Auckland University has netted an up to $600,000 profit in just 12 months after reselling a Parnell mansion controversially bought for its vice-chancellor.
It paid $5.06 million for the luxurious four-bedroom home in December 2019 after buying it as a rental for new vice-chancellor Dawn Freshwater.
Twelve months on, the university has now benefited from one of the biggest Auckland property booms in the past two decades to pocket $5.905m from its resale.
That equates to a profit of at least half a million dollars, even when real estate agent fees and the $160,000-$170,000 spent repairing the home’s roof and swimming pool are factored in.
The tidy profit comes after the Government’s Auditor-General watchdog and Education Minister Chris Hipkins dished out stinging criticism of the partly taxpayer funded university’s purchase.
The Auditor-General said the university did not outline a proper business case explaining why it had bought the home.
The university subsequently put the house up for sale and a spokeswoman said “proceeds of the sale will be used to help reduce the university’s debt”.
The rushed sale timed with a huge jump in Auckland house prices through 2020 as low interest rates led home buyers to rush to buy while they had access to cheaper home loans.
The city’s median house price subsequently hit $1.1m in February, leaping $205,000 in 12 months, according to analysts Valocity.
Parnell’s median price hit $1.64m, jumping 23 per cent or $310,000 in the same period.
However, while the Parnell sale proved profitable, the university earlier had to offload a boutique Remuera mansion bought for its former vice-chancellor Stuart McCutcheon at a massive discount after it was found to be a leaky home.
The Loreto Heights home in Remuera fetched $2.97m at auction last July.
However, that was $1m below its Auckland Council valuation and barely above the property’s estimated $2.87m land value.
That meant the university only profited on the rise in land value but made virtually no capital gains on the home itself, despite owning it for 16 years through multiple Auckland housing booms.
New vice-chancellor recently called the purchase of the Parnell home “regrettable” in an email sent to the university’s staff on March 8.
It came after the home’s purchase – exclusively revealed by the Herald in January last year – immediately led rankled staff and students to voice their disapproval over its bad look.
The deal also caught the eye of Auditor-General Ryan, who said it involved “sensitive expenditure”.
That meant the partly taxpayer-funded organisation ran the risk of being seen to give “disproportionate” benefit to Freshwater above the university’s own business needs, he said.
He also called on the university to consider whether Freshwater’s rental discount should be treated as taxable income under the Income Tax Act.
The University of Auckland subsequently apologised to vice-chancellor Freshwater for getting her embroiled in the backlash.
Chancellor Scott St John – chairman of the university’s council of directors – said media criticism of Freshwater was “grossly unfair and wrong”.
“It was not her decision to purchase the property. Nor was she party to developing the terms and conditions of the tenancy agreement.”
Two independent reviews by consultants KPMG set up with the aim of improving the university’s “review systems, processes and controls” related to tax and so-called sensitive expenditure compliance.
Freshwater told university staff the review had made 11 findings and she aimed to see the related recommended improvements implemented by the end of this year.
She said the university was found to already have relevant systems and controls in place but these needed strengthening.
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