America’s Cup Costs Region Less Than Anticipated
America’s Cup Village Costs Region Less Than Anticipated
Statement made by Peter Kiely, Chairman, America’s Cup Village Limited
The final wash up of finances relating to the development of the America’s Cup Village, and the provision of public participation and running land based events, will cost the Auckland region $23.5 million, a sum less than anticipated in February.
Of this, $14 million is attributable to developing Village infrastructure such as improved wharves and event facilities.
This cost will be reduced even further as we receive additional rents from our syndicate bases and marina berths between now and the next America’s Cup challenge in 2003.
The shortfall in revenue attributable to providing for public participation and land based events was $9.5 million.
We have now finalised the accounts relating to the America’s Cup Village, and this breakdown of costs has been extracted from the financial statements for the year ending 30 June, 2000.
In February we said the anticipated cost to the region for developing the Cup Village and what took place there would be in the vicinity of $25.7 million.
We are encouraged that the final figure is some $2.2 million better than February’s anticipated cost.
We had also hoped that the overall loss on public participation and running the event would be reduced to around $7 million. However, we have taken the prudent decision to retain in the accounts write downs covering the sale of the Yacht Club barge and a small number of outstanding disputes with suppliers.
The public will be the ultimate judge as to whether it received value for money, ACVL believes the Village and facilities were a great success and will be one of the finest investments the region has ever made.
The Village was the catalyst which helped transform a once derelict part of Auckland into what is today the entertainment heart of Auckland, and a prime residential and commercial district. What is clear is that without the vision of the Auckland Regional Services Trust originally and the development work of ACVL, other redevelopment around the Village would not have taken place.
The Village was also the focus of one of the finest sporting events ever held in New Zealand. It was a magnificent spectacle and the Village attracted 4.4 million people, a quarter of them from overseas and another quarter from outside of Auckland.
When the economic impact report on the America’s Cup is released it will show that the region received huge benefits from hosting the event.
Gross receipts relating to the Village came to $13.8 million, significantly down on budget. We were unable to achieve the revenue from sponsorship and royalty payments that we had anticipated.
There was no blow out in costs, with Village expenditure being in line with budget. Many of the activities that the Cup Village undertook were commitments entered into before ACVL began managing the project, and there was very limited scope for us to trim costs when income streams failed to meet expectations.
As other major event managers will confirm, while costs are likely to be relatively predictable and fixed, it is the income side that is the most difficult to forecast.
The major areas contributing to the $9.5 million shortfall were
Royalty income lower than forecast by $3 million.
Royalties received from suppliers and licensees fell short of budget. The forecast income was based on anticipated sales by suppliers and licensees. While the public enjoyed the event, they did not spend their money in the Village.
A loss of $4.1 million on Yacht Club memberships and associated activities.
Contribution fell short by $4.1 million when membership numbers did not reach forecasts and when a write down in relation to the barge on which the Yacht Club was sited is taken into account. The barge is an asset still owned by ACVL and is for sale. ACVL was contractually obliged to provide the facilities and membership fulfilment.
American Express met its contractual obligations to ACVL.
A loss of $310,000 on the Winstone Building lease.
A lease was taken on this building in anticipation of it being needed as a members’ lounge associated with the Yacht Club.
In the event, the facility was not needed for its original purpose, and while efforts were made to defray costs the revenue generated did not cover expenditure.
A loss of $1.7 million on the Village Pavilion.
Leased and refurbished to provide public and retail facilities, the rents and royalties received fell short of expenditure. A factor contributing to the shortfall was delays and costs associated with obtaining entertainment and liquor licence resource consents.
In retrospect, we were over ambitious in developing the Village Pavilion to the extent we did but at the time all expert opinion was that the revenue flows would cover expenditure.
Close to 1 million people visited the Village Pavilion, and it was the main public facility covering retail outlets, facilities, shelter and entertainment.
The estimated realisable value of ACVL’s land and marina holdings at the Cup Village at 30 June, 2000 is in the vicinity of $39 million after selling the log farm to Viaduct Harbour Holdings for $10 million, when the former owner exercised its right to repurchase this area at the contracted price.
The special legislative powers that enabled ACVL to become involved in the America’s Cup regatta have now expired, and ACVL has reverted to the role of property manager and developer.
We will retain the land and marina facilities we own at the Village at least until the end of the next America’s Cup defence in 2003.
While we will no longer be involved in public participation and land based events associated with the America’s Cup regatta we have offered all assistance to whoever takes up this task so that the next event will be an ever-greater spectacle.
Note: unless otherwise noted figures shown are net of tax.