Consultant Report - IPART

SECTION ONE
Executive Summary
1. 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:
a) Recommend one or more evidence-based discount factors.
b) 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
c) 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 findings and recommendations for points (a) to (b) above.
2. Approach Taken for the Three Tasks
In completing the work LPI adopted the following approach:
a) Market Review - rental evidence was sourced from commercial marinas and private
rental arrangements, across the state, for wet and dry storage areas for boats in a
number of situations.
b) Calculation of Discount Factors - A sample of 52 occupancies were selected as
benchmarks from approximately 24 Precincts located across the state. The sample
was selected with the purpose of representing regional, metropolitan and Sydney
Harbour locations. Occupancies were individually valued to determine a land value
specific to each occupancy.
In the course of analysis it was found that the attributes which affect land value
differed for reclaimed and wetland and a different approach was required for each.
Reclaimed land shows a direct relationship with immediately adjacent land and can
be valued by way of applying a discount factor directly to that land (this alters from
that derived by applying a discount factor to a Precinct Statutory Land Value
(PSLV).
Wetland, on the other hand, is restricted to the use to which it is put, consistent with
erected structures, with the land value showing a relationship to that use rather than
the adjoining land. Therefore, wetland has been valued by reference to limited
available rental information based on similar uses.
Consistent with instructions, these valuations have been used to determine separate
discount factors for reclaimed land and wetland, as well as a single discount factor
for all occupancies.
c) Review of the Waterfront Action Group (WAG) analysis - LPI analysed the
properties included in the WAG analysis and the discount factors that WAG
recommended. The analysis was reviewed for accuracy and revised where
considered appropriate. The relevance of the analysis in developing a single
discount factor was considered and reported against.
Investigation of Discount Factor used for determining rentals for Domestic Waterfront Occupancies
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