maori commercial aquaculture settlement - Ministry of Fisheries

73. LECG undertook pilot studies to test the
methodology. One pilot undertaken by LECG
was to test the appropriateness of the
structured expert panel process, the “delphi
method”, to obtain key valuation and productivity
information on marine farms that is unavailable
to the Crown. The pilot confirmed that a site
productivity index can be estimated by an
expert panel, and there is potential for a relative
value index to be estimated. This index would be
used to attribute the value of reference sites to
other sites, and thus to create a national
valuation model.
74. An issue highlighted during the pilot study is
a difference in perceived value between the
discounted cash flow valuation method and
unverified anecdotal market transaction values.
This difference can be due to assumptions
applied in the valuation method not reflecting the
perceptions held by purchasers in the market,
where purchasers may choose to buy marine
farms above their cash flow economic value. It
may be difficult to reconcile the valuation
method to transaction data for the following
reasons:
• the valuation will not capture the scarcity
value of a coastal permit. Transaction data
may include additional value due to the
perceived scarcity of coastal permits that is
not recognised in the valuation
• economic returns observed in the
agriculture and horticulture industries are
often low relative to the opportunity cost of
investment, suggesting that there are
benefits to the investor (e.g. lifestyle
choices) in addition to the intrinsic value of
the asset. If this principle applies to the
aquaculture industry, then the value of a
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marine farm using the valuation method
(which does not capture these additional
benefits) will differ from the value derived
from transaction data
• prices paid for marine farms by vertically
integrated processors or geographically
diversified farmers could include an element
of strategic value because of the benefits
a new farm brings to the purchaser’s
portfolio of assets. This additional value
could distort value comparisons.
75. The valuation methodology may appear
complicated to those not familiar with the
economic concepts. This complexity relates to
the need to apportion the value of a marine farm
between the value of the coastal permit and the
other assets associated with the marine farm.
This apportionment is not an element of a normal
valuation practice when selling or purchasing a
marine farm.
Application of the valuation methodology to the
purchase marine farm method
76. The purchase marine farm method involves the
Crown purchasing marine farms (from willing
sellers) and transferring the coastal permits
associated with the farms to the Trustee for
allocation to IAOs within a region or harbour.
Only the space authorised by the coastal
permits associated with the marine farm counts
against the Crown’s pre-commencement space
obligation.
77. The following process outlines how the valuation
methodology will be applied to the purchase
marine farm method:
• the key inputs used in the valuation
methodology will be obtained from the
willing vendor either at the time of the