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TVNZ / Skycity deal is an asset dump

Written By: - Date published: 10:02 am, September 5th, 2013 - 23 comments
Categories: Economy, tv - Tags: ,

Yesterday morning at about 09:20, within minutes of each other, I saw two press releases from TVNZ corporate.

One lauding the “transformation opportunity” from selling the land on Hobson street to Skycity for $10.6 million.

The other was lauding their “only just” achievement of their profit forecast including the news that their advertising revenue was down by 2.1%, a drop of $6.6 million. To achieve a profit they shut teletext and sold the Avalon studio in Wellington plus “rigorous”  cost savings.

I put them both to one side for further examination because the sales value of the Hobson street site seemed like an extraordinarily low value. It already had an existing building, was in a prime redevelopment area, and I know for instance that my apartment building with less land and a commercially less useful has a higher land value.

TVNZ hobson land dissectionJohn Drinnan at the NZ Herald posted this yesterday at 10:17 in an immediate response

SkyCity paid $10.6 million for 81-95 Hobson street which is around $2 million more than the ratings valuation for the land.

See an aerial shot of the properties here.

But in addition to that payment the government has allowed them to cut the dividend to pay for upheavals – effectively a taxpayer contribution.

The level of dividend relief has not yet been spelt out.

TVNZ initially resisted the sale but went into negotiations after the Government focused on long running negotiations.

Actually John is wrong. A quick look at the Auckland City Council rates shows two rateable values on 85-91 Hobson Street. 85 Hobson Street and 91 Hobson Street. They have a combined rateable value in July 2011 of:-

85 Hobson Street 91 Hobson Street
Land value $3,500,000 $3,450,000 $6,950,000
Value of improvements $500,000 $800,000 $1,300,000

 

So unless there has been a rating valuation that isn’t up at the ACC yet, SkyCity are in fact paying slightly than $2 million more than the rateable value of land and improvements. Now the latter would usually mean the building. But how can this be?

My 51 square metre apartment on the periphery of the CBD has a rateable improvement value of more than $200k. Somehow a multistory building(s) on 2000+ square metres have a improvement value of about 6.5x that? But that is probably a question for a different post.

And my apartment has no part in producing a multi-million dollar profit and causing the shift of 500 odd employees.

“TVNZ reached agreement with shareholding Ministers to dividend relief, net of proceeds from the sale to SKYCITY, to cover the costs of refurbishing its main building at 100 Victoria St West.

“The building transformation project will begin during the coming summer. During the natural break in television programme production over Christmas and New Year, up to 500 people will be moved into temporary leased accommodation in the Telecom building in Victoria St West just 200 metres down the road from TVNZ, a spokesman said.

Chief executive Kevin Kenrick said the sale of land – which it initially resisted – was good for the company.

“This is a great result for TVNZ.”

Yeah right. I think that Kevin Kindrick is simply lying through his teeth and I’m mostly wondering who has the stick up his arse running the mouth. The rushed nature of this move and the small remaining site that they’re going to have available will almost certainly suck the life out of TVNZ over the coming year.  For a starter, I’d anticipate a lot of people leaving before they get pushed as TVNZ tries to fit 500 employees into a single workplace.

The costs of shifting 500 employees and all of their gear is going to be immense. The refurbishment of a already tight site to fit 500 staff is going to be colossal if at all possible. The disruption to the operations of TVNZ will be long ranging and probably deadly in terms of the disruptions to their usual revenue streams. About the only thing that they have going for them is that

If I was working at TVNZ at either of these buildings then my CV would be heading offshore right now.

It seems to me that the government, and most likely Steven Joyce,  has just directly overridden a SOE in the pursuit of a deal with SkyCity that already looked quite corrupt. They have taken an undervalued and depreciated building and sold it to SkyCity for demolition. On the way through they have probably killed much of the remaining operational value of  TVNZ.

All for this for a conference centre of dubious economic value, and a increased social cost. If Key and Joyce aren’t simply corrupt, then they are some of the most stupid business people I’ve ever seen. But most likely they’re just politicians trying to cover their arses for making a stupid mistake.

This morning I see that the Greens have picked up on it as well – see National caught hiding cost of SkyCity deal

TVNZ has revealed today that ministers have permitted it to reduce its dividend payments to the Crown so that it can pay for costs of rehousing TVNZ staff from the building it has been forced to sell as part of the SkyCity deal. That will result in a reduced dividend income for the Crown, leaving a fiscal gap that taxpayers will have to finance.

“National has been caught once again hiding the costs of its dirty deal with SkyCity,” said Mrs Turei.

National has been caught once again hiding the costs of its dirty deal with SkyCity

“National’s ministers were outplayed in the negotiations with SkyCity and have failed to deliver the ‘free’ convention centre that they promised. Now, the taxpayer has to foot the bill.

“The Government tried to downplay the social costs of increased gambling and failed to tell the public about the job losses the deal will cause. Now, we learn that National had to coax TVNZ to play its part in the dirty SkyCity deal by letting it off paying dividends. That will be a cost of millions of dollar to the Crown’s coffers.

 

23 comments on “TVNZ / Skycity deal is an asset dump”

  1. karol 1

    Thanks, Lynn. I was busy working yesterday, so missed those TVNZ press releases, and was puzzled by Drinnan’s article this morning. I also wondered why the sale of the TVNZ site wasn’t bigger news.

    There looks like a typo in this sentence:

    SkyCity are in fact paying slightly than $2 million more than the rateable value of land and improvements.

    I look forward to Turei’s likely questions to Joyce in the House today.

  2. fender 2

    What a scam, and totally contrary to the original “free convention centre” bullshit. Reduced dividends from TVNZ for the benefit of SkyCity means taxpayer subsidy, plain and simple.

    • Draco T Bastard 2.1

      It was always a scam. Its purpose was to have the taxpayers pay for the building of the convention centre with SkyCity not being out of pocket. The end result would be a massive profit for SkyCity for little or no outlay on their part.

      • Tracey 2.1.1

        Brownlee invited interest from the private sector in Christchurch yesterday to “buy” the convention centre there. I wonder if they are climbing over each other to get it? I suspect the silence will be deafening.

      • srylands 2.1.2

        Yes it is all a conspiracy.

    • David H 2.2

      The headlines should be screaming CORRUPTION! But as usual the MSM is silent.

  3. tc 3

    TVNZ is a top heavy ‘has been’ transmitter of foreign content, they’d sell it if it wasn’t playing nice like it has in this deal and offering up patsy PR and soapboxes all the time on breakfast etc.

    Didn’t know they’d sold avalon. So another meagre return to taxpayers from the dominant TV operator who is flogging off it’s assets, what Joyce really meant by SOE’s paying their way has just been demonstrated. Helping the hollowmen take care of their backers.

    • Steve Withers 3.1

      tc: TVNZ is what it is *because* National tore up the public service charter, shut down TVNZ 7 and demanded excessive dividends.

      It’s the oldest play in the book: wreck the thing….then say it’s no good.

      It’s what conservatives do to public assets. I’m surprised people like yourself still fall for it.

      • tc 3.1.1

        Stevie boy TVNZ have been in terminal decline since the 90’s, the nats came along and pushed it faster down road a road that Labour tried to stop them with a charter, too little too late.

        Theyve been wrecking themselves quite nicely so the management can take home fat packages rather then produce content that enhances the organisation and who its meant to serve being the NZ public.

        IMO labour wasted their years by not smashing in down the 2 channells divide, one is commercial and effectively is a replay machine (which tv2 was when I was in the joint) running all the imported dross helping to fund the content creation.

        The nats fan boy rick eliss fought the charter, at taxpayer expense, like telecom fought separation so i dont entirely attribute TVNZs condition to the nats its been heading that way for sonetime now.

  4. Tracey 4

    Interesting to see the government which prides itself on business savvy is putting up a low reserve for the sale of the radio spectrum. I understand that if you have a decent number of bidders getting them engaged in the process can help with a higher auction price…but is the reserve usually publicised? Not at any auction I have been to… but how many parties will be vying?

    “expected to be bought by Vodafone, Telecom and 2degrees and used to support the rural roll-out of 4G mobile networks. ”

    And whose advice was it to set the reserve low?

    ” She said there were countries that had sold their digital dividend spectrum for a lower price per megahertz, per capita, though she was not immediately able to identify them.

    The price partly reflected the fact that New Zealand’s topography and population density meant rolling out networks here was relatively expensive, she said.

    Telecom applauded the announcement. ”

    Adams is aiming to get us better 4g coverage

    “These requirements are designed to ensure that at least 90 per cent of New Zealanders have access to a 4G network and faster mobile broadband coverage within five years.”

    http://www.stuff.co.nz/business/industries/9128505/Govt-denies-bargain-basement-spectrum

    Nationa party promise

    “Rolling out faster broadband

    The National-led government’s ultra-fast broadband rollout is underway. It will deliver broadband speeds of 100 Mbps to 75 per cent of New Zealanders where they live, work, and study.

    The rollout will see schools, hospitals, and 90% of businesses covered by 2015, and links to homes and remaining businesses completed by 2019″

    10 September 2009 – Joyce promised

    “Mr Joyce says he expects the following to happen within six years:

    93% of rural schools will receive fibre, enabling speeds of at least 100Mbps, with the remaining 7% to achieve speeds of at least 10Mbps.

    Over 80% of rural households will have access to broadband with speeds of at least 5Mbps, with the remainder to achieve speeds of at least 1Mbps.”

    Is the low reserve to help ensure they can meet this target?

    • tc 4.1

      Those bloody awstralians and their bloody contractors will be blamed for that tracey even though joyce dicked around for 2 years proabably negotiating with reynolds over how much taxpayer funds chorus would get to entrench their monopoly.

  5. ghostwhowalksnz 5

    Remember the taxpayer is liable for any cost overruns on Sky Citys building.

    The details of the contract mean once the free convention centre is anything but.

    The council valuations were backdated to 2011. Just as well there hasnt been a property boom since then….. could we add 20% easily, and then there is the ‘unwilling seller’ premium.

  6. Not A PS Staffer 6

    Sky City hosted National Party Conferences many times in the past 20 years.
    Sky City hosted National Party fundraisers many times, usually with Tobacco interests buying many tables.

    Many National People got tipsy or drunk at these events.
    Many National People got friskey at these events.

    There must have been many many compromising sights seen by Sky City security on Sky City properties.

  7. BLiP 7

    Good spotting. I had wondered just how much a building smack in the Auckland CBD was worth when I read about this latest National Ltd™ sleight of hand. I’d spotted Steven Joyce’s lie about the deal when denied that TVNZ had been allowed to reduce its dividends as an inducement to sell the land. Here he is just eight weeks ago telling us . . .

    . . . my understanding is the shareholding ministers have written to TVNZ and said “well, look, if you need, for example, to slow down your dividend stream for two or three years to enable you to do this sort of renovations that would actually allow this to happen they’d [the shareholding ministers] would be happy to do that” and that would be something for TVNZ’s board to consider . . .

    I guess Joyce is just following the example of John Key because, as with just about anything he touches,Key has presented New Zealanders with another parade of lies this dodgy back-room deal with Sky City . . .

    the Sky City deal will provide 1000 construction jobs and 800 casino jobs

    all five bidders for the convention centre were treated equally

    my office has had no correspondence, no discussions, no involvement with the Sky City deal

    I did not mislead the House (8)

    I can’t remember what was discussed at my meeting with the SkyCity Chief Executive on 14 May 2009

    I have no record of the 12 November 2009 email from Treasury advising that the SkyCity deal was dodgy and needed to be referred to the Auditor General

    there was nothing improper about the Sky City deal

    SkyCity will only get “a few more” pokie machines at the margins

    any changes to gambling regulations will be subject to a full public submission process

    Sky City has approached TVNZ about the purchase/use of government-owned land

    I did not mislead the House (9)

    this government has been very transparent about all its dealings with SkyCity

    I did not mislead the House (10)

    the Auditor General has fully vindicated National over the Sky City deal

    I did not mislead the House (11)

    the Deputy Auditor General supports the view that there was nothing inappropriate about the Sky City deal

    I did not mislead the House (12)

    I did not breach the confidentiality of the Auditor General’s Report into the Sky City deal

    the Labour Government did exactly the same sort of deal back in 2001

  8. Ad 8

    I am presuming that this decrease in square footage foreshadows a major staff and capacity downsizing of TVNZ as it continues to bleed viewers to the internet video sites and capacities. I have long since lost sympathy for TVNZ as holding public good within it.

    If I ruled the world the news would be read by Warwick Burke, every night. ;-)

    • lprent 8.1

      …foreshadows a major staff and capacity downsizing…

      That would be my bet. Also that the government doesn’t have them destined for the block any time soon.

      • Ad 8.1.1

        Word I get on this arrangement is that Sky had only modelled and Quantity Surveyed a design based on the full land take. TVNZ were operating on a fully commercial price for their land for the lots required – and Sky wasn’t prepared to pay that.

        So Sky were then faced with a reduced footprint, uncosted, un-QS’d, and with lower yield per square metre. Which also meant precious time lost to redesigning everything.

        This, coupled with a timetable that Joyce absolutely insists on which is of course completion by November 2017 (joyous election night!), and Sky and Joyce had a major problem.

        Leverage was applied, as you’d expect: deal for the full TVNZ set of sites at non-commercial price, or no deal.

        So the Crown allowed TVNZ to lower their dividend for the year, expedite the full land holding sale, and off we go …

  9. pollywog 9

    Enough to make your blood boil, except it’s all been sucked dry by these vampires already.

  10. Lloyd 10

    TVNZ has viewshafts for its satellite dishes on that site in the District Plan. How much is that worth? was this included in the price?

    • tc 10.1

      Are they required under a digital scenario, uplinks can be anywhere if you are pointing at geo stationary satelittes if you dont need to see land based points.

  11. Wensleydale 11

    Oh no! National MPs are lying to us! *cue mock outrage and feigned surprise*

    Seriously, this is what National does. They’ve always done it, and they’ll continue to do it until the end of forever. Like spite, avarice and an irrational hatred of poor people, it’s just in their blood.

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