Uni nails profit on controversial home
Parnell mansion resells for $600,000 more than the university paid for it
It was not her decision to purchase the property. Nor was she party to developing the terms and conditions of the tenancy agreement. Scott St John, Chancellor
The University of Auckland has pocketed a $600,000 profit in just a year after reselling a Parnell mansion controversially bought for its vicechancellor.
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 counting real-estate agent fees and the $160,000 to $170,000 spent repairing the home’s roof and swimming pool.
The tidy profit comes after the Auditor-General and Education Minister Chris Hipkins dished out stinging criticism of the partly taxpayerfunded university’s purchase.
The Auditor-General said the university did not outline a proper business case explaining the purchase.
It 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 median house price hit $1.1m in February, leaping $205,000 in a year, according to analysts Valocity.
Parnell’s median price hit $1.64m, jumping 23 per cent or $310,000 in the same period.
But although 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 huge 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, making virtually no capital gain on the home itself, despite owning it for 16 years as the housing market rose.
The new vice-chancellor recently called the purchase of the Parnell home “regrettable” in an email sent to the university’s staff on March 8.
The purchase — revealed by the Herald in January last year — led staff and students to voice disapproval.
The deal also caught the eye of the government’s watchdog, Auditor-General John Ryan, who said it involved “sensitive expenditure”.
That meant the partly taxpayerfunded university ran the risk of being seen to give “disproportionate” benefit to Freshwater above the university’s own business needs, Ryan 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 later 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 her 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 were 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 staff the review had made 11 findings and she aimed to see recommended improvements implemented by the end of this year.
The university was found to have relevant systems and controls in place but these needed strengthening.