Consultant Report - IPART

SECTION TWO
Report Overview
Instructions
Instructions were received from the Independent Pricing and Regulatory Tribunal (IPART) to undertake an
investigation of the Discount Factor used in the formula for determining rentals for domestic waterfront
occupancies. In the investigation, LPI was requested to have regard to the rental market for marina berth and
swing moorings as well as the submission made to IPART by the Waterfront Action Group (WAG).
IPART requested the investigation address specific tasks as follows;
To assist IPART in arriving at a suitable approach to determining the value of occupancies for the purpose of
calculating rents, LPI is required to:
1. Recommend one or more evidence-based discount factors. These recommendations should be:
• derived after considering and reviewing the valuations referred to by WAG in its proposal for a
discount factor (as outlined in pages 11 to 12 and Fact Sheet 8 of WAG’s 31 May 2011 submission
to IPART)
• derived after considering the different types of uses of occupancies
• based on a representative sample of occupancies and precincts across NSW
• consistent with the principles outlined in the Terms of Reference for IPART’s review, including
market return, operational efficiency, consistency and equity.
The recommended discount factor or factors and supporting data should be presented in a form to allow
IPART to apply discounts to:
• the current PSLV approach - ie, discount factor(s) relative to the SLVs of privately owned freehold
waterfront property within the sample precincts
• WAG’s proposed amended approach to calculating PSLVs – ie, discount factor(s) relative to the
median SLV for postcodes within a precinct.
LPI should also make recommendations to provide IPART with the option of applying either:
• 1 discount factor in the rental formula (as is currently the case); or
• more than 1 discount factor, where this is warranted and consistent with the principles of IPART’s
Terms of Reference.
2. Review and provide comment on:
• the 144 separate valuations of occupancies referred to in WAG’s submission
• WAG’s proposed discount factors and how they relate to LPI’s findings in this study.
3. Investigate comparable market rents, including berthing rentals at commercial marinas, swing moorings
and other comparable facilities, as well as rents on adjoining land, and explain how these:
• compare to rents being determined by the current formula
• relate to your findings and recommendations for points 1 to 2 above.
In providing draft and final recommendations to IPART, LPI must also clearly explain the rationale and
methodology behind its analysis and conclusions, document key assumptions, and provide relevant
supporting evidence.”
Investigation of Discount Factor used for determining rentals for Domestic Waterfront Occupancies
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