, ‘Developers ﬁ nd their work government-controlled sites, such space in the Green Square area. cut out luring leery businesses to southern as the NSW Police Service Centre at square’, SMH, 2 June, 2003, p. 6. 377-497 Botany Road. It was not until 2009 that Landcom partnered with WHAT CAN RESIDENTS EXPECT 7 “Green Square – Town Centre Sydney.” Mirvac Projects and Leighton Holdings FOR GREEN SQUARE’S FUTURE? N.p., n.d. Web. 17 Sept. 2012. for the development of these sites. The City of Sydney’s vision for Green www.gstc.com.au/. Secondly, the global financial crisis Square is “a place where people will live and (GFC) has continued to affect the work, a place to shop, for entertainment, access to and terms of development restaurants and cultural and community funding and has fundamentally altered activities”7. Victoria Park, the Landcom- the risk appetite for large-scale urban directed residential development in renewal projects. The GFC also meant Zetland, is a benchmark for what may be those planning controls gazetted in expected from Green Square.

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One council official recently and over in the suburb of Rosebery were clustering art exhibitions, photographic described the planned town centre classified as professionals, compared studios and a furniture showroom as “similar to Victoria Park with with only 6.3% and 12.6% of persons under the one roof. a retail injection and an improved being classified as labourers and trades Despite the delays that the town investment grade of infrastructure”, workers, respectively, according to the centre has suffered, the gentrification of with Victoria Park demonstrating the Australian Bureau of Statistics. Green Square is well under way. Urban ability to successfully achieve density These young professionals are pioneers such as Russel Koskela and Leo and sustainability, the workability of impacting on the retail offering, with Chrisite have revitalised and triggered public-private partnerships and the several ‘trendy’ cafés trading in the the transformation of suburbs in and possibility of pepper-potting affordable area such as The Grounds at 2 Huntley around Green Square into creative hubs. housing with private housing. Street in Alexandria and Kitchen by New residential towers are attracting The large-scale residential Mike at 85 Dunning Avenue. Further young professionals and Green Square’s developments at Green Square are typifying the changing demographic, traditional demographic is changing. also indicative of a much larger Danks Street in Waterloo has developed Unsurprisingly, property values are population settling in the Green into a retail and creative hub, providing rising, with capital growth for units Square area. Projects such as Payce’s organic food, homewares and art. increasing by 41.6% over the past five 206-apartment East Village complex in High-end designer fashion outlets such years, according to RP Data. These Victoria Park and Trident Real Estate as Zimmerman and Charlie Brown are rising prices are further perpetuating Capital’s proposed boutique multi-unit vying for consumer traffic as well. the cycle of gentrification and residential development in Beaconsfield Green Square’s urban renewal demographic shift. are transforming industrial and initiative has also been the catalyst The future is looking promising for commercial space into thriving centres for a bustling creative cluster settling Green Square, yet it remains to be seen of activity. in the area consisting of professionals whether the latest planning vision for The population surge is resulting in in architecture, photography, fashion urban renewal will be achieved. a recognisable demographic shift, with and interior design. Koskela’s design the number of young professionals emporium at 85 Dunning Avenue is replacing the labourers and trades a case in point. Koskela has shown Trident Real Estate and its related workers in and around Green Square – how an industrial warehouse can companies own a significant portfolio APinI Q t2006,r Ad Fina l23.7%.ai 11/26/ 2of01 2persons 11:23:41 A Maged 15 years be transformed into a creative space of assets in and around Green Square.

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FPP REACHES A MILESTONE

The Future Property Professionals (FPP) program has been implemented by the Australian Property Institute as a compulsory pathway to membership for those seeking Provisional Membership with Residential Property Valuer PMAPI (RPV) designation and Associate Membership with Certified Practising Valuer AAPI (CPV) certification.

SARAH DOWSE

I am an assistant valuer at Charter up-to-date pool of knowledge, Keck Cramer (CKC). I work which is important to maintain within prestige residential and as the property industry is an projects where I have been based ever-changing environment. since commencing at CKC in I found leases and GST to February 2010. be the most beneficial to my I am due to sit my professional professional growth. interview in December 2012. The Future Property I aim to develop my knowledge Professionals program enabled as a property professional overall me to gain knowledge external to and I have a particular interest in my everyday working environment. prestige residential property. It acted as an additional avenue The program has definitely to enhance skills outside my brought new information to light. area of expertise via a range of It has also developed my property course material, which was made skills, which were commenced at readily available. RMIT university and broadened once While the Future Property I commenced full-time work and Professionals program is still in the extended over the past two-and-a- initial stages of release, I believe it half years. will be a valuable tool for individuals The Future Property preparing to become a certified Professionals program offered an practising valuer.

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ore than 1350 context for practical application in “It is a credit to the API team, and modules have been the workplace. with an online delivery it is a clear registered in since “The Future Property window to the future for the API.” the program’s Professionals (FPP) program The program parameters have compulsory provides graduates with quality been designed to enhance and inceptionM in July 2012. education and a training pathway to develop the participant’s knowledge There are now over 250 people property professional competency,” and skills by specifying a number of enrolled in the program and 45 have said David Haythorn, National relevant modules that are required completed FPP in full. Director/CEO of the Australian for completion. The milestone confirms the Property Institute (API). The full program parameters can rapidly growing popularity of the “We are delighted after a somewhat be found on the API website at www. FPP program, which involves the apprehensive launch in July 2012 to api.org.au completion of online modules now see over 1000 modules enrolled in Specific enquiries can be which are designed to bolster and many people participating in the addressed to an FPP help desk at tertiary knowledge and provide program in such a short time. [email protected] TESTIMONIALS

WILL PHILLIPS

I have recently gained registration with job training that allows discussion the Queensland Valuers Registration and practical applications of the Board and completed the Australian information provided. Unlike some Property Institute’s Future Property courses, the material was practical Professionals (FPP) program. I am and each module provides a distinctly now seeking Provisional Membership different set of information. (Residential Property Valuer). After As an example, the Preparation receiving my Provisional Membership, I for Professional Interview module intend to move away from the valuation gave me practical information on of developments and specialise in the the requirements of an application valuation of single dwellings, as this for membership with the Australian has always been my goal. Property Institute, as well as an I found the FPP program extremely easy-to-understand explanation of the thorough and an invaluable resource in interview process. It was an extremely my career advancement. Not only did useful resource and undoubtedly will it refresh my study and research skills, help me well in to my career. but it gave me an entirely new body of I would highly recommend the knowledge which can now be used as a program to any budding property reference tool as my career progresses. professional who understands the The FPP program is a very value of building their career on effective learning tool, particularly the best possible foundation of when combined with quality on-the- knowledge and skills.

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678-679_FPP_Program.indd 679 12/7/2012 5:15:44 PM SUSTAINABILITY SUSTAINABILITY BIG WINS AT A LOW COST Investa has been on the sustainability path for several years now, releasing its first Sustainability Report in 2009. Stephanie McDonald spoke to Beck Dawson from Investa about what the company is now doing to help the sustainability cause in the property industry.

pen any newspaper “But once you’ve done a lot of those new data tool Pulse. The automated or property magazine low hanging fruit [initiatives], as we feedback tool provides daily energy and you will see pages normally describe it, it’s much more performance information to devoted to the newest difficult to keep innovating to make building operators and is managed sustainable building new changes to continue that [energy by Buildings Alive, a company now usingO the latest technology. useage] trajectory downwards.” run by former head of sustainability However, on closer inspection, it Having been on the sustainability at Investa, Craig Roussac. is often large property organisations path for some time, Investa is now Investa building operators are able who developed the building, with aiming to make sustainability more to view data several months earlier than smaller companies getting left by the transparent. For example, it is making they would have otherwise, enabling way side in the sustainability race. the environmental performance of more efficient building management Investa is looking to change its portfolio publicly available on its and leading to lower energy use. that and make sustainability more website, with the aim of allowing “It takes a snapshot of what accessible for smaller companies building managers to compare happened yesterday in the building that don’t have big budgets. different buildings in their area to and compares it to a predicted model Beck Dawson, sustainability help improve energy efficiency. for how that building could have manager at Investa, says there are “It’s very difficult to get [building worked yesterday, given the weather several challenges the property managers] to really comprehend conditions of the day,” Ms Dawson says. industry continues to face in adopting exactly all the things that could be “They get an email at 7am and sustainable practices. For example, done and needs to be done to make it tells them whether the day before while the premise of sustainability an [improvement]. But when people was a good day, or a bad day, in terms is about creating more energy can visually see different buildings of electricity use. It gives building efficient buildings, Ms Dawson says placed against each other on an operators an opportunity to more companies are now also competing environmental performance basis, dynamically modify the settings for the to do “something different” as well. they can actually physically see that building and learn how best to run it.” “The biggest challenge for Investa one building’s doing much better Building operators can also compare on sustainability is keeping it fresh than another,” Ms Dawson says. their building with others in the area. and looking at how we improve This can then lead to building “That comparability enables our the environmental performance of managers questioning what initiatives people to work together to become buildings. Despite the fact it’s been a they could undertake to improve the more effective in the way they manage long journey already … it’s relatively building’s energy performance. buildings,” Ms Dawson says. easy to make quick wins and make Investa also developed a new Ms Dawson concedes each sector quite significant savings every year engagement process with building of the property industry is dealing that you try it out,” she says. managers in 2011, making use of the with sustainability differently.

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“The real challenge is how to achieve it…” Ms Dawson says. next few years. That value will, of transfer that down through all layers of “There should be some competitive course, be determined at the end the property industry. That transfer of tension, unquestionably, [and] we of the day by our customers and knowledge is starting to happen to other need that to keep driving change, our clients in our tenants, home parts of the industry,” Ms Dawson says. but bringing it up [through] the buyers and people working on However, she admits that sustainable echelons is very important for industrial developments, etc.” practices are much easier to implement everyone to help support it.” Ms Dawson says improving the for larger companies than for smaller Ms Dawson says there needs to energy efficiency of buildings can companies, with competitive tension be more transparency in the industry now be implemented for little or no driving large organisations to compete and making more information public cost, but can have significant benefits. and can lead to an unwillingness to could help to stamp out greenwash. For example, she says energy, water share information across the industry. For example, companies could detail and greenhouse gas emissions can “But without that competitive what metrics they use to achieve be easily improved through better tension, you could argue that the environmental benchmarks. This management of a building. industry wouldn’t have gone anywhere process would not only benefit the Data information tools can also near as far as they have looking at wider property industry, but also be a cost-effective way of improving sustainability if there wasn’t someone the company releasing information knowledge and sustainability else to compete against in order to publicly, according to Ms Dawson. opportunities, according to Ms “I think tenants can certainly Dawson, and many technology benefit from having more transparency improvements in a building can be about comparing buildings and structured to be cash-flow positive. organisations. The company itself, in “A lot of the time it’s about my experience, benefits too because being smart and sensible about the it then gets focused on the things way things are approached and not that really matter,” she says. “When necessarily going in and expecting it you can see what’s happening more all to cost money, which I think puts clearly, then everyone can focus their people off from even thinking about attention where it’s really required.” it and trying it,” Ms Dawson says. Moving forward, she believes the THE COST MISCONCEPTION increasing cost of energy prices and Sustainability has typically been the carbon tax will mean companies associated with an added cost will need to make a significant shift in to developing a new building or their mindset towards sustainability. implementing initiatives in existing The business case for environmental buildings. However, while Ms Dawson initiatives will also continue to says that is no longer the case, building improve each year, Ms Dawson says. the business case for sustainability is “For people who have been a challenge the industry will continue working on energy efficiency for to face in the coming years. a long time, the carbon price has “I think in a lot of parts of the had far less of an impact than it might property industry, people have a have. For organisations who have really tendency to suggest that sustainability not started their energy efficiency must cost you money instead of being journey, then financially, it makes more something that really adds benefits sense for them to tackle issues and look and tangible value to everybody at how they make energy savings into in the chain or everybody in the cost savings in their business now more investment trajectory,” she says. so than they ever did before,” she says. “Looking at how it creates value “So I think it’s a good reason to start BECK DAWSON is the really big challenge in the on the journey if you haven’t already.”

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* YOU’VE BEEN DISCLAIMED

MICHAEL NIXON BORHAN BORHANI [email protected] [email protected]

Mr Nixon is partner at Mills Oakley Lawyers in the Brisbane Mr Borhani is a graduate, property and commercial, property and commercial team where he specialises in at Mills Oakley Lawyers and is currently acquisitions, disposals, leasing, industrial, retail and working in the firm’s Brisbane office. commercial development, agricultural and the property aspects of commercial transactions. He is dual qualified, being admitted in England and Wales and Australia.

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IN THE MATTER OF WILLMOTT FORESTS LTD (IN LIQUIDATION) [2012] VSCA 202

INTRODUCTION Act 2001 (Act) to disclaim a tenant’s the leases on the basis that they Imagine for a moment that you run a interest in a lease. However, the were contracts with obligations and successful family business from retail use of this power by a landlord liabilities that needed to be relieved. premises in which you are a tenant. to disclaim a lease is novel and Historically, a long-term lease You’re a good tenant – you always previously untested in the courts. created a proprietary interest in pay the rent on time and enjoy a Consequently, Willmott is now the property that went beyond that of a good relationship with your landlord. leading (and only) authority in the area mere contractual relationship between One day you receive news that your of disclaimer of a landlord’s interest the landlord and tenant. Roman law landlord is insolvent and liquidators in a lease. The authority is currently recognised that a tenant was entitled to have been appointed. You believe that liquidators may disclaim leases security of tenure2, as did the common your business will continue to trade with the effect of extinguishing both law in the relationship between and be safe due to your security of a tenant’s proprietary interest in the feudal lords and vassals occupying tenure pursuant to a registered lease. premises and its contractual interest. property3. The effect of this proprietary Think again. A few weeks later interest was to provide remedies to a the liquidator disclaims your lease in BACKGROUND tenant that trumped the contractual preparation for putting the premises on Willmott involved the liquidation relationship between the parties. the market with vacant possession for of a landlord company that was At the centre of the argument a quick sale. You are required to move the responsible entity and manager between the parties is the extent to which out, find new premises on similar terms of multiple forestry investment a disclaimer of a lease by a landlord’s and persuade your financier that they schemes. The landlord leased its liquidator terminates a tenant’s rights to should continue to back your business. land to members of the scheme for occupy the premises. That is, does such a Establishing your business in a 25 years, who in turn grew trees disclaimer of a lease terminate all interests different location may be impossible. for future harvesting. The tenants of the tenant or does it only disclaim You can lodge a proof of debt and prepaid the rent for the entire term. the contractual rights (leaving the prove your losses as a debt in the After the landlord was placed in proprietary rights of the tenant intact)? landlord’s winding up, but chances liquidation, the liquidators applied to are you will recoup very little. court under the Act1, seeking approval THE ACT You have been disclaimed. to disclaim the leases so the properties s 568(1) of the Act provides, amongst You might think the scenario could be sold with vacant possession. other things, that subject to that section is a fictional nightmare, but the The Act provides a mechanism a liquidator of a company may disclaim decision of the Court of Appeal in by which a liquidator can relieve the property of a company that consists of: the Victorian Supreme Court in obligations or liabilities of a company the matter of Willmott Forests Ltd that would otherwise prolong the “(a) land burdened with (in liquidation) [2012] VSCA 202 administration of the company’s onerous covenants; or… (Willmott) has made it a reality. affairs or delay the payment of a (f) a contract;” Until Willmott, courts had, ad dividend to creditors. The liquidators nauseam, applied the powers of sought, amongst other things, to s 568D of the Act provides that liquidators under the Corporations employ these mechanisms to disclaim the effect of the disclaimer is to

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terminate a company’s rights, interests, liabilities and property for or in respect of the disclaimed property. Third party rights or liabilities are only affected so far as is necessary in order to release the company or its property from liability. Further, a person aggrieved by operation of the disclaimer is taken to be a creditor of the company and may prove the losses suffered by the disclaimer as a debt in the company’s winding up. MICHAEL NIXON BORHAN BORHANI AT FIRST INSTANCE The court at first instance found: of leases” in recent law which detracts obvious effect of this decision is that a from the notion that a lease confers tenant’s tenure in a lease is now only • while the disclaimer of the leases an interest in land that survives as good as the landlord’s solvency. by the landlord’s liquidators could the contract creating the lease6 terminate the contractual rights • a tenant’s proprietary interest is EFFECTS OF THE COURT of the tenant, such disclaimers governed by the contract of a lease7 OF APPEAL DECISION do not extinguish the tenant’s • if a lease is disclaimed, the proprietary Landlords and tenants: proprietary interest in the land interest is also extinguished8 Landlords may find themselves having (however, the proprietary interest • there is a continuum between simple to provide warranties and indemnities of the landlord would be brought and complex contracts and it is about their solvency. Further, prudent to an end by operation of s 568D) important to place a lease agreement tenants (or their financiers) may require • a tenant’s proprietary interest in the proper commercial context a landlord to provide security to the could not be characterised as a tenant, ensuring they rank above debts liability or encumbrance on the These findings overturned the of the landlord’s unsecured creditors lessor’s property (and therefore not decision of the Supreme Court and in the event of the landlord’s winding caught by s 568D of the Act, which established the position that the up. Appropriate due diligence will provides that a disclaimer only landlord’s liquidator may disclaim need to be undertaken by a tenant terminates the landlord’s rights, a lease and extinguish a tenant’s with respect to a landlord’s solvency interests, liabilities and property)4 contractual and proprietary interest in prior to entering into the lease. land subject to a lease. If the lease falls Consequently, a disclaimer by a in these circumstances, the tenant’s Valuation and financing: landlord’s liquidator would not bring a estate falls with it. The Court of Appeal A tenant’s financier will be required tenant’s proprietary interest to an end. left some room for movement. It to reassess its willingness to provide acknowledged9 previous authority10 that finance to a tenant. If willing, the terms ON APPEAL a continuum existed between leases that of finance may be less favourable to The Court of Appeal disagreed reflected complex commercial contracts compensate for the loss of security the on the grounds: and those that, by their terms, exclude financier would have otherwise enjoyed conventional contractual clauses. in a lease or a re-entry deed. Valuers • “liability”, as used in s 568D, has The implications of this are (and will need to factor in the insolvency risk a wide meaning and includes the this has yet to be tested) that the of a landlord when valuing a tenant’s liability of a landlord to provide more the lease documents rely on interest in leases for security purposes. possession and quiet enjoyment, contractual remedies and reflect a both of which are not possible if contractual relationship between the Creditors of insolvent landlord: the landlord disclaims its interest parties, the more likely a liquidator Some commentary has suggested in the lease and property and may successfully disclaim a property. that the Court of Appeal’s decision the tenant continues to maintain The use of a liquidator’s disclaimer may benefit creditors of an insolvent a proprietary interest 5 power to disclaim a lease on behalf of landlord, as a disclaimer of lease would • there has been a “contractualisation a landlord is new. The immediate and provide an effective mechanism to

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realise a landlord’s property with to vulnerabilities to an extent not CLOSING REMARKS a greater return. However, as the intended or anticipated by parliament Provided the application for special tenant’s losses may be a debt provable and previous decisions by the courts. leave to appeal to the High Court is in the company’s winding up, an The special leave question is clearly successful, the outcome of the appeal to aggrieved tenant’s participation as poised to demarcate the difference the High Court will have a great impact an unsecured creditor may outweigh in the proprietary rights of landlords on the landlord/tenant relationship. the increased value of the property. and tenants in a lease under the Act. If the court upholds the Court If successfully argued, this will have of Appeal’s decision, tenants (and Equitable mortgages and charges: two significant effects. Firstly, it their respective stakeholders) As the Court of Appeal’s interpretation will dislodge the Court of Appeal’s will need to re-evaluate their risk of s 568(1) of the Act permits a mono-characterisation of a lease as a exposure and negotiate adequate liquidator to disclaim an entire contract “contract” under s 568 of the Act11. security into their lease. (as opposed to only the property Secondly, the “contractualisation of It also opens up options for of the company in liquidation), it leases” becomes irrelevant insofar as the liquidators to improve the value may be possible for liquidators to contractual nature of leases is cause for of the company in liquidation by extinguishing the property rights of the tenant and selling the property AT THE CENTRE OF THE ARGUMENT with vacant possession. This will be of BETWEEN THE PARTIES IS THE EXTENT particular interest in scenarios where: TO WHICH A DISCLAIMER OF A LEASE BY A LANDLORD’S LIQUIDATOR TERMINATES A • tenants have pre-paid rent TENANT’S RIGHTS TO OCCUPY THE PREMISES • premises are leased at below market rates or leases contain onerous landlord covenants disclaim equitable mortgages and determination between parties to the • premises have development charges, grouping such a mortgagee contract (by use of ordinary contractual potential which is improved or or chargee with unsecured creditors. principles), not the exercise of a accelerated by being able to sell the statutory power to disclaim a lease12. premises with vacant possession APPEAL TO THE HIGH COURT This approach, if accepted, will The tenants in Willmott have lodged a only allow a liquidator to: disclaim the If the Court of Appeal’s decision is special leave application to appeal the property of the landlord (not the tenant) overturned, the security of a tenant’s decision of the Court of Appeal to the in the lease; and affect the property tenure against an insolvent landlord High Court of Australia. The special of the tenant so far as is necessary will be reinstated to the position leave question has been phrased: “Did in order to release the company enjoyed (and adopted by the judge Parliament intend the liquidator of a and its property from liability13. at first instance in this case) before land-owning company to have power In this regard, tenants will still Court of Appeal’s decision. under s 568(1) of the Corporations Act be required to make the case that 2001 … to extinguish the property possession and quiet enjoyment of Mills Oakley Lawyers are currently rights of the company’s tenant”. the property is not within the broad acting for the tenants and have The tenants will argue that the definition of “liability”, and in any sought leave to appeal to the Court of Appeal has exposed tenants case, not a liability of the landlord. High Court on their behalf.

References 1 s 511 Corporations Press, 2004, page 67. 7 Ibid 11 Re Willmott Forests [2012] VSCA 202 at [75], Act 2001 3 Re Willmott Forests Ltd 8 Ibid [39] Limited [2012] VSCA regarding the distinction 2 Sein P, Roman Law [2012] VSC 29, [11] 9 Ibid [51] 202, [17] between a disclaimer by in European History, 4 Ibid [16]. 10 Progressive Mailing 12 The argument statute and disclaimer Cambridge, 2004, 5 Re Willmott Forests House Proprietary by minority (but not by contractual right is page 82; Johnston D, Limited [2012] VSCA Limited v Tabali dissenting) judgment turned upon itself. Roman Law in Context, 202, para [37] Proprietary Limited of Redlich JA in Re 13 s 568D Corporations Cambridge University 6 Ibid [52] (1985) 157 CLR 17 Willmott Forests Limited Act 2001

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NEW ZEALAND LOCAL GOVERNMENT AND SUSTAINABILITY IN COMMERCIAL BUILDINGS

Sustainability has been a topic of concern since life first formed on the planet. However, it is becoming increasingly important as the world’s population has exploded, in sync with our industrial capacity. Mark Perkins and John McDonagh examines local government bodies in New Zealand to gauge the extent of their sustainability initiatives.

ince the publication in 1987, which includes the most widely governments chapter 28 of Agenda 21 of Rachel Carson’s recognised definition of sustainable is most important, setting out why local Silent Spring in 1962, development: “Sustainable development government action is so important to sustainability has been of is development that meets the needs of sustainable development (Strong & increasing importance in the present without compromising the Dowdeswell 1996). WesternS culture. There has followed ability of future generations to meet decades of widening environmental their needs.” THE NEW ZEALAND SITUATION discourse with the World Commission The commission then organised The New Zealand government has on the Environment and Development the 1992 summit on the environment enacted internationally progressive (WCED) being established in 1983. in Rio de Janeiro and produced sustainability legislation (Johnson, 1997 The WCED became known as the Agenda 21 setting out a structure for 2008, Suzuki & Boyd 2008). Notable Brundtland Commission and produced addressing issues concerned with amongst these have been the Resource the seminal report Our Common Future sustainable development. For local Management Act 1991 (RMA), the

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Building Act 2004 (BA) and the Local In 2005, the Year of the Built as all government departments being Government Act 2002 (LGA). Environment, the Hon. Marion Hobbs, directed to meet certain targets. The RMA provides the overarching as Minister of the Environment, In November 2008 a National Party- legislation making environmental said: “The year forms an important led government ousted the incumbent sustainability a key consideration for part of the government’s Sustainable Labour Party government. A key election all development, while the BA is much Development Programme of Action pledge was to reform the RMA and to more specific in this regard for the and Urban Affairs portfolio. It reflects this end the national government passed built environment. The LGA, in turn, the government’s commitment to the Resource Management (Simplifying devolves much of the responsibility for work towards ensuring quality built and Streamlining) Amendment Bill in implementing sustainable development environments throughout New 2009. The New Zealand Parliamentary policies to local authorities and for Zealand”. The then Labour government Counsel Office said: “This bill represents assessing their impact (Department of continued to implement various policies the first of two phases of the reform of the Internal Affairs, 2008). through modifications to the BA, as well Resource Management Act 1991. Phase

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one seeks to improve processes under the adopted criteria for the priority planning of the commercial development sector principal Act that have been found to be processing for green buildings. Here the (Oberle & Sloboda 2010). These vary burdensome and costly,” (New Zealand criteria were: “Building construction from US cities like Cincinnati providing Parliamentary Counsel Office 2009). projects that meet or exceed a Gold a 75% exemption on the improved value One of the key aims is to streamline the Rating using the LEED Building Rating of the project for 15 years (Phillips resource consent process for matters System...” (Macris 2006). 2007) to Rockville, Maryland, allowing of national significance. While no US$2 million in tax credit and fee individual commercial building is likely Allowing density bonuses rebates or Becker & Becker receiving a to fall into this category, the agenda for incorporating certain US$4 million tax credit from New York underlying the new legislation will be sustainability features State on its US$4 million investment in important in setting a national tone for Some local authorities have allowed energy conserving technology. sustainable development. developers to increase the density of How well property tax relief works their projects in return for incorporating is problematic. Unless the developer is RESEARCH AIMS AND OBJECTIVES ESD features (Bevege 2007; Popovec a long-term owner-occupier, the benefit The RMA has been in place for nearly 2006). Many councils tie the bonus to an of property tax relief may accrue to 20 years, but some have been concerned overall green rating (Phillips 2007). This the post development owner and/or at the lack of practical application of type of incentive has found favour as it their tenants as the tax relief is applied the principles espoused therein. The has no direct cost to the local council year-by-year. A variation has been used usual focus of the RMA is resource involved and may increase the property in both Berkley and Annapolis where use regulation, but it has been a matter land tax (rates) from the development. the local council provides a low interest of interpretation as to what, if any, However, others have expressed the view loan to finance the upfront costs of incentives or initiatives local government that “good planning is good planning” energy efficiency upgrades and the should undertake in order to help fulfil (Bevege 2007) and that concessions interest payable on the loan is placed on their responsibilities under the RMA. on height or site coverage should not the rates bill. If the property is sold, the Given this scenario, the objective of compromise these principles. loan moves with it (Meinzen 2008). this study was to try and ascertain what Another issue restricting the initiatives to promote the sustainable Waiving part of the use of tax relief is that it is usually design of commercial buildings have development levy to recognise unattractive from a local body’s either been undertaken, are being consid- lesser use of infrastructure perspective in that they are nearly ered, or have been considered and rejected Buildings that incorporate always searching for cash to balance by the various local authorities within NZ. sustainable design features often immediate community demands while use less infrastructure, such as the reduced infrastructure costs are a INTERNATIONAL INITIATIVES stormwater, sewerage and roads, long-term saving (City of San Francisco AND INCENTIVES which are usually provided by the CA 2008; Dicken 2008; Greene 2006; local body and partly funded by US Conference of Mayors Climate Expediting permits and development contributions (Crabbe Protection Agreement 2009b). It can resource consents 1997). This is the case in NZ, but represent “loading up other sectors One way to encourage commercial there is not always a clear relationship of the economy or creating deficits in developers to ‘green’ their buildings between the levy and its use (Knox & the municipal income tax balance,” is to reduce the time to process Smith 2006). This has led to litigation (Braun 2007). resource and/or building consents. and the law associated with this Where this time reduction is linked to issue is expanding as developers and Joint ventures with private environmentally sustainable design, it is territorial authorities seek clarity on enterprise and academic a strong incentive for these features to the relationships (Davidson 2009; institutions be incorporated (Knox & Smith 2006; Oberle & Sloboda 2010). Many environmentally sustainable Oberle & Sloboda 2010; Popovec 2006). design concepts involve relatively Bevege reports that at least six US Providing property tax relief in new or uncommon technology. As cities have recently introduced this return for ESD features a promotional initiative some local approach (Bevege 2007). In 2006 the San The use of local government tax relief councils have engaged with private Francisco City Planning Department has been well received by certain sectors enterprise and/or academic institutions

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to research and demonstrate innovative financial instruments to stimulate solutions (Bevege 2007; City of Chicago sustainable construction, the other key IL 2008; Skett & McDonald 2007). stimulus comes from “...communicative As an example the greater Vancouver instruments (model projects and regional district engaged Simon Fraser covenants),” (Bueren & Priemus 2002). University to produce The Economics of Green Buildings. Similarly, the City Giving awards to high quality of Greater Bendigo partnered with the sustainable buildings Australian Industry Group and Coliban This is a small and low-cost initiative Water to launch a business network that but one that gets the attention of private has achieved “...significant reductions sector developers and builds on ESD’s in water and energy use...” (Skett & social capital (Beatley & Newman 2009). McDonald 2007). Education courses for council Modernising building codes staff on sustainable design A new technology or material may not To some degree the provision of ESD have been through the time consuming education is a prerequisite to local and expensive process required to be authorities setting in place other incorporated into the relevant building initiatives (City of Austin TX 2007; code. This is particularly true in NZ, U.S. Conference of Mayors Climate given problems with leaky buildings Protection agreement 2009a).This is following code changes in the 1990s. recognised in the NZ context in the Subsequent code amendments resulted interagency discussion document as in much less flexibility in materials one of the many barriers to sustainable and design features. This has been development. In the executive summary, exacerbated by local governments’ “fear the first barrier identified is “capacity of litigation” as a consequence of the and capability issues in all levels of leaky building problem (Davis 2005; government...” (Sustainable Urban Kibert 2008; McLennan 2008). Even so, Development Unit 2008). some local authorities have teamed up with other institutions to examine how Act as a clearing house/network building codes might need alteration to centre for sustainability concepts allow sustainable design technology. Acting as a clearing house or networking centre is being tried by various local Providing technical assistance governments, but as noted earlier, This initiative is similar in philosophy resourcing both from a financial and to modernising building codes. It expertise perspective is an issue. In involves the local body recognising countries where central government has the newness of the concepts and provided local government funding for taking a leadership role to educate sustainability initiatives, networking and the commercial sector. However, clearing houses have been established. resourcing issues have been found But once the funding is terminated to be a major constraint in councils’ the local body often cannot afford to ability to implement such ESD policies keep resourcing the program. Those (Greene 2006; Oberle & Sloboda 2010; that have continued have tended to be Rutherford 2006). the larger metropolitan governments In examining the barriers to that have the tax base to support such sustainable construction in the a program (Beatley & Newman 2009; Netherlands, Bueren and Priemus Bueren & Priemus 2002; Cole, Miller, & argue that apart from providing Schroeder 2007; Davis 2005).

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Percentage The results in this paper focus solely Total possible Responses possible on district and city councils, rather District councils 57 24 42% than regional councils and unitary authorities City councils 16 8 50% Table 2 sets out the responses to Regional councils 12 5 42% each survey question and follows an analysis of these responses. Question 15 Unitary authorities 4 2 50% is separated as this is not an initiative Totals 85 39 46% available to building owners or the development community.

TABLE 1: RESPONDENT BY LOCAL AUTHORITY TYPE QUESTION 1 Building consents or resource consents are expedited where Public education and workshops Local government making a the design meets certain Public education is a subset of the certain level of sustainability predetermined sustainable initiatives above but may require a compulsory design targets? smaller resourcing commitment. Many central governments have Sometimes the education is aimed at the put in place ESD requirements on general public but at other times it is to all new government leases and new facilitate technical discussion amongst buildings built for their use. Some local design professionals (Cole et al. 2007). governments have done the same. Such ALL TERRITORIAL AUTHORITIES Never Probability An example is provided by the greater policy measures send a clear message % % Vancouver regional council, which about local governments’ leadership considered near zero partnered with Simon Fraser University in this field, as well as providing the Q1 12 35.3% 11 32.4% to host a series of four public lectures opportunity to engage productively in Q2 19 55.9% 11 32.4% and workshops (Cameron 2004). some of the initiatives mentioned (City of San Francisco CA 2008a; City of Q3 16 47.1% 9 26.5% Green collar job training Vancouver BC 2009; Cole et al. 2007; Q4 21 61.8% 8 23.5% Green collar job training is one of Environment News Service (ENS) 2008). the major planks of the American Q5 17 51.5% 7 21.2% Recovery and Reinvestment Act (ARRA), SURVEY OF NEW ZEALAND LOCAL Q6 23 69.7% 5 15.2% which was enacted by the Obama AUTHORITY INITIATIVES administration as a policy to help their A first step in measuring success in the Q7 15 45.5% 11 33.3% economy recover from the GFC. “Green move to a more sustainable commercial Q8 19 57.6% 8 24.2% collar jobs are blue collar jobs in green built environment is scoping the extent Q9 16 47.1% 12 35.3% businesses – that is, manual labour of existing practices. This study did jobs in businesses whose products and that by surveying all local government Q10 20 60.6% 7 21.2% services directly improve environmental bodies in NZ to gauge the extent of their Q11 13 39.4% 12 36.4% quality,” (Pinderhughes 2007). Even consideration of, and involvement in, before the GFC, Oakland, California set the incentives and initiatives reviewed Q12 24 72.7% 5 15.2% up a joint venture with private enterprise above. A disadvantage with such a survey Q13 13 38.2% 8 23.5% to target those hard to employ where is that one cannot ask extra questions of Q14 24 72.7% 4 12.1% it attempts to teach the hard and soft the respondents to clarify their answers. skills necessary to hold down a job and Another is that the options offered to Total 252 53.8% 118 25.2% give work experience in the expanding answer each question are limited to Q15 13 39.4% 4 12.1% green job sector. For example, installing facilitate analysis of the results. This was TOTAL insulation, erecting solar cells and waste partially overcome by providing space for 265 52.9% 122 24.4% ALL recycling on construction sites. a qualitative response after each question.

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While some local authorities have QUESTION 2 QUESTION 3 given thought to this possible Offering a development density Waiving part of the incentive, those estimating a bonus for incorporating certain development levy to recognise greater than 50% probability of sustainability features? lesser use of infrastructure by implementation is low, with 18% This incentive had the least likelihood of sustainable developments? of territorial authorities placing being implemented of all those examined While 20.6% of respondents themselves in either of the last (55.9% never considered, 32.4% have implemented this incentive, two categories. probability near zero) and the only one there are no other councils The comments of respondents that had not been implemented by any looking likely to implement it. revolved around two themes. Firstly, local authority. The relatively low density The comments indicate that it the councils’ lack of resources to and low land costs of development in is most often implemented in consider detailed policy issues that NZ could be an explanation. Many relation to stormwater or sewerage would be required to give effect to a central city sites are not developed to development and on a case-by-case policy. Secondly, energy and water the maximum density permissible in basis. Typically it would be: “If were most frequently mentioned any case and similar density bonuses stormwater is dealt with on-site, then as areas where an incentive had for heritage building retention have met [the] levy is reduced or waived in been considered. with little success. relation to [a] portion of [the] levy allocated to stormwater.” QUESTION 4 TABLE 2: RESPONSES TO INDIVIDUAL SURVEY QUESTIONS Providing property tax (rates) relief in return for particular Probability Probability Total no. % % Implemented % sustainable design features? under 50% over 50% answers Two councils had implemented the 5 14.7% 2 5.9% 4 11.8% 34 incentive but no more were indicating a high probability of doing so, and 2 5.9% 2 5.9% 0 0.0% 34 the great majority (85%) said it has 2 5.9% 0 0.0% 7 20.6% 34 never been considered, or if it has 3 8.8% 0 0.0% 2 5.9% 34 then there is a near zero probability of implementation. There were 3 9.1% 3 9.1% 3 9.1% 33 very few written responses but two 1 3.0% 1 3.0% 3 9.1% 33 respondents mentioned the protection of green spaces as a feature for which 1 3.0% 2 6.1% 4 12.1% 33 property tax relief may be given. 3 9.1% 2 6.1% 1 3.0% 33 QUESTION 5 2 5.9% 0 0.0% 4 11.8% 34 Undertaking joint 1 3.0% 1 3.0% 4 12.1% 33 venture(s) with private enterprise to demonstrate 3 9.1% 2 6.1% 3 9.1% 33 sustainability features? 2 6.1% 1 3.0% 1 3.0% 33 While over 18% of councils had 3 8.8% 4 11.8% 6 17.6% 34 implemented or would seriously consider such a proposal, there 2 6.1% 2 6.1% 1 3.0% 33 were also comments saying that it 33 7.1% 22 4.7% 43 9.2% 468 was not for a council to be seen to 5 15.2% 2 6.1% 9 27.3% 33 be promoting a particular private enterprise. Where specific initiatives 38 7.6% 24 4.8% 52 10.4% 501 were mentioned it was in relation to stormwater or sewerage.

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QUESTION 6 QUESTION 9 These could include training in land Undertaking joint Providing technical assistance restoration techniques, the correct venture(s) with academic in sustainability to private method of installing solar heating institutions to demonstrate enterprise design teams? panels, retrofitting waterless urinals, sustainability features? While 11.8% of respondent councils correct installation of insulation, etc. While one respondent gave an example have implemented this initiative the Again, a low implementation rate was of such co-operation, most respondents great majority have not and are unlikely evident with only one city council appeared to never have considered such to do so. The clearly dominant reason having implemented such a scheme a possibility (69.7%), perhaps indicating from written responses was that many of and two indicating it as a realistic a lack of awareness of the extensive the councils do not have the resources or possibility. The comments followed academic research in this area. the expertise to do so. the same general theme as for most of Questions 10, 11 and 12 were the other questions, i.e. it was not their QUESTION 7 similar to those above and the results responsibility or there were not the Working with private enterprise are considered as a group – i.e. did resources to attempt such schemes. and/or academic institutions local authorities consider: acting as a to modernise building codes clearing house or network centre for QUESTION 15 and other regulations to sustainability concepts?; providing Does your territorial authority cope with new and innovative public education on sustainable design make a certain level of sustainable design features? of commercial buildings?; facilitating sustainability compulsory for its It is interesting that though uptake is still public workshops on sustainable own new or retroﬁ tted buildings? low, with only four implementations and design of commercial buildings? The answers show councils are more two high possibilities, local authorities These three questions drew similar aware of sustainable building issues appear more comfortable with this responses to the previous questions, with than might be first thought, given the approach. Many comments made said it few local authorities implementing such low implementation rate of the other was not for local authorities to make the initiatives. Predominant comments were initiatives queried. It appears councils building codes but to implement them, along the lines that it is not the council’s are more likely to adopt an initiative although some did see their ability to responsibility to offer such a service and if it has internal benefits rather than make submissions on any review of the “we are not a consultancy”. Other common encouraging the uptake of sustainability codes as something they could do. comments focused on the councils’ lack of practices by the private sector. Also, in resources. The one council that specified contrast to other initiatives, councils QUESTION 8 how it was being delivered said it was via of all sizes have considered and Giving awards or special general design advice notes. implemented sustainability initiatives for recognition to commercial their own buildings. buildings with high levels QUESTION 13 of sustainable design? Providing education courses for SUMMARY OF FINDINGS It had been anticipated that this initiative staff within your organisation on All but one of the initiatives, “Offering may have been quite widely implemented sustainable design features? a development density bonus for as it costs virtually nothing and requires While the adoption rate is still not incorporating certain sustainability very few other resources – which are the high (17.6%), it is much more than for features”, have been implemented two most commonly mentioned barriers public education initiatives, with almost somewhere within NZ. This indicates to implementation. However, as can be a third of respondents likely to or are that NZ local authorities are searching seen from the results in Table 2, it has been implementing such a program. The far and wide in considering their implemented by only one local authority comments were also positive in terms of options. However, there were only 43 and there appears little chance of its wide expressing a likelihood that more will be “implemented” replies from 476 possible uptake by other councils. Part of the answer done for staff in the future. responses (34 local authorities x 14 to this was indicated by two comments questions), indicating that the degree which state sustainability awards are already QUESTION 14 of implementation is low. Further, one being given by national bodies such as Supporting green collar local authority stood out as having the Property Council of New Zealand. job training courses? implemented 10 of the 14 initiatives.

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Twenty-one of the local authorities had Another factor may be that the Party-led government has implemented no implementations at all, while the momentum of the established economic an ETS ahead of most of its major second most active local authority had paradigm, where growth is portrayed trading partners, but it has also initiated implemented three initiatives. as the solution to humanity’s problems a review of the RMA, which has the Excluding the most proactive local by increasing material wealth works potential to override environmental authority from the results means there against ESD change. Local authorities sustainability concerns in the name of were 33 “implemented” replies from can be more concerned with the the national good. the remaining 30 three local authorities implementation of traditional economic Given the difficulties in implementing or an average of one implementation development and the promotion of ESD in the commercial built per authority. If those that indicated social cohesion rather than sustainable environment, many argue that mandatory a likelihood of implementation being development (Baker & Eckerberg 2008). controls must be an important part greater than 50% are added to this result A major cause of lack of of the mix. That is a carrot and stick (22 responses) this lifts the average of implementation is a lack of clarity about approach and is increasingly common the two categories combined to still less who is responsible for precisely what. internationally. than two per local authority. Related to that situation is the fact that While the survey results reported As discussed earlier, finding ways sustainable design still has widely different here show a great deal of good will to make human activities sustainable interpretations. In the NZ context, this is towards the initiatives and incentives has taken on greater importance in reflected in the gap between the Resource possible to promote environmentally recent years. Consequently, a variety of Management Act and the Building Code, sustainable design in office buildings, pan-government organisations such as where local authorities have been given local governments are heavily reliant on the United Nations, the Organisation wide general sustainability objectives national political commitment before they for Economic Development and under the Resource Management Act but can bridge the gaps between overarching Co-Operation and the European Union have little influence over the Building policy and implementation at the have spawned institutions to guide Code which they are required to individual building level. national and sub-national governments administer (Howell & Birchfield 2010). to more sustainable practices. Notable That the survey supports amongst these with regard to local these contentions is revealed in a Graphical results, detailed methodology government is the ICLEI – Local number of different ways. Firstly, and references are included in the full Governments for Sustainability. the administration staff in NZ version of this paper presented at the Although NZ scores highly in the local government bodies often had European Real Estate Society Conference international literature in terms of trouble deciding who to send the in Edinburgh in 2012: http://eres.scix.net/ sustainability legislation, this survey survey questionnaire to. Secondly, 23 cgi-bin/works/Show?_id=eres2012_057&so found the actual implementation potential respondents who were sent rt=DEFAULT&search=Mcdonagh&hits=4 of sustainability initiatives by local the questionnaire declined to answer authorities in NZ to be low. The reasons any questions after opening it and Mark Perkins is the director of a identified for this follow those identified completing Section A. commercial and industrial property in international literature, with the Further evidence is given by the advisory service based in Auckland. Mr standout being a lack of resources fact that only one respondent had Perkins is a Green Star (NZ) accredited (financial and human resources). any mention of sustainability in their professional and he is currently a The question is why haven’t the position title. This last point is also development consultant to Kiwi Income necessary resources been allocated to a reflection of the lack of resources Property Trust. put the expressed sustainability rhetoric reported by many of the local authorities into action? in that one person often has multiple John McDonagh is associate professor It is clear that as one territorial roles to fulfil and it is only the largest in property studies at Lincoln University authority accounted for 23% of the local authorities that can afford to make near Christchurch. He has developed the sustainability initiatives implemented, a more specialist appointment. property asset management course for the progress often comes down to The future sustainability direction master of property studies degree and has individuals with vision and commitment of NZ government bodies is very much published and supervised post-graduate within a particular organisation. in question. The current National students in this field.

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GADGETS ON THE GO

GADGETS The iPad revolution has given professionals more options than ever before when it comes to mobile working. But Apple’s tablet is far from the only gadget that can boost productivity while on the road. ANZPJ takes a look at some of the newest gadgets to hit the market.

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TOSHIBA TABLET AT330 LIVESCRIBE SKY SMARTPEN With its 13-inch touchscreen, the Toshiba Livescribe’s range of smartpens let you Tablet AT330 is noticeably larger than an iPad and automatically digitise notes you write (on a special runs Google’s Android operating system. At around notepad) while also recording audio so you have a 344mm wide and 212mm tall, it feels like a giant. record of events. The new addition to Livescribe’s The tablet has an aluminium back with indented range is the Sky, adding Wi-Fi access and the ability circles, which means it’s easy to grip, but the bezel to automatically synchronise notes and audio to surrounding the display on the front didn’t feel Evernote. sturdy. There’s also a thin gap between the edge of The Sky is thicker than a regular pen, but not the plastic in this area, which easily attracts dust. uncomfortable to use. It has a speaker on the front GADGETS The size of the AT330 makes it a tough device to to play back recordings and there’s also a headphone hold and we found no comfortable way to balance it jack. A small screen on the front displays your in our hands. At almost 1kg, the AT330 is by far the recording time when you’re taking notes, tells you heaviest Android tablet on the market. Although this when the device is syncing with Evernote and shows has been designed for use in and around the home, a battery indicator. the weight will pose an issue for many users. You can charge the pen with a cable that you The screen is bright and clear, but it lacks the connect to a USB port on a computer. Livescribe says vivid colours and striking brightness that you can you’ll get four-and-a-half hours of battery life with find on other tablets. A number of apps are installed Wi-Fi switched on, but we could only manage just on the tablet out of the box, including Amazon below four. You’ll fare better (more than 10 hours) Kindle and Norton Security. However, none of the when you switch Wi-Fi off. If you record notes with AT330’s software has been optimised for the huge Wi-Fi off, the Sky will upload them automatically the display, leaving wasted space everywhere and most next time you turn Wi-Fi on again. of the pre-loaded apps were underwhelming. Evernote works on a range of devices, including The tablet’s performance is reasonably impressive Windows PCs, Macs, iPhones, iPads, Android devices but could be improved. We experienced occasional and within popular Web browsers. However, users lag when attempting basic tasks, like changing who are more familiar with Microsoft’s OneNote settings and scrolling through widget-heavy home will be disappointed their Livescribe notes can’t be screens, though all the games we played ran smoothly. integrated into other note taking applications. The AT330 has one of the worst cameras we’ve Evernote is free, unless you feel the need to buy seen on a tablet and almost all of the photos we took a premium subscription that boosts your monthly suffered from a lack of focus and a complete lack of upload quota to 500MB from the standard 60MB. detail. In our battery tests, the AT330 offered decent A 12-month subscription to Evernote Premium is performance, lasting up to seven hours. included with the 8GB Pro model of the Sky. Using the AT330 felt awkward, frustrating and We encountered a few bugs when synchronising unsatisfying. Although it’s relatively well-designed with Evernote, but overall the Sky is an impressive and performs reasonably, the extra screen real estate device if you find yourself regularly writing notes frequently felt wasted. during meetings. — Ross Catanzariti — Ross Catanzariti

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LENOVO THINKPAD X1 CARBON IPAD MINI Lenovo’s ThinkPad X1 Carbon is a notebook If the iPad Mini was a boxer, it would aimed squarely at business users. It’s well built, quite undoubtedly be the featherweight champion of the comfortable to use and performs well. world. It’s a durable 14-inch notebook with a carbon To put it simply, you’ll be astounded at how light fibre body and weighs only 1.4kg. Instead of a the iPad Mini feels when you pick it up for the first standard ‘spinning’ hard drive, it uses a ‘solid-state time. The iPad mini has a 7.9-inch touchscreen with drive’ (SSD) that has no moving components. This a resolution of 1024x768 pixels; this is the same means it can withstand accidental knocks better than number of pixels as the iPad 2, so it’s not a ‘Retina’ GADGETS most notebooks. It also has a spill-resistant keyboard. display like you would find on more recent full-sized The model of the ThinkPad X1 that we tested was iPads. more than powerful enough for office and Web tasks, Apple claims the battery will last for 10 hours as well as playing multimedia files and even media of Web browsing over Wi-Fi or 10 hours of video encoding. The SSD is extremely swift, making file playback. In our testing we found these claims operations quick. pretty close to the mark and generally experienced When we used the Carbon for casual Web surfing, over nine hours of battery life. Even with heavy the odd YouTube video and office document creation use consisting of Web browsing, watching videos, tasks, it lasted a little over six hours. This was with listening to music, the odd game and constant email, screen brightness just under the halfway mark and the iPad Mini easily pushed through a day-and-a- with the keyboard backlight off for most of the test. half of use. How much life you get out of the standard battery The iPad Mini is relatively snappy and responsive will depend on your usage and power scheme. to use, but it’s not as powerful as the fourth generation One great feature is charging time: in our tests, iPad. The Mini won’t be as quick as its bigger brother it reached 80% capacity in about half-an-hour and it when it comes to opening apps, it takes a little longer took just over an hour to charge completely. Another to load graphically intense games and it is a little handy feature for business users is the integrated SIM slower to populate app lists in the App Store, but card slot: you can slot in a SIM from a telco and get everyday tasks aren’t really affected. Internet access without resorting to using a mobile A more expensive 4G compatible version of the broadband modem plugged into a USB port. iPad Mini is available and it will work with the 4G The notebook also has better than average security networks currently operated by Telstra and Optus. features, including an integrated fingerprint reader. At $369 for the entry level 16GB Wi-Fi only model, The main flaw is the screen. It doesn’t have a the iPad Mini is $120 more than Google’s competing glossy finish, which is great if you’re working in an 16GB Nexus 7 tablet. office because it helps minimise reflections, but it has If you can live with the non-Retina display, the shallow vertical viewing angles: depending on the upside of that extra initial outlay is a fantastic app angle at which you are sitting relative to the screen’s ecosystem that no other tablet manufacturer can height, you might end up having to tilt the screen a match – and that’s really where the iPad Mini truly lot in order to fix contrast and brightness issues. shines. — Elias Plastiras — Ross Catanzariti

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ACER ASPIRE S7 MICROSOFT SURFACE RT WINDOWS 8 NOTEBOOK Microsoft has created a wonderful tablet in The Acer Aspire S7 is a 13.3-inch notebook that runs the Surface RT. It contains things that many tablet Windows 8 out of the box and has a touchscreen. users have considered to be essential elements for What immediately sets the Aspire S7 apart from a great overall user experience, such as a built-in many other notebooks is the clean design. It’s a stand and expansion ports. Furthermore, the Surface minimalist design, with Acer taking off as many RT has been designed with productivity in mind features as possible from the keyboard area in and is available with optional keyboard covers. The particular. It is only about 14mm thick with the lid hardware is versatile and makes for a very enjoyable closed and it’s about as well made as a laptop can be. user experience, but the Windows RT software is GADGETS Aluminium has been used to construct a chassis and (so far) limited in what it can run and it could be a doesn’t flex when pressure is applied to it. The screen source of frustration for many users. is also protected by Gorilla Glass 2 on both sides of The Surface RT is a 10.6-inch tablet that weighs the lid and the notebook weighs just 1.3kg. 700 grams on its own and 900 grams if you attach Our test model made using most office apps the optional Touch cover. The two covers that are effortless and the notebook can even be used for available include the $139.99 Touch cover, which is a tougher tasks such as transcoding video files and 3mm thick screen cover with a touch-based keyboard encoding music files. It’s even adequate for some and the $149.99 Type cover, which is a thicker screen photo editing. When using the S7 with a balanced cover that has tactile keys on it. The latter is better for power profile for Web browsing, document creation, serious typing, while the former is useful for when photo viewing, YouTube and some gaming, we got you want to type a quick email or use the built-in four-and-a-half hours of battery life out of it. touchpad to move the pointer around the screen. One of the most unusual features of this notebook You can’t load any old Windows software, and is the display, which is a touchscreen. The screen was this is one of the major drawbacks. In order to install responsive when we used the new touch gestures software under Windows RT, you must go through supported by Windows 8, such as swiping from the the Microsoft Windows store. Not being able to right to bring up the context-sensitive Charms bar. install regular Windows programs on the RT is made We used the touchscreen on the S7 more than we all the more frustrating by the fact that the interface thought we would and it was a good way to navigate looks exactly like Windows 8. It even has a desktop the Windows 8 Start screens to browse photos and component. scroll Web pages. If you’re after the full Windows experience on a Overall the Acer Aspire S7 is a lovely machine, tablet, you’ll be disappointed, and the new Windows albeit not a perfect one. It feels good and it looks 8 interface does take some getting used to. However, good, but we weren’t impressed by the battery life, we think the Surface RT is worth considering if you the keyboard and the touchpad. That said, we’re don’t already have a tablet, if you don’t mind that mostly pleased with what Acer offers straight out of it can’t run regular desktop applications and if you the box and think the S7 is quite a versatile notebook want something with a semi-familiar interface rather for running Windows 8. than joining the iOS or Android camps. — Elias Plastiras — Elias Plastiras

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AUSTRALIAN CAPITAL TERRITORY NEW SOUTH WALES

COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION Ground Floor, 21-23 Marcus Clarke Street, Canberra City ACT 2601 Level 12, Grosvenor Place Ph: 02 6257 2121 Fax: 02 6225 7350 225 George Street, Sydney NSW 2000 Ph: 02 9257 0222 Fax: 02 9347 0794 Paul Powderly AAPI State Chief Executive William Doherty AAPI Managing Director Matthew Curtis AAPI Director Dwight Hillier AAPI National Director Robert Rixon AAPI Director Ben Wicks AAPI Director Michael Thomson AAPI National Director - Hotels & Leisure Certiﬁed Practising Valuers www.colliers.com.au Edward Watts FAPI Director Paul Moschione AAPI National Director - Healthcare & Retirement Living David McLennan AAPI Director - Retail

Canberra Level 42, Northpoint, 100 Miller Street, North Sydney NSW 2060 Ph: 02 9957 6611 Fax: 02 9957 2990 (02) 9292 7400 Andrew Graham AAPI Director Russell Briggs FAPI Director - Extractive Industries & Waste Management Greg Preston, LFAPI, Director Peter Tunks AAPI Director

• Valuation • Advisory • Research Level 5, Airport Central Tower, 241 O’Riordan Street, Mascot NSW 2020 Tel: 02 9317 4888 Fax: 02 9317 4974 • Corporate Real Estate Solutions James Bellew AAPI National Director • Property & Asset Management www.prp.com.au Peter Blakeley FAPI National Director

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NEW SOUTH WALES Sydney Suite 1403, 115 Pitt Street Sydney NSW 2000 Ph: 1300 793 687 Fax: 1300 793 688 Email: [email protected] Andrew Cowie AAPI Peter Raptis FAPI George Boulougouris AAPI Rockdale Suites 8 & 9/8 Ashton Square Cnr Princes Highway & Rockdale Plaza Drive Rockdale NSW 2216 Ph: 1300 793 687 Fax: 1300 793 688 Email: [email protected] Ian Bolewski AAPI Newcastle Suite 3, Level 5, 45 Hunter Street, Newcastle NSW 2300 Ph: 1300 137 018 Fax: 1300 137 019 Email: [email protected] George Boulougouris AAPI www.mvsvaluers.biz

Ian Blackall FAPI Steve Eccleston FAPI Paul McBurnie FAPI Richard Montague AAPI Level 4, 12 Mount Street, North Sydney Po Box 1741, North Sydney NSW 2059 WK Wotton & Partners ABN 72 083 750 476 Wayne Wotton AAPI Suite 49 Upper Deck Jones Bay Wharf Ph: 02 8920 3044 Fax: 02 8920 3055 Mobile 0408 933 385 26-32 Pirrama Road Pyrmont NSW 2009 Email: [email protected] Phone +61 2 9552 6633 www.bemproperty.com.au Fax +61 2 9552 6433 Carly Jones AAPI Email [email protected] Mobile 0407 262 580 Wotton Curtis & Partners ABN 72 083 750 476 David Curtis AAPI Suite 1 Level 1 3 Hopetoun Street 82 BALO STREET, MOREE Charlestown NSW 2290 C. A. Mobile 0407 778 954 PO Box 273 Newcastle NSW 2300 Northern NSW – Southern QLD Area Phone +61 2 4920 7111 BROWN Phone: (02) 6751 1100 Fax: (02) 6751 1766 Fax +61 2 4920 8659 ASSOCIATES Email: [email protected] Email [email protected] Member of the Paul D. Kelly AAPI - 0428 281 482 Real Estate Valuers Property Consultants Real Estate Asset Managers Network Property Group Clifford A. Brown FAPI - 0428 669 173

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Philip Edmonds B.Ec(Hons), FAPI Sydney Certified Practising Valuer (02) 9292 7400 Certified Practising Accountant Ph: 02/9960 8244 Gregory Preston, LFAPI, Director Suite 2D, 1 Gurrigal St, Mosman NSW 2088 Gregory Rowe, FAPI, Director e-mail: [email protected] Ben Greenwood, AAPI, Assoc. Director Neal Smith, AAPI, Assoc. Director www.edmonds-associates.com.au Ben Toole, AAPI, Assoc. Director Greg Mason, AAPI, Assoc. Director Property Services Rachel Cooper, AAPI, Assoc. Director • Valuation NORTHERN TERRITORY Newcastle | Central Coast • Advisory (02) 4922 0600 • Corporate Real COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION Robert Dupont, FAPI, Director Estate Solutions 396 Stuart Highway, Winnellie NT 0820 David Rich, AAPI, Director Tel: 08 8997 0888 Fax: 08 8997 0899 Joshua Smith, AAPI, Director • Property & Asset Heath Dowling AAPI Director Management Poasa Raqiyawa AAPI Valuer Ili Raqiyawa AAPI Valuer • Research Tim Selby AAPI Valuer Albury/:RGRQJD_:DJJD_*ULI¿WK Alex Maher AAPI Valuer Certiﬁed Practising Valuers www.colliers.com.au/darwin (02) 6041 1362 www.prp.com.au Daniel Hogg, AAPI, Director Michael Redfern, AAPI, Assoc.Director Darwin (02) 9292 7400 Greg Rowe, FAPI, Director 67 Grey Street South Brisbane QLD 4101 • Valuation • Advisory • Research GPO Box 1776 Brisbane QLD 4001 • Corporate Real Estate Solutions www.taylorbyrne.com.au • Property & Asset Management www.prp.com.au 'LUHFWRUV VALUERS & PROPERTY CONSULTANTS T Bartholomew D Burley RESIDENTIAL COMMERCIAL RURAL INDUSTRIAL C Caleo RETAIL LITIGATION FAMILY LAW ACQUISITION QUEENSLAND T Cavanagh J Clune 2IÀFHVLQ ''XIÀHOG QUEENSLAND *'XIÀHOG B Guest Brisbane Bundaberg Cairns Emerald Gladstone Knight Frank Valuations Queensland L Hamilton Level 11, AMP Place, 10 Eagle Street, Brisbane 4000 S Herbert Gold Coast Hervey Bay Kingaroy Mackay T: 07 3246 8888 F: 07 3229 5436 R Hewitt Rockhampton Roma Sunshine Coast Toowoomba A Hoolihan Townsville Gordon Price, AAPI Paul Kwan, AAPI Richard Nash, AAPI A Innes C Lando Timothy Uhr, AAPI Peter Zischke, AAPI Philip Willington, FAPI NEW SOUTH WALES J Lyons Ian Gregory, AAPI Samantha Macann, AAPI Tim O’Sullivan, AAPI P Lyons Ballina Coffs Harbour Grafton Inverell Daniel Billiau, AAPI Verushka Dimitrov, AAPI Mallory Lees, GAPI T Rabbitt P Turner Lismore Port Macquarie www.knightfrank.com.au

Knight Frank Newcastle Brisbane 2B/96 Lytton Road Sean Fox, AAPI East Brisbane QLD 4169 John Harrington, AAPI Ph: 1300 737 687 Fax: 1300 737 688 Ross Cooper, AAPI Email: [email protected] Suite 2, Ground Floor, 400 Hunter St, Newcastle NSW 2300 www.mvsvaluers.biz Phone (02) 4920 5700 Fax (02) 4927 1755 www.knightfrank.com.au Robert Pearson AAPI

Anthony Looby FAPI Director John Kendall, FAPI MJDavis Murray Liston AAPI Director Level 4, 345 Ann Street Colin Sorrenson FAP Brisbane QLD 4000 propertyValuations valuers & consultants Consultant T 07 3613 7394 293 Macquarie Street, Liverpool, NSW 2170 M 0434 227 253 Phone: (02) 9601 2500 Email: [email protected] NAVIGATING A BALANCED OUTCOME www.kendallsva.com.au

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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 'LUHFWRUV VALUERS & PROPERTY CONSULTANTS T Bartholomew • Valuation • Advisory • Research D Burley RESIDENTIAL COMMERCIAL RURAL INDUSTRIAL • Corporate Real Estate Solutions C Caleo RETAIL LITIGATION FAMILY LAW ACQUISITION • Property & Asset Management T Cavanagh www.prp.com.au J Clune 2IÀFHVLQ ''XIÀHOG QUEENSLAND *'XIÀHOG B Guest Brisbane Bundaberg Cairns Emerald Gladstone L Hamilton Knight Frank Valuations (SA) S Herbert Gold Coast Hervey Bay Kingaroy Mackay R Hewitt Rockhampton Roma Sunshine Coast Toowoomba James Pledge FAPI A Hoolihan Townsville Alex Smithson FAPI A Innes Nick Bell AAPI C Lando NEW SOUTH WALES Level 25 Westpac House J Lyons Jason Oster AAPI P Lyons Ballina Coffs Harbour Grafton Inverell Zac Vartuli AAPI 91 King William Street T Rabbitt Craig Barlow AAPI Lismore Port Macquarie ADELAIDE SA 5000 P Turner Rob Mitchell AAPI Lucy Graham AAPI T: +61 08 8223 5222 Paul Scrivener AAPI F: +61 08 8231 0122 Carol Simons AAPI Lyle Montgomerie RPV Brisbane Sam Tucker AAPI Nicki Quinn RPV ͗ĂĚŵŝŶΛƐĂ͘ŬŶŝŐŚƞƌĂŶŬǀĂů͘ĐŽŵ͘ĂƵ Ben Badenoch APPI Andrew Skilbeck RPV (07) 3846 2822 Chris Hill AAPI Peter Hansen RPV Troy Chaplin, AAPI, Director David Coventry AAPI Mark Whitcher RPV ǁǁǁ͘ŬŶŝŐŚƞƌĂŶŬ͘ĐŽŵ͘ĂƵ Matthew Harris, AAPI, Senior Valuer Tom Walker AAPI Kim Wallace RPV We have Specialist Valuers in the areas of: WůĂŶƚΘƋƵŝƉŵĞŶƚͻ,ĞĂůƚŚ͕ZĞƟƌĞŵĞŶƚΘŐĞĚĂƌĞͻŚŝůĚĂƌĞͻŐƌŝďƵƐŝŶĞƐƐͻZĞŶƚĂůĞƚĞƌŵŝŶĂƟŽŶ Cairns ,ŽƚĞůƐ͕DŽƚĞůƐΘĂƌĂǀĂŶWĂƌŬƐͻZĞƐŝĚĞŶƟĂů͕^ƵďĚŝǀŝƐŝŽŶΘĞǀĞůŽƉŵĞŶƚƐͻŽŵŵĞƌĐŝĂůͻ/ŶĚƵƐƚƌŝĂůͻZĞƚĂŝů (07) 4031 9552 • Valuation • Advisory Robert Cowell, AAPI, Director COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION Brian Walsh, AAPI, Director • Corporate Real Estate Solutions Level 10, Statewide House 99 Gawler Place, Adelaide SA 5000 • Property & Asset Tel: 08 8305 8888 Fax: 08 8231 7712 Management Tony West FAPI Director www.prp.com.au Jennifer Robertson AAPI Director – Healthcare and Retirement Living • Research Alex Thamm AAPI National Director – Rural and Agribusiness Angus Barrington-Case AAPI 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 Marcus JohnsonPartners FAPI: in Directoryour success. Troy Linnane AAPI National Director /DZ\HUDQGTXDOL¿HG9DOXHU Craig Clayworth AAPI Director Property law, commercial litigation, Warren Galea AAPI Director compulsory acquisitions, site value objections Scott McKeiver AAPI Associate Director DQGSODQQLQJDSSHDOV Tim Kent AAPI Associate Director Cleveland | Capalaba | Brisbane CBD

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Brett McCracken AAPI TASMANIA Graeme Smith AAPI

John Burke AAPI Damien Taplin AAPI CPV C.P.M. Tas Peter Bouwmeester AAPI CBRE Valuations Pty Limited Managing Director Level 3, Oracle East Tower, 0418 513 003 Chris Kennedy AAPI, MRICS 6 Charles Avenue, Mobile Claudine Reinecke AAPI Broadbeach Qld 4218 Our Certiﬁed Practising Valuers 5 Audley Street Paige Sherwood AAPI T: 61 7 5571 2000 F: 61 7 5581 2099 provide professional specialist North Hobart TAS 7000 service to the Mortgage Industry. Phone 03 6231 6688 Fax 03 62316788 www.tpcvaluers.com.au Email [email protected]

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TASMANIA VICTORIA

Hobart COLLIERS INTERNATIONAL CONSULTANCY AND VALUATION (03) 9602 0555 Damian Kininmonth, FAPI, Director Level 32, Optus Centre 367 Collins Street, Melbourne VIC 3000 • Valuation • Advisory • Research Tel: 03 9629 8888 Fax: 03 9629 8549 • Corporate Real Estate Solutions Jim Macey AAPI National Director • Property & Asset Management www.prp.com.au Stephen Andrew FAPI National Director - Retail John Conrick AAPI Director - Healthcare & Retirement Living Ben McCallum AAPI Director Paul Wheate AAPI Director Knight Frank Valuations (TAS) Peter Volakos AAPI Associate Director Matthew Page, AAPI Level 3, Building 3 195 Wellington Road, Clayton North VIC 3168 Scott Newton, FAPI Tel: 03 8562 1111 Fax: 03 8562 1122 Ian Wells, FAPI Chris Dupen AAPI Director Stuart Wigston, AAPI www.knightfrank.com.au Certiﬁed Practising Valuers www.colliers.com.au 5 Victoria Street, Hobart TAS 7000 T: 03 6220 6999 F:03 6224 3218, [email protected]

BARTROP REAL ESTATE BALLARAT SAUNDERS & PITT REAL ESTATE AUCTIONEERS & VALUERS David Saunders B.Ec. Dip.Val. FAPI Andrew Pitt Dip.Val. AAPI, AREI Russell Cripps B.Bus Dip.Val. FAPI, AREI -RH6WDQV¿HOG B.Prop. AAPI BRUCE E. BARTROP, FAPI, FREI, ACIS &HUWL¿HG3UDFWLVLQJ9DOXHUV Certified Practising Valuer 50–54 LYDIARD ST STH, BALLARAT 3350 14-16 Victoria Street, Hobart TAS 7000 Incorporating “A Real Estate Office Since 1876” D. Saunders & Co. 3KRQH )D[ Established 1905 Phone: (03) 5331 1011 Fax: (03) 5333 3098 (PDLOVDXQGHUVSLWW#ELJSRQGFRP Email: [email protected]

VICTORIA Knight Frank Valuations

Melbourne | Mornington (03) 9602 0555|(03) 5975 0480 Damian Kininmonth, FAPI, Director Joseph Perillo FAPI Level 31 Neal Ellis, AAPI, Director David Way MRICS AAPI 360 Collins Street Michael Schuh MRICS AAPI Melbourne VIC 3000 Ballarat Samuel Murphy MRICS AAPI F Fin T: 03 9604 4600 (03) 5334 4441 Property Services Samantha Freeman FAPI David Keenan AAPI F: 03 9604 4773 Darren Evans, AAPI, Director • Valuation Chris Safstrom AAPI E: [email protected] Yong-Fu Lim AAPI Gippsland • Advisory Natasha Altson AAPI www.knightfrank.com.au (03) 5672 4422 • Corporate Real Matthew Crowther AAPI Tim Barlow, AAPI, Director Estate Solutions Alex Ellis, AAPI, Director • Property & Asset Management Geelong | Warrnambool • Research Charter Keck Cramer - Independent Strategic Property Consultants (03) 5221 9511|(03) 5562 5851 Strategic Research; Urban Economics & Policy Gareth Kent, AAPI, Director www.prp.com.au Stuart Mcdonald, AAPI, Director Mitchell Rowe, FAPI, Assoc. Director Development & Project Management; Land Surveying; Civil Engineering; Quantity Surveying

Corporate Real Estate; Private Equity; Strategic Asset Management; Accommodation Solutions; The Valuation Expert for Commercial Valuations; Residential Valuations; Hospitality, Tourism and Leisure Specialist Valuations Telephone 61 3 9884 7336 Peter Hutchins AAPI Managing Director Bob Butterworth FAPI L1, 620 Church St, Richmond, VIC 03 9425 5555

www.butterworth.com.au www.charterkc.com.au

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VICTORIA AUCKLAND

Nicholas Bond AAPI Trevor Crittle AAPI Andrew Kollmorgen AAPI Level 1/501 Church Street Richmond VIC 3121 Nicholas Tassell AAPI T 03 9428 7676 www.avaproperty.com.au Chris Pulvirenti AAPI

John K Dowling FAPI FREI K L Dowling & Co Specialist Valuers Estate Agents & Property Managers Valuations and Expert Evidence prepared for: /LWLJDWLRQ &RPSHQVDWLRQ City – 5HQWDO'HWHUPLQDWLRQ Level 8, 52 Swanson Street, Auckland 1010 0HGLDWLRQ $UELWUDWLRQ 6DOHSXUFKDVH ORDQVHFXULW\ Phone: (09) 309 2116 Facsimile: (09) 309 2471 ,QVXUDQFH JHQHUDOSXUSRVHV Email: First name and surname initial (one word) @ seagars.co.nz 6HFRQG)ORRU%RXUNH6WUHHW0HOERXUQH Manukau – Level 1, Cnr Te Irirangi Dr & Ormiston Rd, Botany Junction, Auckland 7HO )D[ (PDLOMRKQGRZOLQJ#NOGRZOLQJQHWDX 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

WESTERN AUSTRALIA City Manukau Chris Seagar, DIP URB VAL, FPINZ, FNZIV Mike Clark, DIP VAL, FPINZ, FNZIV Ian McGowan, B COM (VPM), FPINZ, FNZIV Joseph Gillard, DIP URB VAL, FPINZ, FNZIV Knight Frank Valuations Ian Colcord, B PROP ADMIN, SPINZ, ANZIV Richard Peters, BBS, DIP BUS STUD, SPINZ, ANZIV Reid Quinlan, B PROP ADMIN, DIP BUS (FIN), SPINZ, ANZIV Warren Priest, B AGR COM, SPINZ, ANZIV Stephen MacKisack, B AGR, SPINZ, ANZIV Ken Stevenson, QSM DIP VFM, VAL PROF URB, FPINZ, FNZIV Marc Crowe AAPI DIRECTOR Andrew Buckley, B PROP ADMIN, SPINZ, ANZIV Malcolm Hardie, FPINZ, FNZIV Sean Ray AAPI MRICS DIRECTOR Level 10, Exchange Plaza, David Bolton AAPI Scott Keenan, BA, B PROP, MPINZ, ANZIV Mark Brebner, B PROP ADMIN, SPINZ, ANZIV 2 The Esplanade Perth WA 6000 Andrew Buchanan AAPI MRICS Jane Wright, BBS (VPM), MPINZ Charlene Smith, B PROP, MPINZ, ANZIV David Lang AAPI T: 08 9325 2533 Kelly Beckett, B PROP, B COM, MPINZ Carina Cheung, B PROP, DIP COM (FIN), MPINZ Jonathan Vaughan AAPI www.knightfrank.com.au Glenn Paul, B SC, B PROP Pamela Smith, B PROP Damon Buckley, B COM, B PROP Julia Flett, B PROP Jamie Ellis, B COM, B PROP Brad Featherstone, B COM, B PROP Perth (02) 9292 7400 Greg Rowe, FAPI, Director HAWKES BAY • Valuation • Advisory • Research • Corporate Real Estate Solutions LOGAN STONE LTD • Property & Asset Management www.prp.com.au REGISTERED VALUERS & PROPERTY SPECIALISTS 205 Hastings Street South, Hastings. PO Box 914, Hastings. Phone (06) 870 9850 Email [email protected] Facsimile (06) 876 3543 www.loganstone.co.nz Frank Spencer, BBS (VAL PM), FPINZ, FNZIV, AREINZ Boyd Gross, B AGR (VAL), DIP BUS STD, FNZIV, FPINZ John Reid, M PROPERTY STUDIES, B COM, FNZIV, FPINZ Philippa Pearse, BBS (VPM), MPINZ Grant Barron, B COM (AG) VFM, MBA, ANZIV, MPINZ, AREINZ Advertising Enquiries Jay Sorensen, B APPL SC (RURAL VAL, AGBUS), MPINZ Louise Thompson, BBS (VPM), MPINZ

[email protected] TAURANGA

PROPERTY SOLUTIONS (BOP) LIMITED +61 (0)2 9902 2706 REGISTERED VALUERS, MANAGERS, PROPERTY ADVISORS TAURANGA MOUNT MAUNGANUI ROTORUA Phone (07) 578 3749 Phone (07) 572 3950 Phone (07) 343 9261 Email: [email protected] www.4propertysolutions +61 (0)407 201 386 Simon Harris, B AG COM, ANZIV, FPINZ Garth Laing, BCOM (VPM), ANZIV, SPINZ Harley Balsom, BBS (VPM), ANZIV, SPINZ Mark Grinlinton, BCOM (VFM) SPINZ Steve Newton, BBS (VPM), SPINZ Todd Davidson, BBS (VPM), SPINZ

702 ANZPJ DECEMBER 2012

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AUCKLAND AUCKLAND

COLLIERS INTERNATIONAL NEW ZEALAND LIMITED

REGISTERED VALUERS CONSULTANTS PROPERTY ADVISORY

Auckland Wellington Level 27, 151 Queen Street, Auckland 1010 Level 10, 36 Customhouse Quay, Wellington 6011 REGISTERED VALUERS, PROPERTY CONSULTANTS, PO Box 1631, Shortland Street, Auckland 1140 PO Box 2747, Wellington 6140 RESEARCH, PROPERTY MANAGEMENT, LICENSED REAL ESTATE AGENTS Phone +64 9 3581888 Phone +64 4 473 4413 Facsimile +64 9 3581999 Facsimile +64 4 4703902 Web: www.cbre.co.nz Email [email protected] Email [email protected] Email: [email protected] National Director: Directors: Auckland CBD Office Kane Sweetman BA BPROP MPINZ AAPI FRICS Gwendoline Callaghan FPINZ FNZIV Mike Horsley FPINZ FNZIV Level 14, 21 Queen Street, Auckland Directors: Andrew Washington BCom (VPM) SPINZ ANZIV PO Box 2723, Auckland S Nigel Dean DipUrbVal FNZIV FPINZ AREINZ Milton Bevin BPA FPINZ FNZIV Phone: +64 (09) 355 3333 John W Charters Val Prof (Urb/Rural) FNZIV FPINZ AREINZ Valuation & Advisory Services Mark Parlane BBS ANZIV SPINZ Associates, Registered Valuers & Valuers National Director Russell Clark BCom (VPM) MPINZ Jeremy Simpson BBS (VPM) MPINZ Campbell Stewart, B.Prop, SPINZ, ANZIV Michael Granberg BCom BPROP ANZIV Kellie Slade BBS (VPM) MPINZ Directors Reuben Blackwell BSc BCo m GRAD DIP VAL MPINZ Associates, Registered Valuers & Valuers Genevieve Grant BCom (VPM) GRAD CERT BUS SUST MPINZ Steven Dunlop, B.Prop, SPINZ, ANZIV Hamilton Office Lianne Harrison BBS (VPM), ANZIV, MPINZ Jacqueline Forshaw BBS (VPM) MPINZ Patrick Ryan, BBS, SPINZ, ANZIV Ground Floor, 155 Te Rapa Road Anthony Long BPA ANZIV SPINZ Louise Hammond BBS (VPM) MPINZ Tim Arnott, B.Com, (VPM), MPINZ PO Box 1330, Hamilton Melaney Kuper B.ApplSc (RVM) DipUrbVal William Franks BCom (Mktg) GRAD DIP VAL Michael Gunn, B.Com, (VPM) SPINZ, ANZIV Phone: (07) 850 3333 Chris Bennett BPROP Hotels & Leisure Valuation Valuation & Advisory Services Melody Spaull BPROP ANZIV MPINZ Christchurch & Advisory Services Director Darren Park BPROP Unit A, 15 Sir Gil Simpson Drive, Director Matt Snelgrove, SPINZ, ANZIV Nick Hooper BPROP Burnside, Christchurch 8053 Dhilan Balia BCom BPROP PO Box 13478, Christchurch 8141 Stephen Doyle, B.Prop, MPINZ, ANZIV Wellington Office Gemma Peterson BCom BPROP (Hons) Phone +64 3 379 6280 North Auckland Office Level 12, ASB Tower, Facsimile +64 3 366 1240 Queenstown Unit 8, 35 Apollo Drive 2 Hunter Street, Wellington Email [email protected] Level 1, Cnr Camp & Shotover Sts, Mairangi Bay, North Shore City, PO Box 5053, Wellington Queenstown 9300 Directors: PO Box 33-1080 Phone: (04) 499 8899 PO Box 416, Queenstown 9348 Gary Sellars FNZIV FPINZ Phone: +64 (09) 984 3333 Valuation & Advisory Services Phone +64 3 441 0790 Warren Glassey Val Prof (Urban) FNZIV AREINZ FPINZ Director Facsimile +64 3 441 0791 David Harris FNZIV FPINZ Directors Jamahl Williams, BBS,(VPM), SPINZ, ANZIV Email [email protected] Martin Cummings DipUrbVal FNZIV Peter Schellekens, SPINZ, ANZIV South Auckland Office William Bunt, FPINZ, FNZIV Directors: Registered Valuers & Valuers Level 1, 7a Pacific Rise John Scobie BCom BBS (VPM) Samantha Stark BBus Prop (Val) AAPI MPINZ Mt Wellington, Auckland Christchurch Office Carl Graham BCom (VPM) MPINZ PO Box 11-2241, Penrose, Auckland Level 3 CBRE House, 112 Tuam Street Registered Valuers & Valuers Ryan Teear BCom (VPM) MPINZ Phone: +64 (09) 573 3333 PO Box 13-643, Christchurch Doug Reid BCom (VPM) ANZIV SPINZ AREINZ Paul Koster BCom (VPM) MPINZ Andrew Hyndman BCom (VPM) Valuation & Advisory Services Phone: +64 (03) 374 9889 Geoff McElrea BBS (VPM) Director Valuation & Advisory Services John Fletcher FNZIV FPINZ AREINZ Wouter Robberts, NDPV, MPINZ, ANZIV Directors Tim Thomas BCom GRAD DIP VAL Plant & Machinery Valuation Chris Barraclough, B.Com, FPINZ, FNZIV

Mike Morales, SPINZ Marius Ogg, SPINZ, ANZIV Accelerating success. www.colliers.co.nz NELSON / MARLBOROUGH

42 Halifax Street, Nelson P (03) 548 9104 F (03) 546 8668 WELLINGTON E [email protected] 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 Turning Professionals into Leaders IN PUBLIC LAND & INFRASTRUCTURAL ASSETS 12 OFFICES NATIONWIDE 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 property.org.nz Email [email protected] Website www.propertygroup.co.nz Professional Pathways

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DOES YOUR RMM EXPIRE IN 2012 OR 2013?

RENEW IT NOW BY COMPLETING IT IN A FACE-TO- FACE SESSION OR ONLINE.

Program details and available face-to-face session dates can be found at www.api.org.au

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