An article regarding the unbelievable incompetence, or otherwise, relating to the purchase of a parcel of land.
The plot thickens.
Itās a pork farm, sorry piggery for those versed in agricultural terminology.
The sale price $29.8M for 12 hectares.
The valuation less than $3M, or $250,000 per hectare is still very generous.
The average value of agricultural land in NSW in 2019 - $5066 per hectare.
With slightly better than average SW Sydney grazing lands, this established macadamia farm, (Approx 12 ha) with bonus house, views and private tip, looks like an absolute bargain.
At 1.75million Aussie gumnuts local currency, itās difficult to comprehend how they can even get to $3M for cow country. The nuts in Sydney and Canberra must come of a different kind of tree. 
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A more proper analogy is āsmart like a foxā knowing how to move money to the āproper pocketsā.
Many of us have ābeen thereā where a procurement document was riddled with hackneyed cut and pasted standard text of how rigorous the process was, value for money, blah blah and the contract was awarded sans tender because it was $10 below the mandate for competitive bidding. Or in cases the tender did not award to the lowest conforming bid because subjective assessments demonstrated higher value elsewhere. Sometimes the subjective assessment was a friendly firm, friendly face, or a well placed pollie gave a ring.
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ā¦ and it happens at all levels, from your local sporting club through to the oligarchs, even the Russian ones
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This happens all the time in the public and private sector when a development requires a lot of land owned by a number of parties.
Why, often some land is key to a development and not purchasing it means the development canāt proceed. This is not discussed in the ABC article which is a major failure on their partā¦as they chose a political slant to the ānewsā.
The cost of not purchasing say the 12 hectares will cost far more than $30M due to time delays, unable to access for planning and preconstruction activites and potentially the airport project not proceeding (if they canāt use compulsory acquisition powers or have only chosen to negotiate purchases based on a project decision/using their āsocial licenceā).
When projects like this occur, the cost of not purchasing needs to be compared to the cost of purchase (which in this case would have been the money on the table to get a negotiated settlement). The purchase cost is more than land value also, it includes compensation for business/agricultural disruption, improvements, legal fees, moving costs etc. It could also have been the full cost to move the business to a replacement property suitable to the land owner to continue operations. None of these additional standard compensations which are paid were also ignored by the ABC. An example of how compensation is accessed, and it being more than land value, can be found hereā¦
https://www.vicroads.vic.gov.au/planning-and-projects/land-acquisition-and-compensation/compensation
Something also worth noting is while its current use may be agriculture, it highest and best use might be residential or industrial. Compensation may have been based on this highest and best use as the acquisition is a lost opportunity for the existing landowner. This results in land values used for determining compensatiin being significantly higher than for a lower value land such as agriculture.
Edit: Getting two valuers in a room will resukt in two valuations. This is possibly what the auditor found is their own valuation advice post purchase differs to the valuation methods used for the purchase. As outlined above, the purchase could have been inflated for project reasons.
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That makes sense in the current situation IF there was some negotiation and that is what the landowner demanded. If government made an offer significantly above rational market value that is something else. Government also can set a value and take land when it so deems; the compensatory value may end up in court, but. It has a certain odour, even if there are many explanations, one or two that might stick as plausible.
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No necessarily. The company owning the land was an unwilling sellerā¦and it appears the ~$30M was considered as a reasonable compensation by the ownerās valuerā¦that which would have got the acquisition over the line. They could have offerred a maximum of $25M, but this may not have got the purchase over the line and caused significant additional project costs.
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So why do we disagree?
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That isnāt quite true, the article says that figure is the median not the average. The median would probably be a better indicator of what would be common as the distribution has a long tail due to millions of hectares of dryland or near desert that can still be called agricultural land but is worth bugger all.
Neither the median nor the average give much background to what a fair price might be in any given situation or in this case. Itās a bit like asking the price of diamonds per carat, both mean and median of that statistic ignore all the other attributes that determine price so saying that you spent x when the median was y tells us nothing.
Land valuation is complex and tricky you would need to understand all the factors taken into account to work out whether the nominated $3M was reasonable or not. One obvious question (among many) is were any guidelines given for the basis of the valuation? Is is valued as a piggery, as land on the fringe of the big city that has subdivision potential or as land on the edge of a big hungry development?
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We donāt disagree. The $30M soes seem a lot, but without knowing the full circumstances of the property and the project requirements, placing judgment on this figure is impossible. It could be reasonable, it would be overpriced. The ABC has placed political judgement that the compensation paid was 10 times what it should have been based on raw land value. This is worryingly incorrect and shows lack of understanding of established valuation/compensation processes. It is possibly the ABC which could be shonky in this caseā¦presenting limited information with the intention to potentially be misleading.
I say reasonable, for example, as the existing pastoral ownerās business may be heavily reliant on this property and its improvements. Using the scenario that the property has organic certified and had been for decades, the pastoral owner products branding linked directly to this property and was recognised by all its customers (including established quality of the agricultural products from the particular property fetching a premium due to the property) and the owner has made significant improvements over time (could be significant irrigation schemes, yards, fencing, weed control and the list goes on). This scenario would substantially increase the value of the property (land and improvement purchase value) and would also have a considerable business value (due to branding and identification by its customers). Any compensation (purchase price negotiated) would need to consider such factorsā¦and not just the underlying land value (which the ABC thinks that it possibly should).
As the owner is an unwilling seller, this may increase the value of the compensation paid to get the owner over the line to sell it.
What also needs to be considered is one the airport project is announced, the land value changes substantially. It goes from rural/agriculture to transport infrastructure/industrial. The raw land values between the change is significant. Using a case I have direct knowledge ofā¦rural where council identified it as future industrial. Land values changed from about $20K/ha to $200K/ha overnight and the compensation paid to landowners was based on the future lost opportunity (which they now had Council planning document which supported this). When the project kicked off, the land compensation was based on being rural and additional monies had to be sought to cover the change in potential land use. This is the case with the airport as the land has a higher potential use than agriculture and this is what the compensation is often based on.
While it may not be acceptable to the media, governments or other organisations shouldnāt be using their power to short change opportunities which owners have been fortunate beneficiaries of. If they did, governments and organisations would buy on lower land values based on decisions they are about to make or have made and then sell on higher land values to reap the change in land values. This could be corruption as itās worst.
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Iām assuming here it was subject to state law prior to transfer to the CofA?
Agree the median and average make a difference. My reference prefers to avoid providing the rest publicly. The $5,066 figure was intended to draw attention to the potential disparity in valuation. My lay reading of some examples suggest that even as land that one day might be future residential redevelopment, it is worth closer to the $3M mark than ten times that.
The $29.8M purchase price values the land undeveloped at approx $250 per sq metre.
This is what the ABC actually said:
The ANAO noted the Federal Government had tried to buy the Leppington Triangle plot in 1989 and had been engaged in a 10-year dispute with the owners over carving out that parcel from the original acquisition.
In its response to the ANAOās scathing report, the department said it was investigating allegations of āindividual breaches of integrityā.
It conceded the valuation approach was āunorthodoxā, but said it had been backed by the Finance Department and the Australian Government Solicitor.
The ANAO was also critical of the way the department first responded to questions about the sale, and stated it was ānot ethical behaviourā.
The less than $3M was a revaluation provided independently of the ABC by the ANAO.
Are we calling the Australian National Audit Office Shonky? Perhaps the ABC has retained itās integrity on this one.
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It is nice to see the reliably repetitive use of politically appointed āindependentā sources who are expert at confirming no wrong has been done. I especially enjoy the AGS statement that includes, my bolding for clarity of what it really says. (Been there, worked with that.)
Our long experience in working with government agencies means we understand the Governmentās legislative and regulatory frameworks, policy objectives and key programs.
We work with agencies to develop innovative solutions to legal issues and to implement commercially and legally robust approaches to some of the largest projects in which the Australian Government is involved.
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Like I indicated above, one canāt make judgment, including the ABC, without knowing all the aspects associated with the valuation and compensation paid. It is possible to get ālow ball valuationsā by using land value onlyā¦this could have been the scope if the ANAO valuationā¦the ANAO valuation could have been desktop onlyā¦it could have been comprehensiveā¦such is not known. How was it done, donāt know and possibly never will.
ANAO criticised the department for only carrying out one valuation. ā¦it seems ironic that the ABC and ANAO are relying only on one valuation as well.
Presenting news without providing (or knowing which the ABC acknowledges as they are awaiting information from the pastoral company) all the facts is misleading and could be seen as political. It also could be making a news story before anyone does and to release only some of the facts to do so.
This topic is starting to become reminiscent of āThe Castleā.
Obviously you havenāt worked for a governmentā¦The Castle, Utopia, Yes Minister, The West Wing etc might be satirical, but they provide some home truths to the functioning of government as well.
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Iāll take that further in that some episodes of each are veritable documentaries with the names changed to protect the guilty.
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Watching Yes Minister was de rigueur. When the show was running on TV, Departmental Senior Executive were uncontactable during screening time.
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No. I never worked directly for a Government as I spent most of my working life managing businesses, mainly for myself.
However, some 50 years ago I worked for the Authority which then owned all the hydro, coal and gas power stations and the 132KV network in North Qld and I witnesssed lots of stupidity.
One was that whenever they bought a new Landcruiser, the guys who did washing and some maintenance of the vehicle fleet at the HQ in Townsville would replace the Toyota dual throat carby with a Holden Stromberg carby to cut the fuel consumption.
When you are generating and selling the majority of electricity in North Qld, you reallty canāt afford to pay for petrol, but at least they were not as cheap as the PMG who ordered their vehicles with the low compression option so they could run them on Standard instead of Super petrol.
When you are ripping off your customers for up to 90 cents per minute for STD calls, you cannot even afford to pay for decent fuel.
Back on the topic from the beginning.
The responsible Minister Paul Fletcher has been quoted by the ABC:
Cabinet minister Paul Fletcher has labelled information given to him about a massively inflated land sale as ādeficientā, blaming department officials for allowing the deal to sail through unquestioned.
Nothing more to see or to be said.
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A time honoured technique, aka throwing your agency under the bus?
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