Hundertwasser Feasibility Report

Transcription

Hundertwasser Art Centre – Feasibility Study
Whangarei District Council
September 2011
Contents
1.
Executive Summary
1
2.
Introduction
5
3.
Approach
9
4.
Governance and Ownership
10
5.
Visitor Numbers and Pricing
12
6.
Financial Analysis
20
7.
Operating Risks & Opportunities
44
8.
Costs and Benefits to Ratepayers
51
9.
Conclusion
53
Appendix 1 – Visitor Numbers and Profiles
56
Appendix 2 – Admission Prices
60
Appendix 3 – Financial Modelling Assumptions
64
About Deloitte
69
1.Executive Summary
“The arts and broader cultural resources, amenities and facilities are coming to be seen as
an urban asset and they have an important and strategic role to play in society. It is
important that we continue to make Whangarei an attractive place to live, work and
play...We need a diverse range of cultural attractions of high quality for both the local
residents and visitors”1
Whangarei District Council (WDC) are considering developing the former Northland Harbour Board building into the Hundertwasser Art
Centre, based on the unique building designs that the world renowned artist developed during his time living in Northland. The
Hundertwasser Non-Profit Trust have offered the Council the opportunity to house original Hundertwasser artworks in the gallery. There are
also opportunities to house other artworks from prominent Maori artists and other artists from Northland.
In addition the development would create a unique and iconic building within New Zealand, to be promoted to tourists globally.
WDC have commissioned this report to assist in determining the feasibility of the project, and to consider it in the wider context of Council’s
strategy and vision and of the economic impact that such a development would have on the region. An Economic Impact Assessment has
been carried out separately to this feasibility study and should also be read in conjunction with this report to assist Council in its decision
making2.
The capital cost of the project is $12.2 million including a contingency allowance ($13.6 million allowing for inflation at 4%). The capital
expenditure could be funded through loans and therefore rates or through some other funding mechanism. The funding of the capital for the
1
2
Sustainable Futures 30/50 Whangarei District, May 2010
Hundertwasser Arts Centre, Economic Impact Assessment, Deloitte September 2011
Hundertwasser Art Centre: Feasibility Study
1
project will be considered by the WDC and the results and potential impact on rates falls outside the scope of this report, and will be
considered as part of the 2012 – 2022 Long Term Plan process.
1.1. Key Findings
The key findings resulting from this feasibility study are:
•
The proposed ownership and governance structure of the Hundertwasser Art Centre would appear to be an appropriate one, as
there is shared governance between WDC and a Trust in the form of some of the elected council members sitting on the Trust’s
board. The use of the Trust will allow the Trust to apply for grants that would not otherwise be available to the WDC.
•
Estimated visitor numbers to the Hundertwasser Art Centre have been projected through to 2025, and are relatively conservative,
they do not include potential additional visitors that maybe generated by the project. Predicting these numbers relies on too many
unknowns and uncertain data sources. The feasibility of the project has been assessed on our more conservative projections and
any additional flows of visitors would only improve the projected result.
•
The base financial projections indicate that the Hundertwasser Art Centre would make cash surpluses but small accounting
surpluses and deficits after accounting for depreciation. These cash surpluses should give the Trust sufficient funds for capital
reinvestment in the future. Additional revenue streams from grants and any sponsorship funding (for the theatre complex) have not
been included in the financial projections. Should they be secured, the financial performance of the centre would be improved.
•
The sensitivity analysis shows that the project is relatively sensitive to changes in revenue, admission volumes and expenses.
There are a number of expenses that are more sensitive than others, and we have recommended that close financial monitoring to
budgets should occur and be reported back on in a timely manner so that any issues can be managed during operation of the
Hundertwasser Art Centre, if the project proceeds.
•
The cafe/restaurant, which is to be open in the evenings as well as during the day, should be sub-leased to a third party. This
would generate lower returns to the Trust operating the Hundertwasser Art Centre but would result in a lower risk. The operation of
a cafe/restaurant is neither the Trust nor Council’s core business.
•
There are a number of risks and opportunities for WDC in building the Hundertwasser Art Centre. Many of these risks and
opportunities impact on the wider Town Basin and CBD area as well as the Hundertwasser Art Centre itself. Projects have already
2
been undertaken to revitalise the Town Basin, with the Hundertwasser Art Centre likely to encourage other developments to
progress in the near vicinity which fits with WDC’s long term strategic vision for the revitalising of the Town Basin and developing a
“sense of place”.
•
WDC are keen to increase spending in the region from visitors, and the Hundertwasser Art Centre provides an example of an
attraction where visitors could spend a few hours. However, WDC need to encourage visitors to stay longer, preferably overnight,
in order to maximise visitor spend in the district. Therefore additional attractions are required to encourage visitors to do this.
Attractions such as the Artisans market and the Art Trail are examples of these. WDC should also consider encouraging
river/harbour charter tours, developing a Hundertwasser Art Trail incorporating the Kawakawa amenities block etc and other
attractions to change Whangarei from being just a stepping stone to the Bay of Islands and the Far North, and become a
destination in its own right. The potential development of a 4 star hotel could also assist in attracting overnight stays, and could
also attract a core of business travellers to the region.
•
WDC need to consider the wider impacts that the Hundertwasser Art Centre and other developments may have. They are likely to
provide jobs locally in the construction industry in the short term, and/or attract out of town workers to spend their wages in the
district on food and accommodation.
•
New jobs would be created within the Hundertwasser Art Centre and the cafe/restaurant. Our estimates indicate that 11 staff would
be required for the Hundertwasser Art Centre and up to 21 staff to work in the cafe/restaurant (to cover its proposed opening
hours), in addition to security personnel for monitoring the centre and patrolling the Town Basin.
•
The separate economic impact analysis carried out shows that there is an estimated annual benefit of $3.5m to the region from
developing the Hundertwasser Art Centre. This excludes any Hotel or other developments that may occur.
•
The revitalised waterfront area will not only attract tourists and visitors but will also become a place for locals to enjoy the
waterfront and attractions in the way that many waterfront developments have both in New Zealand and overseas.
•
The developments could increase property values in the area that may result in an uplift of rental streams for owners of the
properties in the Town Basin and CBD.
•
WDC also need to consider car parking for a variety of vehicles from coaches, camper vans, cars, etc and the traffic flows into the
Town Basin during peak times of the day and during the year to and from the state highway. We understand that WDC is
considering a new parking strategy and further development at the Town Basin to address parking.
3
Overall, the Hundertwasser Art Centre presents a unique opportunity to develop one of New Zealand’s truly iconic buildings that also fits
within the WDC’s vision to revitalize the Town Basin as a cultural/arts precinct, with economic benefits of $3.5m per annum, which would
start to deliver a positive return on investment in the District within a period of 4 years on the construction cost of $13.7m. The development
may also put Whangarei on the international map for visitors interested in such a unique structure or Hundertwasser’s other art works.
4
2.Introduction
“A critical part of the Whangarei district having a sustainable community going forward
is its ability to attract highly skilled professionals to live here. Whangarei needs to shape
cultured, vibrant and stimulating Centres... museums, galleries, markets and public art all
help create a sense of place for residents and prospective residents, and Hundertwasser
could have a significant impact in this"3
2.1. Background
The Whangarei District’s 30/50 Sustainable Futures Growth Strategy completed by Council in its previous term projected Whangarei
District’s population to increase by a minimum of 50,000 in the next 50 years. These new residents will choose to live, work and play in
Whangarei for a variety of reasons connected to the “sense of place” they feel about Whangarei District, in other words what they find
attractive about the area and how it meets their needs. Over time the District has developed a variety of community assets across various
sectors, all of which have been built around catering for the present and future needs of the people of the Whangarei District.
Whangarei is the largest urban population north of Auckland, and WDC continues to follow a strategy of developing the District to be
among the country’s most desirable and affordable places to live, work and play. WDC has already initiated a significant redevelopment of
the town basin, and when combined with the continued development of arts, cultural, heritage and civic amenities, it could act as a catalyst
to further enhance the district’s economic prosperity. Not only could this influence economic development directly in the creative industries,
it could attract new residents and businesses to the area and boost tourism by increasing the flow of domestic and international visitors.
Friedensreich Hundertwasser is a celebrated 20th century Austrian artist, who for much of the last 30 years of his life lived at Kaurinui not
far from Kawakawa. His works are celebrated across the globe from Europe, through Japan and the Pacific. In 1993 Hundertwasser was
3
Whangarei 20/20 plus (CBD Guideline Development Plan) 2006
5
invited to select a building in Whangarei that would be suitable for one of his world famous architectural transformations. He selected the
Northland Harbour Board building as his chosen subject. Hundertwasser made a number of sketches of the building along the lines of
previous projects that have been made works of art in Europe and Japan. These sketches were retrieved from the Hundertwasser NonProfit Foundation’s archives to create the architectural drawings for the proposed development. The Hundertwasser Non-Profit Foundation
support the proposal to develop and convert the Northland Harbour Board building, as this is the building Hundertwasser himself selected
for transformation. It is unlikely that the foundation would support an alternative building, as this is the only building with a direct link to the
artist. The foundation has indicated it will support the Hundertwasser Art Centre through the provision of original Hundertwasser pieces of
work free of charge, with WDC bearing only the freight, shipping and insurance costs. The support of the Hundertwasser Non-Profit
foundation for the project was clearly outlined in a presentation by Richard Smart (Representative for the Hundertwasser Non-Profit
Foundation, New Zealand) to a Whangarei District Council meeting on 27th April 2011.
The Hundertwasser Art Centre provides Whangarei with a unique opportunity to establish a nationally and internationally recognised
cultural facility and tourist attraction. Not only is its proposed location in the former Northland Harbour Board building at the town basin
linked directly to the artist, it is strategically located to incentivise investment in the local economy. The conversion of the building to a
Friedensreich Hundertwasser-designed art gallery housing high end Maori art and Hundertwasser originals could make Whangarei a
sought after tourist destination and transform the very perception of the city.
The building itself will be a stunning artwork on a grand scale and will immediately become one of New Zealand’s few iconic buildings. It
could have an impact on Whangarei which parallels the impact of the Guggenheim building in Bilbao, Spain and could put Whangarei on
the international stage.
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2.2. Purpose
WDC requested that a feasibility study be carried out for the Hundertwasser Art Centre. A financial model was developed to determine the
cash flows that the Centre itself (excluding the impact on the district as this was covered under a separate economic impact assessment)
could generate and to determine the likelihood of the Centre requiring ongoing financial support from WDC. The underlying methodology
behind the model was tested for sensitivity to determine what financial risks there are and how these may impact on the Council. In addition
to the above, this report will also discuss the following:
•
A strategic analysis and background, detailing the problem to be solved and what the outcome would be from the planned
investment, and it’s fit with the proposed redevelopment of the town’s basin.
•
A review of the capital cost of developing the Centre highlighting potential risks associated with the cost of the capital build and
how these could be mitigated.
•
Review and documentation of the proposed ownership and governance model, highlighting risks and/or issues to the WDC.
•
High level benefits and costs of the proposal to Whangarei ratepayers.
The report also incorporates the key findings from the Economic Impact Assessment, carried out separately to this study.
2.3. Report Use
The findings from this feasibility study that we have conducted on behalf of WDC have been reported to you solely for the purpose of
establishing the feasibility of the project and highlighting any potential issues that may be of relevance to you in connection with your
decision making processes under the 2012 – 2022 Long Term Plan process.
Deloitte accept no responsibility for any reliance that may be placed on this report should it be used by any party or for any purpose that
has not been expressly agreed to in writing by Deloitte.
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2.4. Reliance on Information
In preparing our report, we have relied upon and assumed, without independent verification, the accuracy and completeness of all
information as furnished to us by WDC staff. We have evaluated that information through analysis, enquiry and examination for the
purposes of performing our financial analysis. However, we have not verified the accuracy or completeness of any such information nor
conducted an appraisal of any assets. We have not carried out any form of due diligence or audit on the accounting or other records of
WDC. We do not warrant that our enquiries will identify or reveal any matter which an audit, due diligence review or extensive examination
might disclose.
2.5. Disclaimer
Our report has been prepared with care and diligence and the statements and conclusions in our report have been given in good faith and
in the belief, on reasonable grounds, that such statements and conclusions are not false or misleading. However, in no way will we
guarantee or otherwise warrant that any forecasts of future surpluses, cash flows or financial position of WDC’s Hundertwasser Art Centre
will be achieved. Forecasts are inherently uncertain. They are predictions of future events which cannot be assured. They are based
upon assumptions, many of which are beyond the control of WDC and its management team. Actual results will vary from the forecasts
and these variations may be significantly more or less favourable.
We will assume no responsibility arising in any way whatsoever for errors or omissions (including responsibility to any person for
negligence) for the preparation of our report to the extent that such errors or omissions result from our reasonable reliance on information
provided by others or assumptions disclosed in our report or assumptions reasonably taken as implicit.
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3.Approach
The approach we followed in performing this analysis was to:
•
Discuss with the Hundertwasser Project Team at WDC to understand the project’s vision, and where the project had got to and the
requirements for the feasibility study thereby assisting us in our understanding of further research required and for developing
financial projections to understand the financial feasibility of the project.
•
Review the ownership and governance aspects of the Hundertwasser Art Centre.
•
Develop assumptions on visitor numbers and pricing based on information currently available and that we would be able to take
and develop future projections of possible visitor numbers, and to determine a suitable price for entry into the Hundertwasser Art
Centre.
•
Review key assumptions with the WDC Hundertwasser Project Team before incorporating them further into our work.
•
Discuss the project and its impact on development in the Whangarei Town Basin with members of the development community.
•
Develop a Financial Model to determine the feasibility of the project and carry out sensitivity analysis.
•
Identify and assess other potential risks and opportunities associated with the project.
•
Assess the project in the wider context of WDC’s long term vision (waterfront development) and of other complimentary or
competitive projects in the region.
•
Consider the impact on the project from the findings of the separate Economic Impact Assessment being carried out.
•
Discuss the findings resulting from the above work with the Hundertwasser Project Team.
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4.Governance and Ownership
The proposed Hundertwasser Art Centre incorporates involvement from a number of entities. WDC, who own the land and existing building
where the proposed centre would be situated, will sell the site to a Trust and will fund the building of the Hundertwasser Art Centre, shown
as grant income to the Trust. This means that a Trust will own the land and existing building and then build the proposed Hundertwasser
Art Centre. WDC will be required to strengthen the existing building to meet current standards at a cost of $1.2m. This will be treated as a
separate project, and the cost of doing so is excluded from the overall cost of building the Hundertwasser Art Centre.
WDC is considering how the capital cost of the Hundertwasser project should be funded, via drawing down loans, to be funded via rates or
through some other funding mechanism. This analysis of funding mechanisms is being carried out separately to this feasibility study, but
readers should consider the impacts of funding in making their decision on whether to progress with carrying out this project. In addition
WDC will fund the property maintenance of the centre, and are looking at options of how this maybe secured through sponsorship options.
As at the time of writing this report, no legal agreements had been drafted to further determine the nature of the sale of the site and the
building’s ongoing maintenance.
A Trust will be incorporated as a board under the Charitable Trusts Act 1957. The Trust will contract WDC to provide management services
It is proposed that it will be an exempt organisation under section 7 of the Local Government Act 2002 (LGA). The Trust would be a related
party to WDC for accounting purposes and that some of the councillors elected to the Trust’s board, would exercise governance over the
Trust. Any decisions made by the board of the Trust are likely to be in line with WDC’s vision.
The Hundertwasser Art Centre has provision for a cafe/restaurant on site. It is proposed that the cafe/restaurant is sub-leased out to a third
party (restaurateur). While the restaurant is likely to generate positive returns above the lease income that the Trust would enjoy, it is not
the Trust’s or WDC’s core business. So although the potential rewards maybe significantly higher so too are the risks associated with the
hospitality trade. Securing a lease on the cafe is of a much lower risk, with more certain returns being generated for the benefit of the Trust.
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Proposed Ownership and Governance Diagram
11
5.Visitor Numbers and Pricing
5.1. Overview and Assumptions
There are a number of general assumptions that have been applied to all options. These assumptions are:
1. It is assumed for the purposes of this analysis that the Hundertwasser Arts Centre construction is completed by June 2014
2. Visitor numbers are based on projections developed by the Ministry of Economic Development (MED) to 2016 and are then
projected out through to 2025. These were for the Northland Region but have been adjusted to produce numbers for Whangarei
District only.
3. Projections for initial local visitors from Visitor Solutions4, who carried out an earlier Economic Impact Analysis, are used and
referenced in our analysis.
4. In determining the number of family pass tickets sold for the Hundertwasser Art Centre we have assumed two adults and one child.
Additional children up to a certain amount (3 or 4) would be free.
5.2. Rational for Determining Visitor Numbers
5.2.1. Visitor Origins
The determination of potential visitor numbers to a new attraction is an extremely difficult exercise, and one which should be approached
with the utmost caution. The forecast visitor numbers used as a basis in this report have been obtained with reference to the most up to
date and relevant industry data and market information available. For the purposes of determining the number of potential visitor numbers
to this new attraction we have categorised the visitor flows into three main groups, these are:
4
Visitor Solutions – Hundertwasser Art Centre Initial Appraisal and Preliminary Economic Impact Assessment, April 2011
12
•
•
•
Domestic visitors (outside Whangarei District)
International visitors
Local visitors (from Whangarei District)
5.2.2. Visitor Groups
We have obtained our base information for domestic and international visitors from the Ministry of Economic Development’s (MED) 2010 –
2016 New Zealand regional tourism forecast for the Northland Regional Tourism Organisations (RTO), published in August 2010. This
report provides historical statistics for travel periods as far back as 2004. We have used these figures to calculate the average visitor
growth between 2004 and 2016 per visitor category. The figures provided between 2004 - 2009 are based on the actual data recorded for
visitor numbers to the Northland RTO while the periods between 2010 – 2016 are forecasted visitor numbers. We have calculated the
average movement over the 2004 – 2016 period and applied this to our forecasts out to 2025.
The MED report categorises visitors into five separate groups:
1.
2.
3.
4.
5.
Holiday
Visits for family reasons (VFR)
Business
Education
Other
For the purposes of determining potential visitors to the Hundertwasser Art Centre we have excluded all of those visitors who fall into the
business and other visitor categories for Domestic visitors and other visitor categories for International visitors. Given the nature of this
attraction it is reasonable to assume that visitors from these two categories are significantly less likely to visit an attraction such as the
Hundertwasser Art Centre. Should we have included them, there is a risk that we would be overstating visitor numbers to the
Hundertwasser Art Centre.
5.2.3. Visitors who Visit Museums/Art Galleries
In order to determine the proportion of visitors that are likely to visit the Hundertwasser Art Centre while visiting Northland we have taken
historical data derived from the International Visitor Survey (IVS) and Domestic Travel Survey (DTS) published by the MED. This has
allowed us to determine the number of international and domestic visitors who visit museums/art galleries while in the Northland region. We
13
have taken the MED’s 2011 projected rate for domestic visitors, and an average of the previous 10 years international visitor rates to apply
to our forecasts going forward.
5.2.4. Capture Rate
We have used a capture rate to project the total number of visitors to the Whangarei district from the Northland region. In order to refine this
number to reflect what we think is a likely projection of visitors to the Hundertwasser Art Centre we have applied a 75 percent capture rate.
This capture rate reflects our assumptions around the Hundertwasser Art Centre’s ability to attract 75 percent of those visitors who visit
museums/art galleries, whilst visiting Northland. These are visitors that are projected to visit the Northland region whether the centre is built
or not. The centre may generate new visitors to the region, but it is difficult to determine what these numbers may be for such a unique and
iconic structure so we have ignored them. Therefore our projections are based on more known numbers and projected out into the future,
and are therefore likely to be conservative.
We have compared all information obtained in the above reports against information obtained from tourism and business statistical data
sources, Northland service providers, the Statistics New Zealand website and the Visitor Solutions April 2011 report (Initial Market
Appraisal and Preliminary Economic Impact Assessment).
See Appendix 1 for full breakdown of projected visitors through to 2025. Examples of the calculation of visitor numbers are on the following
pages.
14
5.3. Domestic Visitors
It has been estimated that in its first year of operation (2015) the Hundertwasser Art Centre will attract 53,806 domestic visitors. There are a
number of specific assumptions relating to the determination of domestic visitors. The total number of domestic visitors to the Northland
region for 2015 (4,616,859) has been obtained from the MED’s 2010 – 2016 New Zealand regional tourism forecast. This number has been
adjusted to take into account a number of considerations. Firstly the total visitor numbers have been adjusted to exclude all domestic
visitors to the Northland region who are visiting for business or other purposes. The rational for this adjustment is that these categories of
visitor are less likely to visit an attraction such as a museum/art centre while in the district. Secondly, we have applied our projected
percentage of domestic visitors who visit museums/art galleries whilst visiting the Northland region. In 2011 the MED projected that this
figure was 2.0%, we have applied this percentage out to our 2015 – 2025 projections. We believe that this provides a conservative estimate
of the likely domestic visitor numbers to visit the Hundertwasser Art Centre. Lastly, we have applied a capture rate of 75 percent to
represent our projection of visitors to the Northland region that visit museums/art galleries who will visit the Hundertwasser Art Centre.
Our assumptions for domestic visitors are illustrated in the figure below:
2015 Domestic Visitors to Northland
Purpose
Holiday
VFR
Business
Education
Other
Total
Adjusted Total
Northland Visitors to Museums
& Galleries
Total based on Capture Rate
Visitor Numbers
2,158,494
1,389,825
871,805
38,750
157,984
4,616,859
3,587,070 Adjusted for Business & Other
71,741 2.0% of total visitors
53,806 75% Capture Rate
15
5.4. International Visitors
It has been estimated that in its first year of operation (2015) the Hundertwasser Art Centre will attract 76,709 international visitors. There
are a number of specific assumptions relating to the determination of international visitors. The total number of international visitors to the
Northland region (972,124) has been obtained from the MED’s 2010 – 2016 New Zealand regional tourism forecast. This number has been
adjusted to take into account a number of considerations. Firstly the total visitor numbers have been adjusted to exclude all international
visitors to the Northland region who are visiting for other purposes. Similar to the rational we have applied to the domestic visitor numbers,
we believe that this category of visitor is less likely to visit an attraction such as a museum/art centre while visiting. However, we believe
that international business travellers are more likely to include a number of site seeing activities to their visit. This is very conservative.
Secondly, we have applied our projected percentage of international visitors who visit museums/art galleries whilst visiting the Northland
region. In 2011 the MED projected that this figure was 11.1%, we have applied this percentage out to our 2025 projections. Lastly, we
have applied a capture rate of 75 percent to represent our projection of visitors to the Northland region that visit museums/art galleries who
will visit the Hundertwasser Art Centre.
Our assumptions for international visitors are illustrated in the figure below:
2015 International Visitors to Northland
Purpose
Holiday
VFR
Business
Education
Other
Total
Adjusted Total
Northland Visitors to Museums
& Galleries
Total based on Capture Rate
Visitor Numbers
682,166
213,036
23,639
24,155
29,127
972,124
942,997 Adjusted for Other
104,908 11.125% of total visitors
78,681 75% Capture Rate
16
5.5. Total Local Visitor Numbers
In our estimation of local visitor numbers to visit the Hundertwasser Art Centre we have taken Visitor Solutions conservative forecast of
29,500 that was published in their April 2011 Initial Market Appraisal and Preliminary Economic Impact Assessment. The total local visitor
numbers they estimate from the Whangarei district have been based on population data supplied from Statistics New Zealand, with the
estimated level of visitors based on a comprehensive national survey. The figures obtained suggest that of the 2010 Whangarei City adult
population over the age of 15 (40,067), approximately 20,000 are ‘likely’ to visit a museum or art gallery at least once a year. This equates
to roughly 50% of those in the Whangarei City adult population. If the remaining adult population of those aged over 15 in the wider
Whangarei District outside of the city (21,700) are included, Visitor Solutions have estimated that it is ‘likely’ that a further 9,500 would visit
a museum or art gallery at least once per year, this being around 43% of those in the Whangarei District adult population outside of the city.
When these two populations are combined, it adds up to a ‘estimated’ local market of visitors totalling 29,500. Other Northland visitors
would be included in the Domestic visitor numbers.
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5.6. Admissions Price Assumptions
Fundamental Pricing Considerations
In determining the pricing structure for the forecast we have considered the following:
A. What is a competitive pricing structure that takes into account the prices of similar attractions across district, region and national
landscapes.
B. At what level should the age thresholds be set for child and senior citizen admission prices.
C. What is a realistic expectation around the mixture of admissions numbers (i.e. number of family passes sold verses the number of
adult passes sold).
D. Should discounts be offered to local residents to incentivise them to not only visit the Hundertwasser Art Centre once, but also
repeat visits in following years.
Comparison against Similar Attractions
We reviewed over 60 local, regional and national attractions to provide the most relevant indication of how much the Hundertwasser Art
Centre could charge for admission. We recommend further market research to optimise the price and volume mix to enhance revenue. In
order to identify the most relevant attractions to Hundertwasser we categorised each of the attractions we reviewed as either:
•
A (highly relevant to Hundertwasser)
•
B (moderately relevant to Hundertwasser)
•
C (not relevant to Hundertwasser)
This categorisation allowed us to map out all competing and complementary attractions to estimate an accurate admissions price. Refer to
Appendix 2 for a detailed breakdown of all attractions reviewed. Our review of current pricing would suggest that a standard adult entry fee
would be $10 as at September 2011. As the entry fee is not modelled to increase in the short to medium term, and will need to absorb
18
increasing costs through inflation, that a standard adult entry fee commencing mid 2014 would be $12. However, we believe that further
market research around entry fees and their effect on the number of admissions should be carried out closer to the time of opening the
Hundertwasser Art Centre to the public.
The figure below represents the admissions prices to be charged for entry into the Hundertwasser Arts Centre.
Hundertwasser Art Centre Admissions Price
Pricing Structure
Hundertwasser Art Centre
1
2
Standard Pricing Policy
Resident/Ratepayer Discount (50%)
Adult
$
$
12.00
6.00
Child
$
$
Family Pass
6.00
3.00
$ 28.00
$ 14.00
Senior Citizen
$
$
8.00
4.00
Student
$
$
8.00
4.00
Although local residents are projected at 50% of the standard pricing policy, the overall policy for pricing to local residents has not been
determined. Ticket pricing for locals may be dependent on locals bringing out of the region visitors to the centre or through purchasing an
annual admission ticket etc. For ease of financial projections, and without carrying out market research of Whangarei district the
assumption used was 50% of the standard pricing policy.
19
6.Financial Analysis
6.1. Overview and Assumptions
In preparing the Report, we have relied upon and assume without independent verification, the accuracy and completeness of all
information that is available from public sources and all information that has been furnished to us by WDC. Our work would not constitute a
review or an audit of any kind.
The sections below show the forecast financial analysis for WDC, the Hundertwasser Art Centre and for the Cafe/Restaurant and the
assumptions that have been used in developing these forecasts. Forecasts are inherently uncertain. They are predictions of future events
which cannot be assured. They are based upon assumptions, many of which are beyond the control of WDC, the Trust and their
management teams. Actual results will vary from the forecasts and these variations may be significantly more or less favourable.
There are a number of general assumptions that have been applied to all options. These assumptions are:
1. It is assumed for the purposes of this analysis that the Hundertwasser Arts Centre construction is completed by June 2014
2. Visitor numbers are based on projections developed by the MED through to 2016 and are then projected out through to
2025.These were for Northland but have been adjusted to account for Whangarei District only by applying a capture rate of 75%,
as visitor numbers and statistics for Whangarei on its own are not available. NZIER who have the only economic model in the
country that is able to look at impacts on districts and regions is unable to break-down Whangarei from the Northland region.
3. Figures and projections for initial local visitors from Visitor Solutions who carried out an earlier Economic Impact Analysis are used
and referenced in our analysis.
4. In determining the number of family pass tickets sold for the Hundertwasser Art Centre we have assumed two adults and one child.
Additional children up to a certain amount (3 or 4) would be free.
20
5. Back-office functions such as accounting and IT would be carried out in a shared services type of arrangement with the Whangarei
Art Museum Management Group. The cost of these services is undetermined, and have therefore been ignored in the financial
modelling.
6. Other costs and revenues were developed recognising required staffing, and other overhead costs. Full details of these
assumptions can be found in Appendix 3.
7. In determining the operation of the cafe/restaurant on-site, we used the number of FTEs (excluding the owner) to determine the
revenues and costs of the cafe/restaurant using revenue and expenditure benchmark percentages. These benchmark percentages
were obtained from the 75th percentile results of the 2010 Waikato University Management School’s New Zealand Business
Benchmarking Survey. 161 cafes/restaurants were used to determine the margins to generate revenues and costs for the
cafe/restaurant. The exception applied to this was rental costs as these were known from the additional modelling work carried out,
and market rental prices supplied for the Town Basin.
6.2. Costs to Whangarei District Council
An independent Trust will own and operate the Hundertwasser Art Centre. WDC will contribute to the construction costs of the project
through providing grants to the Trust.
The capital cost of the project is $12.2 million including a contingency allowance ($13.6 million allowing for inflation at 4%). Of this total
$1.2m is required for strengthening the existing building, and will need to be incurred by WDC as a separate project, therefore $12.4m of
the $13.6m is for the Hundertwasser project. The capital expenditure could be funded through loans and therefore rates or some other
funding mechanism. The funding of the capital for the project will be considered by the WDC and the results and potential impact on rates
falls outside the scope of this report, and will be considered as part of the 2012 – 2022 Long Term Plan process.
The design and construction work has already commenced with initial costings prepared by Griffiths and Associates Ltd, based on the initial
information that they have received. The method of procurement could also affect the cost, as it can transfer the risks from overruns etc.
However, further site work would be required and the full final cost of the project would not be known until tenders for the project have been
received, and would be subject to geotechnical reports. Since the Christchurch Earthquakes, a number of construction projects have
required further foundation work than originally planned for. Until geotechnical investigations are carried out, the impact of any adjustments
21
is unknown at this stage. The key risk for construction is that the cost does increase, beyond the $1m contingency budget allowed for;
however, reasonable allowances have been made in the existing budget. The opportunities to value engineer the project may be limited
due to the uniqueness of the project. While there are opportunities to do so on structural elements, value engineering on the exterior
plastering and tiling aspects of the project will be limited. However, this should be discussed with Griffiths and Associates and the Quantity
Surveyor to understand the opportunities and limitations in more detail.
Allowing for the design, consultation, and construction timeframes, the project would be due for completion in June 2014. The following
charts show both the monthly spend and the cumulative spend on the project.
Monthly Capital Expenditure
Cumulative Capital Expenditure
1,200,000.00
16,000,000
14,000,000
1,000,000.00
12,000,000
800,000.00
10,000,000
600,000.00
$
8,000,000
6,000,000
400,000.00
4,000,000
200,000.00
2,000,000
22
Jun-14
Apr-14
May-14
Mar-14
Jan-14
Feb-14
Dec-13
Oct-13
Nov-13
Sep-13
Jul-13
Aug-13
Jun-13
Apr-13
May-13
Mar-13
Jan-13
Feb-13
Dec-12
Oct-12
Nov-12
Sep-12
Jul-12
Aug-12
Jun-12
Apr-12
May-12
Mar-12
Jan-12
Feb-12
Dec-11
Oct-11
-
Nov-11
-
Sep-11
$
6.2.1. Sensitivity Analysis
We carried out sensitivity analysis on the capital cost of the project, increasing and decreasing capital expenditure by +/-10% with the
following results:
Year Ending 30 June
2012
$
2013
$
2014
$
Construction Costs - Base
755,000
3,944,000
8,918,000
Cummulative Construction Costs - Base
755,000
4,699,000
13,617,000
Construction Costs - 10% increase
830,500
4,338,400
9,809,800
Cummulative Construction Costs - 10% increase
830,500
5,168,900
14,978,700
Construction Costs - 10% decrease
679,500
3,549,600
8,026,200
Cummulative Construction Costs - 10% Decrease
679,500
4,229,100
12,255,300
23
The results are also shown on the following charts:
Annual Capital Expenditure
16,000,000
16,000,000
14,000,000
14,000,000
12,000,000
12,000,000
10,000,000
$
Cumulative Capital Expenditure
10,000,000
8,000,000
Construction Costs - 10%
increase
6,000,000
decrease
$
8,000,000
increase
6,000,000
4,000,000
4,000,000
2,000,000
2,000,000
-
decrease
2012
2013
2014
2012
2013
2014
24
6.3. Operation of the Hundertwasser Art Centre
The Hundertwasser Art Centre will be operated by the Trust. For developing financial projections, it was agreed with the WDC
Hundertwasser Project Team that we would exclude the financial position and performance of the Trust (if already existing), and start with a
clean sheet, so that the performance of the Hundertwasser Art Centre was more transparent. The administration and back-office staff of the
Whangarei Art Museum Management Group could be utilised in a shared services type of arrangement, which is currently undetermined
and is shown in the modelling at no additional cost, so that only the operational staff required for the centre were considered.
A number of potential revenue streams from grants or the sponsorship or naming rights to the theatre complex inside the centre have been
excluded from this analysis, with the exception of the capital funding of the project and ongoing grant funding equal to the rates expense,
i.e. grants would offset rates expense. This analysis uses visitor numbers projected from existing historical data projected forward i.e. the
visitor numbers who would be projected coming to Whangarei whether the Hundertwasser Art Centre was built or not. Any additional
visitors, visiting the centre after it has been built are hard to quantify and to justify, as there are too many unknown elements (internationally
this could include how famed the project becomes, exchange rates, visitor numbers to New Zealand etc). Comparisons could be drawn to
the success of the Guggenheim building in Bilbao, Spain, but that is easier for international visitors to get to, compared to the remoteness
of Whangarei and New Zealand to the rest of the world. Therefore a more conservative approach to visitor numbers has been taken and it
should be expected that the centre be financially feasible for these visitors, then any additional visitors from “new” visitors could be
considered windfall gains and show improved returns to the Trust.
Through taking this approach, WDC is able to determine what funding shortfalls there may be, and where additional revenue streams need
to be sought to ensure that the centre is financially feasible.
We have treated the cafe/restaurant as being sub-leased by the Trust to an independent commercial operator, which provides a stable low
risk return compared to operating a cafe/restaurant. Although the cafe is projected as being profitable based on the margins enjoyed by the
75th percentile cafe/restaurant of a benchmark study carried out by Waikato University5, it is neither the Trust’s or WDC’s core business,
and would therefore result in a higher levels of risk, albeit with higher surpluses or losses. We believe that the cafe/restaurant would
generate significant business, not only to Hundertwasser paying visitors, but those visitors who have not paid an admissions fee and for
locals to frequent as well. Its location overlooking the water should make it a desirable place for dining.
5
The University of Waikato, New Zealand Benchmarking Survey, Financial Statistics 2010, H4511, p266
25
The split of income currently forecast can be seen as percentages of total income below. The grant income is shown during the
construction phase, and then shown as less than 1% of income for grants offsetting rates:
Revenue Split as a Percentage
100%
90%
80%
70%
60%
50%
Cafe/Restaurant Lease Income
Souvenir Shop Income
40%
30%
Admissions Revenue
Grant Income
20%
10%
0%
26
Although we determined and agreed with WDC what could be a suitable entry fee into the Hundertwasser Art Centre (M or medium in the
table below), we analysed the effect of lower and higher pricing on revenue. The price is kept consistent during the period modelled, and is
not inflated in the later years.
Adult
Children
Family Pass
Student
Senior
Adult - Local
Children - Local
Family Pass - Local
Student - Local
Senior - Local
GST Inclusive
L
$
10.00
$
3.00
$
23.00
$
4.00
$
4.00
$
$
$
$
$
3.00
1.00
7.00
2.00
2.00
Admission Prices
M
$
12.00 $
$
4.00 $
$
28.00 $
$
6.00 $
$
6.00 $
$
$
$
$
$
6.00
2.00
14.00
3.00
3.00
$
$
$
$
$
H
14.00
5.00
33.00
8.00
8.00
6.00
3.00
15.00
4.00
4.00
Using the same visitor numbers (without further market research we are unable to determine the effect of price sensitivity on admission
numbers) the effect on admissions revenue is as follows:
Year Ending 30 June
2012
$
2013
$
2014
$
2015
$
2016
$
2017
$
2018
$
2019
$
2020
$
2021
$
2022
$
2023
$
2024
$
2025
$
Admissions Revenue - High Prices
1,473,329
1,352,606
1,315,116
1,319,291
1,323,903
1,343,070
1,362,696
1,382,795
1,403,377
1,424,454
1,446,040
Admissions Revenue - Medium Prices
1,220,189
1,124,107
1,094,732
1,098,751
1,103,139
1,119,215
1,135,678
1,152,537
1,169,802
1,187,482
1,205,589
933,446
878,805
864,266
869,811
875,653
888,640
901,939
915,559
929,506
943,789
958,416
Admissions Revenue - Low Prices
27
The Effect on Admissions Revenue from Pricing
Decisions
1,600,000
1,400,000
1,200,000
1,000,000
800,000
Admissions Revenue - High Prices
Admissions Revenue - Medium Prices
600,000
Admissions Revenue - Low Prices
400,000
200,000
-
Although the project should be finished in June 2014, we have shown visitors arriving from 1 July 2014, with staff and other costs being
incurred during June as the art works are installed and staff are trained, etc. As the centre is not complete to some years within the 2012 –
2022 Long Term Plan (LTP) cycle we have extended our analysis beyond this time-frame.
28
The key assumptions used in developing the financial projections can be found in Appendix 3. The results of the financial projections can
be seen in the following pages:
STATEMENT OF FINANCIAL PERFORMANCE
Period End
30 Jun 12
30 Jun 13
30 Jun 14
30 Jun 15
30 Jun 16
30 Jun 17
30 Jun 18
30 Jun 19
30 Jun 20
30 Jun 21
30 Jun 22
30 Jun 23
30 Jun 24
30 Jun 25
E1.00 Profit & Loss State ment
REVENUE
Admissions Revenue
Grant Income
2,755,000
-
5,699,000
-
8,918,000
-
1,220,189
15,132
575,104
122,714
1,124,107
15,541
485,746
122,714
1,094,732
15,961
459,067
122,714
1,098,751
16,392
465,484
122,714
1,103,139
16,834
472,054
122,714
1,119,215
17,289
491,127
140,200
1,135,678
17,755
511,042
140,200
1,152,537
18,235
531,837
140,200
1,169,802
18,727
553,556
140,200
1,187,482
19,233
576,241
140,200
1,205,589
19,752
599,939
160,177
TOTAL REVENUE
2,755,000
5,699,000
8,918,000
1,933,140
1,748,108
1,692,473
1,703,341
1,714,741
1,767,831
1,804,675
1,842,809
1,882,284
1,923,156
1,985,457
230,042
194,299
183,627
186,194
188,822
196,451
204,417
212,735
221,422
230,497
239,976
DIRECT COSTS
Souvenir Shop Cost of Goods Sold
TOTAL DIRECT COSTS
GROSS MARGIN
GROSS MARGIN %
-
-
-
230,042
194,299
183,627
186,194
188,822
196,451
204,417
212,735
221,422
230,497
239,976
2,755,000
5,699,000
8,918,000
-
1,703,099
1,553,810
1,508,847
1,517,148
1,525,919
1,571,380
1,600,258
1,630,074
1,660,862
1,692,659
1,745,481
100.00%
100.00%
100.00%
88.10%
88.89%
89.15%
89.07%
88.99%
88.89%
88.67%
88.46%
88.24%
88.01%
87.91%
OVERHEADS
In-House Cafe/Restaurant Other Expenses
Overhead Expenses
Insurance
Exhibitions & Freight
Security
Property Maintenance Expenses
Salary & Wage Expenses
Other Personnel Expenses
-
-
63,187
1,830
63,284
6,966
7,799
35,283
22,227
204,915
22,555
54,160
85,855
96,109
434,405
26,064
208,109
23,164
55,623
88,173
98,704
445,700
26,742
212,733
23,789
57,124
90,554
101,369
457,288
27,437
218,161
24,431
58,667
92,999
104,106
469,177
28,151
223,739
25,091
60,251
95,510
106,917
481,376
28,883
229,706
25,768
61,878
98,088
109,804
493,892
29,634
235,837
26,464
63,548
100,737
112,768
506,733
30,404
242,136
27,179
65,264
103,457
115,813
519,908
31,194
248,609
27,912
67,026
106,250
118,940
533,426
32,006
255,260
28,666
68,836
109,119
122,151
547,295
32,838
262,094
29,440
70,695
112,065
125,450
561,524
33,691
TOTAL OVERHEADS
-
-
200,577
924,064
946,214
970,294
995,692
1,021,766
1,048,769
1,076,491
1,104,951
1,134,169
1,164,164
1,194,959
8,717,423
779,035
607,596
538,553
521,456
504,154
522,611
523,767
525,123
526,693
528,495
550,522
20,040
519,670
510,286
515,421
517,943
507,555
513,294
516,393
505,585
522,311
536,714
491,978
8,697,384
259,365
97,310
23,131
3,513
(3,401)
9,317
7,374
19,538
4,382
(8,219)
58,544
-
-
-
-
-
-
-
-
97,310
23,131
3,513
(3,401)
9,317
7,374
19,538
4,382
EBITDA
Depreciation
EBIT
2,755,000
2,755,000
Interest (Overdraft)
NET PROFIT BEFORE TAX
Taxation
NET PROFIT AFTER TAX
2,755,000
2,755,000
5,699,000
5,699,000
5,699,000
5,699,000
8,697,384
8,697,384
259,365
259,365
-
-
-
-
-
-
-
-
97,310
23,131
3,513
(3,401)
9,317
7,374
19,538
4,382
(8,219)
(8,219)
29
58,544
58,544
STATEMENT OF FINANCIAL POSITION
Period End
30 Jun 12
30 Jun 13
30 Jun 14
2,313
-
2,126,770
-
1,812,872
-
Total Current assets
2,313
2,126,770
Non-Current assets
Fixed assets (WDV)
Deferred Tax Asset
2,755,000
-
6,699,000
-
30 Jun 15
30 Jun 16
30 Jun 17
30 Jun 18
2,182,368
5,800
2,788,751
5,792
3,272,961
5,792
3,792,517
5,800
1,812,872
2,188,167
2,794,542
3,278,752
15,776,264
-
15,256,594
-
14,746,308
-
14,288,012
-
30 Jun 19
30 Jun 20
30 Jun 21
4,297,451
5,800
4,761,284
6,617
5,283,209
6,617
3,798,317
4,303,251
4,767,901
13,770,069
-
13,262,513
-
12,811,097
-
30 Jun 22
30 Jun 23
30 Jun 24
30 Jun 25
5,809,488
6,626
6,145,758
6,626
6,639,660
6,617
6,687,487
7,560
5,289,826
5,816,114
6,152,384
6,646,277
6,695,047
12,294,704
-
11,789,119
-
11,467,887
-
10,958,708
-
10,993,263
-
F1.00 Balance Sheet
Current assets
Cash
Debtors
Total Non-Current Assets
2,755,000
6,699,000
15,776,264
15,256,594
14,746,308
14,288,012
13,770,069
13,262,513
12,811,097
12,294,704
11,789,119
11,467,887
10,958,708
10,993,263
Total Assets
2,757,313
8,825,770
17,589,136
17,444,761
17,540,851
17,566,764
17,568,385
17,565,764
17,578,998
17,584,530
17,605,233
17,620,271
17,604,985
17,688,309
2,313
-
371,770
-
437,753
-
34,013
-
32,792
-
35,574
-
33,683
-
34,463
-
38,380
-
36,538
-
37,703
-
48,359
-
41,291
-
66,071
-
2,313
371,770
437,753
34,013
32,792
35,574
33,683
34,463
38,380
36,538
37,703
48,359
41,291
66,071
Current Liabilities
Bank Overdraft
Creditors
GST
Tax Payable
Total Current Liabilities
Non-Current Liabilities
Loans
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Retained Profits
Total Equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,313
371,770
437,753
34,013
32,792
35,574
33,683
34,463
38,380
36,538
37,703
48,359
41,291
66,071
2,755,000
8,454,000
17,151,384
17,410,748
17,508,059
17,531,190
17,534,703
17,531,301
17,540,618
17,547,992
17,567,530
17,571,912
17,563,694
17,622,238
2,755,000
8,454,000
17,151,384
17,410,748
17,508,059
17,531,190
17,534,703
17,531,301
17,540,618
17,547,992
17,567,530
17,571,912
17,563,694
17,622,238
2,755,000
8,454,000
17,151,384
17,410,748
17,508,059
17,531,190
17,534,703
17,531,301
17,540,618
17,547,992
17,567,530
17,571,912
17,563,694
17,622,238
30
STATEMENT OF CASHFLOWS
Period End
30 Jun 12
30 Jun 13
30 Jun 14
30 Jun 15
30 Jun 16
30 Jun 17
30 Jun 18
30 Jun 19
30 Jun 20
30 Jun 21
30 Jun 22
30 Jun 23
30 Jun 24
30 Jun 25
G1.00 Cash Flow Statement
Operating Cash Flow
Operating Cash Inflow
Operating Cash Outflow
Net Operating Cash Flows
Interest Paid
Tax Paid
Total Operating Cash Flow
3,168,250
3,168,250
3,168,250
6,553,850
(263,250)
6,290,600
6,290,600
10,255,700
(165,869)
10,089,831
-
2,217,312
(1,417,875)
799,437
-
10,089,831
799,437
2,010,333
(1,403,950)
606,383
606,383
1,946,344
(1,399,137)
547,207
-
1,958,835
(1,436,582)
522,252
-
547,207
522,252
1,971,952
(1,467,019)
504,934
504,934
2,032,188
(1,500,116)
532,072
-
2,075,376
(1,550,531)
524,845
-
532,072
524,845
2,119,221
(1,592,942)
526,279
526,279
2,164,627
(1,606,620)
558,007
2,211,638
(1,677,868)
533,770
-
-
2,282,333
(1,652,544)
629,789
-
558,007
533,770
629,789
Investing Cash Flow
Capital Expenditure
(3,165,937)
(4,166,143) (10,403,729)
(429,941)
-
(62,997)
(2,696)
-
(68,239)
(2,920)
-
(221,738)
(39,868)
(581,962)
Total Investing Cash flow
(3,165,937)
(4,166,143) (10,403,729)
(429,941)
-
(62,997)
(2,696)
-
(68,239)
(2,920)
-
(221,738)
(39,868)
(581,962)
Financing Cash Flow
Loan Drawdown
Principal Repayment
Equity Contribution
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Financing Cash Flow
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net Cash Inflow/(Outflow)
2,313
Opening Balance
-
Closing Balance
2,313
2,124,457
(313,898)
369,496
606,383
484,210
519,556
504,934
463,833
521,925
526,279
336,270
493,902
47,827
2,313
2,126,770
1,812,872
2,182,368
2,788,751
3,272,961
3,792,517
4,297,451
4,761,284
5,283,209
5,809,488
6,145,758
6,639,660
2,126,770
1,812,872
2,182,368
2,788,751
3,272,961
3,792,517
4,297,451
4,761,284
5,283,209
5,809,488
6,145,758
6,639,660
6,687,487
31
The projected financial results from above can also be seen in the following charts, showing the level of retained earnings and cash
reserves available for reinvestment:
Financial Performance of the Hundertwasser Art
Centre
2,500,000
2,000,000
1,500,000
Total Revenue
1,000,000
EBITDA
Net Surplus/(Deficit)
500,000
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
(500,000)
32
Financial Performance of the Hundertwasser Art
Centre
20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
Total Revenue
EBITDA
Net Surplus/(Deficit)
Retained Earnings
6,000,000
Cash Surplus
4,000,000
2,000,000
(2,000,000)
The financial projections show the initial grant income which is used to fund construction of the centre. During construction there are no
operating expenses only capital expenditure, so the revenue becomes the retained earnings of the Trust. The Trust is projected to produce
a cash surplus of just over $0.5m per annum (Earnings before depreciation, interest, and taxation – EBITDA). After the depreciation charge
is applied *there is no tax or interest cost projected, the Trust would be breaking even (some years small surpluses, other years, small
losses. The small losses are caused by the last year of the sub-lease of the cafe/restaurant, after which the lease cost is increased by the
rate of inflation and is fixed for another 5 years. The effect of making cash surpluses can be seen over time in the second chart. The breakeven nature of net profit is reflected in the fairly static retained earnings line in the second chart.
Admissions revenue is conservatively based on the 75% capture rate of existing projected tourists to the Northland region who visit
museums and art galleries. Therefore opportunities to secure additional grants or sponsorship funding, should improve the profitability of
the centre. Although the current level of net surpluses forecast are almost at a break-even point, the Trust is likely to generate future cash
reserves to cover major capital reinvestment in the future or to sustain itself in later yearsto allow for any significant downturn in visitor
33
numbers. The effect on various sensitivities can be seen in the sensitivities sub-section below. Therefore the Trust may need to seek future
additional funding to cover any significant shortfall in visitor numbers in the short term only until sufficient reserves to cover expenditure are
generated. Additional funding could be in the forms of grants, sponsorship or funding from WDC or others. However, the results above
demonstrate that on a year by year operational basis, the Trust would not require additional funding for operational funding.
6.3.1. Sensitivity Analysis
We carried out sensitivity analysis on the profitability of the Hundertwasser Art Centre. We examined the results of the following
sensitivities:
•
Increasing / decreasing revenue (Admissions, souvenir shop spend, sub-lease of cafe/restaurant) by 10%
•
Increasing / decreasing the volume of admissions by 10%
•
Increasing / decreasing expenditure by 10%
•
Increasing / decreasing inflation by 10%
•
Increasing / decreasing capital expenditure by 10% (Effect on Net Surplus/(Deficit) only)
The charts below show the effect of this sensitivity analysis. The charts show the effect of sensitivities after depreciation is charged (Net
Surplus/Deficit) and before Depreciation is charged (EBITDA). The charts clearly demonstrate that the project is sensitive to revenue,
volumes and expenditure but far less sensitive to movements in inflation. As the financial projections above show only very small surpluses
being made, the effect on the profitability of the centre is significant should expenses increase by 10% or revenues or volumes fall by 10%.
The fall in net surpluses would quickly turn into losses (which are then compounded due to interest charges, due to running an overdraft, as
additional loan facilities have not been modelled).
What this means is that, should expenses by higher than planned, or revenues are lower or the number of visitors to the centre are lower
than projected, then the Hundertwasser Art Centre could require additional funding support. Grants or sponsorship may cover these
shortfalls, but if these are not secured, WDC may be called upon to support the centre through additional funding. This would not be
uncommon for community infrastructure.
34
Conversely should revenues be higher than forecast, visitor numbers greater or expenses lower, then the centre is likely to enjoy higher
profit margins and build up cash reserves so that it less reliant on additional funding from other parties.
Sensitivity Analysis on Net Surplus/(Deficit) Results
500,000
400,000
Net Surplus/(Def icit) - Base
300,000
Net Surplus/(Def icit) - Revenue +10%
Net Surplus/(Def icit) - Revenue -10%
200,000
Net Surplus/(Def icit) - Volume +10%
Net Surplus/(Def icit) - Volume -10%
100,000
Net Surplus/(Def icit) - Expenditure +10%
Net Surplus/(Def icit) - Expenditure -10%
Net Surplus/(Def icit) - Inf lation +10%
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Net Surplus/(Def icit) - Inf lation -10%
Net Surplus/(Def icit) - Capex +10%
(100,000)
Net Surplus/(Def icit) - Capex -10%
(200,000)
(300,000)
35
Sensitivity Analysis on EBITDA Results
1,000,000
900,000
800,000
700,000
EBITDA - Base
EBITDA - Revenue +10%
600,000
EBITDA - Revenue -10%
EBITDA - Volume +10%
500,000
EBITDA - Volume -10%
EBITDA - Expenditure +10%
400,000
EBITDA - Expenditure -10%
EBITDA - Inf lation +10%
300,000
EBITDA - Inf lation -10%
200,000
100,000
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
In addition to the sensitivity analysis above which demonstrates the effect on one area of sensitivity, we examined a “worse case” should
several of these elements be incurred at the same time. For this “worse case” scenario we assumed:
•
Ticket pricing is at the “low” option
•
Admissions are 10% lower than projected
•
Souvenir shop revenue is 10% lower than projected (also affected by visitor numbers)
•
Cafe/Restaurant lease income is 10% lower than projected
•
Expenses are 10% higher than projected
36
The results of this “worse case” scenario can be seen below:
Worse Case Scenario - Financial Performance of the
Hundertwasser Art Centre under an operating Trust
2,000,000
1,500,000
Total Revenue
1,000,000
Gross Margin
500,000
Earnings Before Interest, Tax,
Depreciation and Amortisation
(EBITDA)
-
Net Surplus/(Def icit)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
(500,000)
(1,000,000)
37
The effect on retained earnings and cash are also demonstrated below and show the retained earnings being eroded over time, as cash
balances are very low:
Worse Case Scenario - Financial Performance of the
Hundertwasser Art Centre under an operating Trust
20,000,000
18,000,000
16,000,000
Total Revenue
14,000,000
12,000,000
10,000,000
Earnings Before Interest, Tax,
Depreciation and Amortisation
(EBITDA)
Net Surplus/(Def icit)
8,000,000
6,000,000
Retained Earnings
4,000,000
2,000,000
Cash Surplus
(2,000,000)
The effects of the “worse case” scenario demonstrates that the Hundertwasser still maintains a positive cashflow over 10 years, although
suffering accounting losses. In this circumstance should there be a sudden drop in visitor numbers then the Trust could need additional
financial assistance. The Trust could still require assistance with any major capital reinvestment as well. Any financial assistance would
most likely reside with WDC even if some sponsorship or grant income could be obtained.
The operations of the Hundertwasser should be closely monitored against budgets set, including admission volumes, so that if further funds
are required, these can be actioned within a timely manner.
38
We carried out a net present value (NPV) sensitivity on the base case financial projections using an 8% discount rate (The Treasury, public
sector discount rate). We then reviewed the impact of the high-low NPV values of the top 10 variables to determine which are the most
sensitive, so that they can be carefully managed.
The results of this analysis can be seen in the Tornado chart below:
Sensitivity Tornado - Top 10 Variables
Ticket Pricing
No. Of Tickets
Salaries & Wages
Overheads (Excluding Insurance)
Wage Inflation
Property Maintenance
Security
Capex Sensitivity
5,000,000
5,500,000
6,000,000
6,500,000
7,000,000
7,500,000
8,000,000
8,500,000
9,000,000
9,500,000
10,000,000
Enterprise Value
39
The analysis demonstrates that the NPV of the Hundertwasser Art Centre is most sensitive to ticket pricing followed by the number of
tickets sold. For other income items, the level of expenditure in the Souvenir Shop will have an impact, with the least impact through the
sub-lease of the cafe/restaurant. Of these four revenue variables, the Trust can control the ticket pricing and the lease rental for the
cafe/restaurant. The volume of tickets and discretionary spend on souvenirs are ultimately beyond the control of the Trust. However, the
Trust needs to keep a close track on what sells in the shop to ensure that it maximises souvenir revenue generated from visitors. While
there could be opportunities to raise ticket prices to enjoy a greater level of revenue, the impact on admissions is unknown and would need
to be supported by further market research. The price indicated in this report is based on a comparison to 60 other attractions, and is
reflective of what we believe is a fair entry into an attraction such as the Hundertwasser Art Centre once it opens to the public in mid 2014.
The most sensitive expense in our analysis was salaries and wages. These will need to be carefully managed, and considered especially
as wage inflation is also sensitive. Overheads in general are the second most sensitive expense. Many of these costs will be outside the
Trust’s control, but where costs are in their control, these should be carefully managed, and likewise property maintenance. The Trust may
be able to secure sponsorship or align itself with a DIY or Paint supply company to cover or reduce the costs of property maintenance.
Security was also relatively sensitive, and as outsourced, volatility could be reduced and managed through long term contracts. The value
of the project is only relatively sensitive to movements in capital expenditure.
What this analysis demonstrates is that the Trust should look to control costs and use long term contracts where possible to avoid price
volatility, and carefully monitor visitor numbers to maintain the project’s value.
40
6.3.2. Operation of the Cafe/Restaurant
It is recommended that the Trust sub-lease the restaurant to a restaurateur, who has experience in the hospitality industry and understands
the key risks and rewards of operating such a business. It is not the core business of the Trust or WDC, and were the cafe/restaurant to be
run in-house we believe that additional costs may need to be incurred in appointing a manger to run the cafe/restaurant, although there
would be savings made in not paying the rent. The rewards are potentially greater, but so too are the risks if not run well. Therefore we
believe it should be sub-leased to an external party.
We believe that the location of the restaurant would not only attract customers from visitors but also from locals. The location overlooking
th
the water should enhance the number of patrons, and so in developing potential projections for the cafe/restaurant we have used the 75
percentile results of the 2010 Waikato University Management School’s New Zealand Business Benchmarking Survey. 161
cafes/restaurants were used to determine the margins to generate revenues and costs for the cafe/restaurant. The exception applied to this
was rental costs as these were known from the additional modelling work carried out, and from the market rental prices supplied for the
Town Basin. We have looked at the number of potential staff (21 Full Time Equivalents (FTEs)) required to be involved in the operation of
the cafe/restaurant for opening during the day and in the evenings 7 days a week, and then used the number of staff required to generate
revenues and other expenses. There could also be opportunities for catering events that may be hosted within the Hundertwasser Art
Centre itself that could provide additional revenue streams for the cafe/restaurant.
In addition, we have reviewed what is included in the preliminary costings for the centre and believe that additional capital expenditure of
between $80,000 - $100,000 will be required to fit out the cafe/restaurant with the appropriate equipment by the commercial operator.
We have projected the likely results of the cafe/restaurant prior to an owner taking a salary or dividend, and the results can be seen below:
41
E2.00 Profit & Loss State ment - Cafe/Restaurant Outside of the Trust
Period End
30 Jun 12
30 Jun 13
30 Jun 14
30 Jun 15
30 Jun 16
30 Jun 17
30 Jun 18
30 Jun 19
30 Jun 20
30 Jun 21
30 Jun 22
30 Jun 23
30 Jun 24
30 Jun 25
REVENUE
In-House Cafe/Restaurant Income
-
-
-
2,187,703
2,246,771
2,307,433
2,369,734
2,433,717
2,499,427
2,566,912
2,636,219
2,707,396
2,780,496
2,855,570
TOTAL REVENUE
-
-
-
2,187,703
2,246,771
2,307,433
2,369,734
2,433,717
2,499,427
2,566,912
2,636,219
2,707,396
2,780,496
2,855,570
DIRECT COSTS
In-House Cafe/Restaurant Cost of Goods Sold
-
-
-
734,193
754,016
774,375
795,283
816,755
838,808
861,456
884,715
908,602
933,135
958,329
TOTAL DIRECT COSTS
-
-
-
734,193
754,016
774,375
795,283
816,755
838,808
861,456
884,715
908,602
933,135
958,329
GROSS MARGIN
-
-
-
1,453,510
1,492,754
1,533,059
1,574,451
1,616,962
1,660,620
1,705,456
1,751,504
1,798,794
1,847,362
1,897,240
66.44%
66.44%
66.44%
66.44%
66.44%
66.44%
66.44%
66.44%
66.44%
66.44%
66.44%
GROSS MARGIN %
0.00%
0.00%
0.00%
OVERHEADS
Administration
Advertsiing & Promotion
Occupancy expenses excl rent
Rent
Plant & Equipment
Phone, fax, communication
Vehicle expenses
Wages - employees & labour only contract
Other expenses
-
-
-
22,752
4,375
111,519
122,714
44,410
7,657
4,157
507,593
122,913
23,366
4,494
114,530
126,028
45,609
7,864
4,269
520,790
126,232
23,997
4,615
117,622
126,028
46,841
8,076
4,384
534,331
129,640
24,645
4,739
120,798
126,028
48,106
8,294
4,502
548,223
133,140
25,311
4,867
124,059
126,028
49,404
8,518
4,624
562,477
136,735
25,994
4,999
127,409
126,028
50,738
8,748
4,749
577,102
140,427
26,696
5,134
130,849
143,985
52,108
8,984
4,877
592,106
144,218
27,417
5,272
134,382
143,985
53,515
9,227
5,009
607,501
148,112
28,157
5,415
138,010
143,985
54,960
9,476
5,144
623,296
152,111
28,917
5,561
141,736
143,985
56,444
9,732
5,283
639,502
156,218
29,698
5,711
145,563
143,985
57,968
9,994
5,426
656,129
160,436
TOTAL OVERHEADS
-
-
-
948,090
973,181
995,533
1,018,475
1,042,023
1,066,193
1,108,958
1,134,420
1,160,554
1,187,378
1,214,910
EBITDA
-
-
-
505,420
519,574
537,526
555,976
574,938
594,427
596,499
617,084
638,240
659,983
682,330
-
-
-
218,989
224,902
230,974
237,210
243,615
250,193
256,948
263,885
271,010
278,328
285,843
-
-
-
286,431
294,672
306,552
318,766
331,323
344,234
339,551
353,198
367,230
381,656
396,488
-
-
-
1,094
1,123
1,154
1,185
1,217
1,250
1,283
1,318
1,354
1,390
1,428
-
-
-
285,337
293,549
305,398
317,581
330,106
342,984
338,267
351,880
365,876
380,266
395,060
-
-
-
79,894
82,194
85,511
88,923
92,430
96,036
94,715
98,526
102,445
106,474
110,617
-
-
-
205,443
211,355
219,886
228,658
237,677
246,949
243,552
253,354
263,431
273,791
284,443
Assumed other costs (Depn, Amort, etc)
EBIT
Interest
NET PROFIT BEFORE TAX
Taxation
NET PROFIT AFTER TAX
42
6.3.3. Financial Analysis Conclusion
The financial analysis has shown that based on the current conservative visitor numbers forecast, that the Hundertwasser Art Centre would
make cash surpluses and small accounting surpluses and deficit, but could need additional funding, should there be a downturn in
admissions or for capital reinvestment in the short term. The centre is vulnerable to movements in increases or decreases in revenues, the
number of visitor admissions, and expenses, either enjoying higher returns or needing financial assistance. We recommend that WDC
investigate the possibility of either securing naming rights or sponsorship from a commercial company. It was suggested that a technology
based company be involved in providing revenues to develop and maintain the theatre or interactive section of the centre. In addition a
Paint Supply company may wish to be associated with the building and sponsorship could be sought in maintaining the look of the building.
Both of these would provide additional revenue or reduced costs to the centre, which would strengthen its financial viability, from the base
financial projections prepared.
The analysis has also shown that if a number of negative variables impact the centre at the same time, then the centre could require
significant financial assistance. Conversely, if a number of positive variables impacted the centre at the same time, significant reserves
could be built up. The NPV analysis shows which revenues and expenses are most sensitive and could affect the value of the centre. Many
of these items can to a certain degree be carefully managed by the Trust in its operation of the Hundertwasser Art Centre.
The capital cost exceeding budgeted cost is the key risk to the Trust as they will only have finite funds with which to build the centre. WDC
also need to investigate how it will fund the grants towards the capital cost of the project. WDC do not currently earn income from the
existing building. Through transferring it to the Trust they are foregoing the opportunity to potentially earn rental income by using the
building for some other purpose, or through selling the site to a developer which needs to be understood by ratepayers, and in the context
that the success of the Hundertwasser Art Centre has wider impacts on the district.
The financial projections for the cafe/restaurant show surpluses, but are before considering shareholder salaries or dividends in order to
recompense the owner. The rewards are potentially greater than the Trust earning lease income from the cafe/restaurant but so too are the
risks, especially as it is not the Trust’s or WDC’s core business. We therefore would recommend that the cafe/restaurant is sub-leased
generating a smaller but lower risk return to the Trust.
43
7.Operating Risks & Opportunities
There are a number of risks and opportunities that exist around the operation of the Hundertwasser Arts Centre. It is critical that the
governing body of this iconic attraction consider the wider strategic risks and opportunities that relate to the operation of this attraction. A
number of risks and opportunities have been outlined below:
7.1. Hundertwasser Art Centre and Whangarei District Operating Risks
7.1.1. Attracting Repeat Visitors
There is the need to operate the Hundertwasser Art Centre in a manner that will generate repeat visitors to not only the centre itself, but the
Town Basin and the Whangarei district in general. While a number of visitors will come to the Hundertwasser Art Centre and the wider
Town Basin to visit the building itself, the regular rotation of paintings and other cultural artefacts is a key aspect to generate repeat
admissions to the Hundertwasser Art Centre. There is a need to devise initiatives that encourage repeat visitors to the building, bearing in
mind that a lot of visitors will come to view the building itself, instead of the artwork.
7.1.2. Complementary and Competitive Attractions
Given that the Whangarei Art Museum will be relocated in close proximity to the Hundertwasser Art Centre there is a relatively low risk that
this could impact on the visitor numbers to the centre. We would recommend that WDC consider possible joint pricing, or a discounted
price to visit both art galleries, so that it is a complimentary attraction rather than competition to the Hundertwasser Art Centre. The opening
of the Heritage Trail, with sculptures and an art trail only 250 metres from the proposed Hundertwasser Art Centre could also be a
complimentary attraction to visitors. The updated bridge, (only metres from the proposed Hundertwasser Art Centre) with the week-end
artisans’ market could also be a complimentary attraction for visitors. This bridge will eventually be part of a 3.6km loop walkway/cycleway
at the Town Basin.
In order to generate the greatest benefit to the Whangarei District, WDC need to consider whether there are enough attractions to keep
visitors in the region busy for a whole day or longer. Currently many visitors may use Whangarei as a short stopping point on the way
further north to the Bay of Islands and beyond. The Hundertwasser Art Centre on its own may become an activity to do once “stopped” on
the journey north. Therefore, it needs to be considered how attractions can leverage off of visitors in order to encourage them to stay longer
44
in the district, and stay overnight. This needs to be part of a larger strategy for the district and will need to consider accommodation
requirements etc.
7.1.3. General Town Basin Infrastructure
The Hundertwasser Art Centre is expected to attract a considerably higher level of vehicle and traveller thoroughfare to the Town Basin.
With this in mind, and the prospect of other attractions such as the Information Centre and Whangarei Arts Museum relocating to the Town
Basin along with other new attractions such as the new Art Park, there is a risk that the current roading and general infrastructure is not
adequate to handle an increased level of visitor thoroughfare. The major risks can be categorised into the following areas:
Lack of Suitable Parking and Accessibility
There are currently only a limited number of parks in the Town Basin which achieve high occupancy rates. There is a risk the number of
parks available may not accommodate the visitor numbers this report is forecasting to visit the Hundertwasser Art Centre, besides any
additional demand for car parking that could be generated from other attractions relocating to the Town Centre during peak seasonal
demand. We understand that WDC have considered the availability and occupancy of car parking as part of their Parking Management
Strategy 2011. New parking facilities close to the Hundertwasser Art Centre will be available, with a strategy in place to provide for visitors
to the area rather than to commuters. Further the wider parking strategy will look to better manage parking in Whangarei without
necessarily providing additional car parking spaces, so that parking is available for visitors, commuters, and residents. In terms of
accessibility, and in considering any future waterfront development, there needs to be consideration around the types of transport arriving
and departing, or for hire in the Town Basin. These could include; buses, cars, people movers, camper vans, taxis, shuttle vans, bicycles,
motorbikes and scooters. We understand that WDC is is confident worker and visitor parking needs will be met within the new strategy.
Infrastructural Risks within Town Basin and CBD
As outlined in Whangarei’s 20/20 Plus strategy document, there is currently poor street hierarchy and connection in between the general
CBD and Town Basin. The current design of the towns inner precincts have been labelled as creating a number of issues, including but not
limited to the following:
•
Poor pedestrian connections and increasing traffic conflict
•
Increasing traffic congestions in times of normal and heavy demand
45
•
Limited community facilities and amenities
•
Little after-hours activity and some anti-social behaviour (calling into question the security of the area). We understand that this will
be addressed through new security measures to be implemented in the Town Basin and the Hundertwasser Art Centre.
•
Realising spatial and pedestrian links to the hills and along the water front
WDC is already addressing the issues raised through its CBD upgrade and concentration on linkage of Town basin and the CBD. A second
harbour crossing is due to be opened in 2013, which will remove an expected 10,000 vehicle movements daily from the Town Basin area.
Lack of Quality Accommodation in CBD/Town Basin
There is a risk that the Hundertwasser Art Centre and coincidentally the Whangarei District may never realistically be considered as a
suitable conference/convention centre or overnight destination until more attractive accommodation exists in the form of improved
accommodation (i.e. a 4 star Hotel). The risk around the current lack of suitable accommodation may not only be limiting the potential of
attractions and events such as those of the Hundertwasser Art Centre, but also other attractions throughout the Whangarei District as well.
46
7.2. Hundertwasser Art Centre and Whangarei District Opportunities
In order to attract a skilled workforce, cities must be attractive places to live and work in their own right. They must promote a range of
social, cultural and environmental features to create a real “sense of place”.
7.2.1. Targeting of Education Platforms
An opportunity exists around the targeting of primary, secondary and tertiary (e.g. Elam School of Fine Arts) education platforms. If the
Hundertwasser Art Centre can entice these institutions from within its own region and neighbouring regions to commit to annual visits, then
this will increase awareness for the centre as well as visitor numbers. A carefully constructed pricing structure would need to be developed
around this opportunity.
7.2.2. Targeting of Tourism Charters
There is an opportunity to develop competitive pricing structures targeted at local, national and international tourism providers. If the
Hundertwasser Art Centre is able to attract coach/bus services to the region then this would have a positive impact on other operators in
the Town Basin and throughout the Whangarei District.
7.2.3. Continued Waterfront Development
The re-development of the Town Basin and particularly its interaction with the waterfront at this location is part of WDC’s vision. Similar to
many other councils and regions around New Zealand there is a desire to utilise water where available. Experience both in New Zealand
and overseas, shows that people are attracted to waterfront locations. The waterfront developments in Whangarei could provide an ideal
opportunity for locals and visitors to develop a “sense of place”.
The Paihia waterfront in the Bay of Islands is an extremely valuable intermediary between people and water and is the access point for a
host of water based activities. It’s also a hub combining travel, tourism and transport. While it is well documented that there are some
infrastructure hurdles surrounding the development of the Town Basin, there are a number of opportunities that exist around its waterfront
development.
The Hundertwasser Art Centre has the potential to act as a catalyst for further waterfront development, which could bring a number of
direct benefits to the community. These include, but are not limited to the following:
47
•
Revitalisation of the tourism industry.
•
Encouraging the schooling, development and retention of skills within the district.
•
Increasing cultural diversity.
•
Stimulation of property values around the waterfront and increased returns on WDC’s investments.
•
An increased opportunity to host varying sized events that would otherwise go to other districts or regions.
Like the lessons taken from other significant water developments such as St Katherine’s Dock in London and that of the Auckland
waterfront development, the continued re-development of the Town Basin waterfront could enhance the liveability and attractiveness of the
district by not only rejuvenating the urban landscape, but further improving quality of lifestyle choices available for those in the area, or
considering moving to the area.
7.2.4. Additional Complementary Developments to Consider
While the development of the Hundertwasser Art Centre may be seen as the beginning of a much larger strategic initiative around
increasing the District’s economic and cultural prosperity, there are a number of opportunities that feed off of its development.
Development of a Hundertwasser Trail
WDC should consider the development of a Hundertwasser trail connecting Kawakawa amenities block to the Hundertwasser Art Centre.
The Kawakawa amenities block has an estimated 10,000 visits per month. A trail such as this could capitalise on bringing tourists through
Whangarei’s Town Basin and also include visits along the way to other prominent attractions in the Whangarei District.
Veranda Development
A veranda development at the Hundertwasser Art Centre cafe/restaurant, utilising its waterfront location could create an extremely tempting
option for passing tourists. Numerous other councils around New Zealand and overseas have identified waterfront hospitality as a key part
of their longer term development plans. WDC can consider this alongside other future developments, taking advantage of the
Hundertwasser Art Centre’s prime waterfront location.
48
Complementary Attractions Packages
With the Whangarei Art Museum having opened in close proximity to the Hundertwasser Art Centre there is an opportunity to offer a
complementary package to visit both attractions. There are a number of similar attractions both within and outside the Town Basin that
could fall within this category, however there would need to be an appropriate level of market research conducted around the fit of any such
attractions and split of ticketing revenue within such a package.
Relocation of the Information Centre and the Development of other Attractions in the Town Basin
The majority of visitors who currently visit the Information Centre are international travellers, so it is a real draw card for those international
travellers who come to Whangarei. If the Information Centre is relocated to the Town Basin then this will encourage more traffic
thoroughfare to the Town Basin and will have a positive impact on all other attractions operating in the Town Basin area. The Heritage Trail
and Art Park opened this month adjacent to the Town Basin and the Bascula Bridge due to open in 2013, are examples of other attractions
in this area.
Continuing Development of the Town Basin
An opportunity exists to leverage off of the development of the Town Basin and converge this upgrade with that of the CBD and the other
urban precincts within the city. This idea is outlined in the Whangarei 20/20 plus strategy. The redevelopment of the Town Basin can also
act as a catalyst for the Whangarei District’s other natural attractions, with the development of stronger connections around the District.
Associations/Affiliations with Professional Bodies
There is an opportunity for the Hundertwasser Art Centre to associate/affiliate itself with the “The Arts Promotion Trust” which is the
creative/arts sector development body for the Northland region, if the Trust is not already a member. The Arts Promotion Trust are
responsible for a number of notable arts events – including the “Northland Arts Trail” and “Art Beat”.
Targeting Art Conventions and Conferences
Given the relatively close proximity to Auckland, where a large number of arts conventions and exhibitions are held, the Hundertwasser Art
Centre can compete with these to bring conventions/conferences into the Whangarei’s local economy. There does however remain a
fundamental issue that there is no accommodation recognised at a 4 star rating or higher.
49
7.3. Other Developments
As part of our review we have investigated other potential developments in or adjacent to the Town Basin area. Developers in the region
view the building of the Hundertwasser Art Centre as favourable and some have seen it as a catalyst affecting both the timing and nature of
their own developments. Others see it is an opportunity to work with WDC in developing Public Private Partnerships (PPPs) or providing
additional infrastructure to the town, such as a potential public transport hub/car park. Other developers are considering commercial
developments of 3,500 to 4,000 square metres that includes potential retail and some additional parking. They view the Hundertwasser Art
Centre as generating demand (through foot traffic and the desire to work in an enhanced environment) for their own development, as it will
become the part of town to “be in”, i.e. a catalyst. Should the Hundertwasser Art Centre not proceed, then the timing for such a
development may also be delayed. The value of such a commercial development could vary from its intensity ranging from a $16m to $40m
development, which could provide additional economic growth into the District.
WDC is considering options for the development of a 4 star hotel in the Town Basin area. The developers are currently independent but
would be keen to see any hotel development branded with an internationally recognised name e.g. Novotel. The developers see a need for
such a hotel in the region, and believe that it would have a corporate base of visitors travelling to the region on business. The development
of the Hundertwasser is seen as complimentary to the development and if branded could attract visitors to Whangarei for a night before
proceeding further north on their visit and likewise on their return. It could also encourage week-end visits from Auckland.
Other developers in the Town Basin and CBD are keen for the revitalisation of the area, as it is likely to lift the property values of the area,
and could result in increased rents, as well as strengthening the balance sheets of organisations including WDC’s.
50
8.Costs and Benefits to Ratepayers
WDC is considering funding the construction of the Hundertwasser Art Centre through the provisions of grants to the Trust in order to build
the Hundertwasser Art Centre. Although WDC are considering various funding mechanisms there are likely to be some costs for
ratepayers. There will be reasons for the Whangarei community to support or not support the proposed Hundertwasser Art Centre. There
will be social and economic benefits and there will be financial costs.
8.1.
Benefits
There are a number of social and economic benefits, some are short term and some are longer term. The benefits include:
•
Public access to Hundertwasser and other significant artworks in the region.
•
Construction opportunities locally, the Economic Impact Assessment prepared by Deloitte estimates that 68 FTEs would be
required. In addition should the Hundertwasser Art Centre progress, it would bring forward other developments within the Town
Basin, CBD area of town.
•
The Deloitte and Visitor Solutions Economic Impact Assessments have estimated an on-going economic benefit of between $3.5m
- $3.7m per annum from 2015 onwards from the development. This does not include the impact from other complimentary
developments that are likely to occur as a result.
•
New jobs would be created, with an estimated 11 additional jobs required for front-line work in the Art Centre, and potentially 21
jobs in the cafe/restaurant. Security personnel would also be required for monitoring the CCTV within the centre and for patrols to
be in the Town Basin.
51
•
Potential increased spending in the region. Monies spent at the Hundertwasser may not result in diminished spend at other
attractions in the region, but in additional spending due to the number of few attractions that the Hundertwasser Art Centre would
be competing for.
•
The project fits into the strategy of the revitalisation of the Town Basin, improving the look and feel of the heart of the city, and
should help to engender a “sense of place” for ratepayers, and a place to spend time in, which would not only benefit existing
ratepayers but could attract professionals and their families to the Whangarei District, growing its cultural base and aiding its future
sustainability.
•
Compliments and enhances other developments such as the Art Park, the new location of the Whangarei Art Museum, and the
Hatea Hub Bridge development.
•
The revitalisation of the Town Basin is likely to result in an increase in property values in and around the Town Basin and the CBD.
8.2. Costs
In addition to the benefits above, the proposed Hundertwasser Art Centre would also bring with it costs. The costs include:
•
The grants provided towards the construction costs of $13.6m will need to be paid for, either through rates paying for a loan over a
set period of time or through some other funding mechanism. $1.2m of these costs will need to be incurred in strengthening the
building, whatever its future use, as it is a public building subject to the provisions of WDC’s earthquake code and is being
addressed independently of the proposed Hundertwasser Art Centre. Therefore $12.4m is the additional cost to be funded by WDC
less any additional grants that can be secured by the Trust towards the construction of the centre.
•
There is an opportunity cost of what the funding from a full commercial lease would provide Council compared with transferring the
Hundertwasser Art Centre to the Trust.
The costs to ratepayers and the funding mechanisms to support building the Hundertwasser Art Centre are being considered by WDC and
are outside the scope of this report. It should be noted that significant spending of $1.2m is required to make the building usable for any
other development there.
52
9.Conclusion
From our analysis of the proposed Hundertwasser Art Centre, the ownership and governance structure would appear to be an appropriate
one, as there is shared governance between WDC and the Trust in the form of the elected council members sitting on the Trust’s board.
The operation of the Trust will allow the Trust to apply for grants that would not otherwise be available to WDC. Care should be taken by
the Trust and WDC as they will be related parties for accounting purposes, and appropriate controls and policies should be put in place if
they are not already there.
Visitor numbers projected are relatively conservative and are based on historical and projected information from the MED and are then
projected further out through to 2025. The visitor numbers as discussed are those projected to visit Whangarei and Northland whether the
Hundertwasser Art Centre is developed or not. The development of the Hundertwasser Art Centre may encourage new additional visitors to
the region and could result in a similar success story as the Guggenheim building in Bilbao, Spain. Although this would be hard to gauge as
the Hundertwasser Art Centre and New Zealand are far more remote to international visitors than mainland Europe, and there are other
unknowns that would make any influx of additional visitors hard to gauge. Therefore our projections are based on the more conservative
visitor patterns that are known and measured.
The price for entry admissions is based on our research of other entry fees for numerous attractions, and what would appear to be a fair
price for the public with allowance made for the opening of the centre in mid 2014. For local ratepayers, we have shown in our analysis that
they would pay 50% of entry fees to the centre. There have been suggestions that local residents could purchase an annual pass to the
centre or enter free with a full paying guest from outside the region. WDC will need to give further consideration as to how local ratepayers
would be charged. This could be carried out through consultation with the public and/or through market research.
The financial analysis shows that the Hundertwasser Art Centre could operate without additional WDC support, unless there was a
significant shortfall in visitor numbers in the short term. Should grant or sponsorship (for theatre complex) funding be sought, it will serve to
strengthen the financial performance of the Trust. Budgets and operating costs will however need to be closely monitored, as the project is
sensitive to movements in visitor numbers and increases and decreases in revenues and expenditure. Therefore it remains a risk to WDC,
that the Hundertwasser Art Centre could need additional funding to support it. The centre should generate sufficient cash reserves for
capital reinvestment at some stage in the future, although small accounting net surpluses and deficits are forecast. The sensitivity analysis
53
shows that there are a number of expenses that are more sensitive than others and these should be monitored more closely to keep control
of costs.
We would recommend that if the project progresses, that budgets are set with monthly reporting back on actual results, including variance
analysis, so if any problems emerge that they can be identified and mitigated in a timely manner.
We have shown the cafe/restaurant being run by an external third party, as this is neither the Trust’s or WDC’s core business. The financial
projections developed for the cafe/restaurant which will be open in the evenings as well during the day, show reasonable returns prior to an
owner taking out a salary or dividend (excluded from analysis). However, although the returns projected are higher than the sub-lease
rental income to be earned, the risks would be significantly higher, and we would therefore recommend that the Trust sub-lease the
cafe/restaurant to a third party, and accept the lower returns of lease income but also the lower risks associated with sub-leasing.
There are a number of risks and opportunities for WDC in building the Hundertwasser Art Centre. Many of these impact on the wider Town
Basin and CBD area as well as the Hundertwasser Art Centre itself. There are opportunities to revitalise the Town Basin, and the
Hundertwasser Art Centre is likely to encourage other developments to progress in the near vicinity which fits with WDC’s long term
strategic vision for the city’s heart and developing a “sense of place”.
WDC are keen to increase outside spending in the District, and the Hundertwasser Art Centre provides an example of an attraction where
visitors could spend a few hours. However, WDC need to encourage visitors to stay longer, preferably overnight, in order to maximise
visitor spend in the district. Therefore additional attractions are required. Attractions such as the Artisans market and the Art Trail are
examples of this. WDC should also consider river/harbour charter tours etc and other attractions to stop Whangarei being just a stepping
stone to the Bay of Islands and the Far North, and become a destination in its own right. The potential development of a 4 star hotel is likely
to assist in attracting overnight stays, or week-end visits from Auckland in addition to attracting a core of business travellers to the District.
The Hundertwasser Art Centre and other developments may provide jobs locally in the construction industry in the short term, and/or attract
out of town workers to spend their wages in the District. New jobs would be created within the Hundertwasser Art Centre and the
cafe/restaurant. The separate economic impact analysis carried out shows that there is an annual benefit of $3.5m per annum to the region
from developing the Hundertwasser Art Centre. This is prior to the hotel or other developments that may occur.
The revitalised waterfront area will not only attract tourists and visitors but will also become a place for locals to enjoy the waterfront and
attractions in the way that many waterfront developments have both in New Zealand and overseas. The developments are likely to
increase property values in the area, which may result in an uplift of rental value for owners of the properties.
54
One of the key risks for WDC will be considering the availability of car parking close-by to these attractions and also managing traffic flows
from the state highway down to the Town Basin especially during peak traffic times and the summer season. We understand that WDC is in
the process of undertaking a Car Parking Strategy, but we would recommend that should the project progress, that Traffic consultants
review the new strategy and potential traffic flows into the Town Basin.
WDC will need to consider the other benefits and of course the cost to its ratepayers in making a decision to progress with the
Hundertwasser Art Centre, as well as considering their views during the 2012 – 2022 Long Term Plan consultation process.
Overall, the Hundertwasser Art Centre presents a unique opportunity to develop one of New Zealand’s truly iconic buildings that also fits
within the WDC’s Town Basin revitalisation vision, with economic benefits of $3.5m per annum, which would deliver a return on investment
in the District over a pay-back period of 4 years on the construction cost of $13.7m. The development may also put Whangarei on the
international map for visitors interested in such a unique structure or Hundertwasser’s other art works.
55
Appendix 1 – Visitor Numbers and Profiles
Age Profile of Domestic Tourists to Northland
Age Profile of Local Whangarei Population
Age
Two Year
(Grouped) YE Mar 10 YE Mar 11 Average
15 to 24
20%
18%
19%
25 to 34
15%
18%
17%
35 to 44
19%
20%
20%
45 to 54
18%
17%
18%
55 to 64
14%
17%
16%
65+
13%
10%
12%
Age Profile of International Tourists to Northland
Age
(Grouped) YE Jun 10
15 to 24
17%
25 to 34
23%
35 to 44
11%
45 to 54
17%
55 to 64
18%
65+
13%
Two Year
YE Jun 11 Average
17%
17%
21%
22%
13%
12%
18%
18%
18%
18%
13%
13%
Deloitte has used Visitor Solutions projection of
29,500 visitors from the wider Whangarei District.
We have compared this projection alongside data
collated from the 2006 Census to obtain a break-out
of visitors under each age category. We feel that this
provides a reasonable projection of local visitor
numbers
Age
per 2006
(Grouped) Census Percentage
16,953
23%
0 to 14
9,096
12%
15 to 24
7,605
10%
25 to 34
10,845
15%
35 to 44
10,395
14%
45 to 54
8,511
11%
55 to 64
11,058
15%
65+
Total
74,463
per Visitor
Solutions
6,716
3,604
3,013
4,296
4,118
3,372
4,381
29,500
Note: per Visitor Solutions column is calculated as (29,500 *
2006 Census %)
56
Total International Visitors 2014 - 2025
100% capture
Total Visitors 75% capture
15 to 24
17.0%
25 to 34
22.0%
35 to 44
12.0%
45 to 54
18.0%
55 to 64
18.0%
65+
13.0%
2014
101,999
2015
104,908
2016
107,629
2017
110,271
2018
112,978
2019
115,751
2020
118,593
2021
121,503
2022
124,485
2023
127,540
2024
130,670
2025
133,877
76,499
13,005
16,830
9,180
13,770
13,770
9,945
78,681
13,376
17,310
9,442
14,163
14,163
10,229
80,722
13,723
17,759
9,687
14,530
14,530
10,494
82,703
14,060
18,195
9,924
14,887
14,887
10,751
84,734
14,405
18,641
10,168
15,252
15,252
11,015
86,814
14,758
19,099
10,418
15,626
15,626
11,286
88,944
15,121
19,568
10,673
16,010
16,010
11,563
91,128
15,492
20,048
10,935
16,403
16,403
11,847
93,364
15,872
20,540
11,204
16,806
16,806
12,137
95,655
16,261
21,044
11,479
17,218
17,218
12,435
98,003
16,660
21,561
11,760
17,640
17,640
12,740
100,408
17,069
22,090
12,049
18,073
18,073
13,053
41,519
11,015
5,649
11,015
4,237
73,436
84,734
42,539
11,286
5,788
11,286
4,341
75,238
86,814
43,583
11,563
5,930
11,563
4,447
77,085
88,944
44,652
11,847
6,075
11,847
4,556
78,977
91,128
45,748
12,137
6,224
12,137
4,668
80,916
93,364
46,871
12,435
6,377
12,435
4,783
82,901
95,655
48,021
12,740
6,534
12,740
4,900
84,936
98,003
Assumtions of international travelers:
Senior Citizens are regarded as those over 65 years of age - They will all purchase senior citizen passes
We estimate (30%) of those in the age category 15 - 24 are students
70% of international visitors fall within the 25 - 64 age group, we estimate the split of that group as follows:
60%
Adult
16%
Child
24%
Family Pass
We estimate the proportion of admission tickets to be purchased will be done so as follows:
Tickets/Pa sses
Adult
Child
Family Pass
Senior Citizen
Student
Total Tickets
Total Numbers
49%
13%
20%
13%
5%
37,485
9,945
5,100
9,945
3,825
66,299
76,499
38,554
10,229
5,245
10,229
3,934
68,190
78,681
39,554
10,494
5,381
10,494
4,036
69,959
80,722
40,525
10,751
5,514
10,751
4,135
71,676
82,703
49,200
13,053
6,694
13,053
5,020
87,020
100,408
57
Total Domestic Visitors 2014 - 2025
100% capture
Total Visitors 75% capture
15 to 24
19.5%
25 to 34
16.5%
35 to 44
19.5%
45 to 54
17.5%
55 to 64
15.5%
65+
11.5%
2,014
71,875
2,015
71,741
2,016
71,605
2,017
71,455
2,018
71,300
2,019
71,141
2,020
70,975
2,021
70,805
2,022
70,628
2,023
70,446
2,024
70,259
2,025
70,065
53,906
10,512
8,895
10,512
9,434
8,355
6,199
53,806
10,492
8,878
10,492
9,416
8,340
6,188
53,703
10,472
8,861
10,472
9,398
8,324
6,176
53,591
10,450
8,843
10,450
9,378
8,307
6,163
53,475
10,428
8,823
10,428
9,358
8,289
6,150
53,355
10,404
8,804
10,404
9,337
8,270
6,136
53,231
10,380
8,783
10,380
9,316
8,251
6,122
53,103
10,355
8,762
10,355
9,293
8,231
6,107
52,971
10,329
8,740
10,329
9,270
8,211
6,092
52,835
10,303
8,718
10,303
9,246
8,189
6,076
52,694
10,275
8,694
10,275
9,221
8,168
6,060
52,549
10,247
8,671
10,247
9,196
8,145
6,043
13,904
13,904
4,813
5,882
5,348
43,850
53,475
13,872
13,872
4,802
5,869
5,336
43,751
53,355
13,840
13,840
4,791
5,855
5,323
43,650
53,231
13,807
13,807
4,779
5,841
5,310
43,545
53,103
13,773
13,773
4,767
5,827
5,297
43,436
52,971
13,737
13,737
4,755
5,812
5,283
43,324
52,835
13,700
13,700
4,742
5,796
5,269
43,209
52,694
13,663
13,663
4,729
5,780
5,255
43,090
52,549
Assumtions of Domestic travelers:
70% of international visitors fall within the 25 - 64 age group, we estimate the split of that group as follows:
33%
Adult
33%
Child
34%
Family Pass
Tickets/Pa sses
Adult
26%
14,016
13,990
13,963
13,934
Child
26%
14,016
13,990
13,963
13,934
Family Pass
27%
4,852
4,843
4,833
4,823
Senior Citizen
12%
5,930
5,919
5,907
5,895
Student
10%
5,391
5,381
5,370
5,359
Total Tickets
44,203
44,121
44,037
43,945
Total Numbers
53,906
53,806
53,703
53,591
58
Total Local Visitors 2014 - 2025
Local Capture
Total Visitors
0 - 14
15 to 24
25 to 34
35 to 44
45 to 54
55 to 64
65+
29,500
22.8%
12.2%
10.2%
14.6%
14.0%
11.4%
14.9%
2014
100%
29,500
6,716
3,604
3,013
4,296
4,118
3,372
4,381
2015
50%
14,750
3,358
1,802
1,506
2,148
2,059
1,686
2,190
2016
30%
8,850
2,015
1,081
904
1,289
1,235
1,012
1,314
2017
25%
7,375
1,679
901
753
1,074
1,030
843
1,095
2018
20%
5,900
1,343
721
603
859
824
674
876
2019
20%
5,900
1,343
721
603
859
824
674
876
2020
20%
5,900
1,343
721
603
859
824
674
876
2021
20%
5,900
1,343
721
603
859
824
674
876
2022
20%
5,900
1,343
721
603
859
824
674
876
2023
20%
5,900
1,343
721
603
859
824
674
876
2024
20%
5,900
1,343
721
603
859
824
674
876
2025
20%
5,900
1,343
721
603
859
824
674
876
Assumtions of Local visitors:
50% of domestic visitors fall within the 25 - 64 age group, we estimate the split of that group as follows:
33%
Adult
33%
Child
34%
Family Pass
Tickets/Pa sses
Adult
Child
Family Pass
Senior Citizen
Student
Total Tickets
Total Numbers
22%
22%
23%
15%
17%
6,490
6,490
2,262
4,425
5,310
24,977
29,500
3,245
3,245
1,131
2,213
2,655
12,488
14,750
2014
159,905
6,716
27,120
28,737
23,988
27,322
25,497
20,525
2015
147,237
3,358
25,670
27,694
22,082
25,638
24,188
18,607
1,947
1,947
679
1,328
1,593
7,493
8,850
1,623
1,623
565
1,106
1,328
6,244
7,375
1,298
1,298
452
885
1,062
4,995
5,900
1,298
1,298
452
885
1,062
4,995
5,900
1,298
1,298
452
885
1,062
4,995
5,900
1,298
1,298
452
885
1,062
4,995
5,900
1,298
1,298
452
885
1,062
4,995
5,900
1,298
1,298
452
885
1,062
4,995
5,900
1,298
1,298
452
885
1,062
4,995
5,900
1,298
1,298
452
885
1,062
4,995
5,900
2016
143,275
2,015
25,276
27,524
21,448
25,163
23,865
17,984
2017
143,670
1,679
25,411
27,791
21,449
25,295
24,036
18,010
2018
144,109
1,343
25,553
28,067
21,455
25,434
24,215
18,041
2019
146,069
1,343
25,883
28,505
21,681
25,787
24,571
18,298
2020
148,076
1,343
26,221
28,954
21,913
26,149
24,935
18,561
2021
150,131
1,343
26,568
29,413
22,150
26,520
25,308
18,830
2022
152,235
1,343
26,922
29,883
22,392
26,899
25,690
19,105
2023
154,390
1,343
27,285
30,364
22,641
27,288
26,082
19,387
2024
156,597
1,343
27,656
30,858
22,895
27,686
26,482
19,676
2025
158,856
1,343
28,037
31,363
23,155
28,093
26,893
19,972
Total Visitors 2014 - 2025 (By Visitor Age)
Split on total Travelers for
Total Visitors Region
0 - 14
15 to 24
25 to 34
35 to 44
45 to 54
55 to 64
65+
Total Visitors 2014 - 2025 (By Visitor Category)
Adult
Child
Family Pass
Senior Citizen
Student
Total Tickets
Total Numbers
57,990
30,451
12,213
20,300
14,526
135,479
159,905
55,788
27,463
11,219
18,360
11,970
124,800
147,237
55,464
26,404
10,893
17,729
10,999
121,489
143,275
56,081
26,308
10,902
17,753
10,822
121,865
143,670
56,721
26,217
10,914
17,783
10,646
122,281
144,109
57,709
26,456
11,042
18,040
10,738
123,985
146,069
58,721
26,701
11,173
18,303
10,832
125,730
148,076
59,757
26,951
11,307
18,573
10,929
127,517
150,131
60,819
27,208
11,444
18,849
11,027
129,347
152,235
61,906
27,470
11,584
19,132
11,128
131,221
154,390
63,020
27,739
11,728
19,422
11,232
133,140
156,597
64,160
28,014
11,876
19,718
11,337
135,105
158,856
59
Appendix 2 – Admission Prices
Admissions Price Comparison Data
Whangarei District Attractions
Category
B
B
B
B
B
B
B
B
Pricing Structure
Attraction Name
Tuatara
Burning Issues Gallery
Appin Gallery
The Gallery, Helena Bay Hill
The Papermill
Whangarei Art Museum
Quarry Arts Centre
Natural Wood Creations
Location
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
B
B
B
Parua Bay Gallery
The BACH (Basin Arts & Crafts House)
Reyburn House Gallery
Whangarei
Whangarei
Whangarei
B
C
C
A
B
B
B
B
C
A
C
C
Glenbervie Pottery Gallery
Pacific Carvers
Steve Haywood Master Jeweler
Kiwi North - Museum. Kiwi House. Heritage Park
Hikurangi Historical Museum
Terenga Paraoa Tours
Waipu Museum
Forum North
Miniature Train Rides
Claphams Clocks- The National Clock Museum
Pupurangi Hire & Tour
Whangarei Central Library
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Whangarei
Adult
Child
Family Pass
Senior
Student
Additional Details Noted
Admission free
Admission free
Admission free
Admission free
No pricing structure, all receipts by donation
Admission free
Admission free
No pricing information available - assuming free entry
No pricing information available
No pricing information available - assuming free entry
$140 (per person including lunch)
$ 10 $
5
$ 25
$ 50 $ 30
Dependent on event
$ 2.50 $2.50
$ 8 $ 4
$ 20
$
6
$
6
$10 per person for kayak/Waka Ama hirage alone
Free
60
Wider Northland Region Attractions
Category
C
C
C
A
A
B
B
B
A
A
C
Pricing Structure
Attraction Name
Location
World of Wheels
Zion Wildlife Gardens
Botanica Whangarei - Fernery, Conservatory & Cacti House
The Kauri Museum
Far North regional Museum
Hokianga Museum
Kaikohe Pioneer Village
Kelly Tarltons Museum of Shipwrecks
Russell Museum
Waipu Museum
Waitangi National Trust Museum (Treaty House)
Northland
Northland
Northland
Northland
Northland
Northland
Northland
Northland
Northland
Northland
Northland
Adult
Child
Family Pass
$ 4 $ 2
$ 60 $ 30
Senior
n/a
Student
n/a
n/a
Admission free
$ 17 $
$ 4 $
4
1
$ 35
$ 8
$
15 $
15
Koha/Donation
$ 5
$ 6
$ 8
$ 8
$ 25
$ 1
$ 3
$ 2
$ 3
$ 12
$ 15
$ 20
$
6
$
6 Concessions available for large groups
NZ residents admission is free
61
National Attractions
Category
B
B
B
B
B
B
Pricing Structure
Attraction Name
Location
Christchurch Arts Centre
Mairange Arts Centre
Corbans Estate Arts Centre (Waitakere)
TSB Bank Wallace arts centre (Auckland)
Mangere Arts Centre
Auckland Art Gallery
Christchurch
Auckland
Auckland
Auckland
Auckland
Auckland
B
City Gallery
Wellington
B
C
C
C
B
B
Auckland
Auckland
Auckland
Waitomo
Auckland
Auckland
B
A
A
B
Stardom
Sky Tower
Te Puia
Waitomo Caves
MOTAT
Auckland War Memorial Museum
Cultural & Heritage shows
Polish Heritage Trust Museum
Howick Historical Village
Auckland Museum
Cantebury Museum
B
B
B
C
C
C
Te Papa
Voyager New Zealand Maratime Museum
Arataki Visitor centre
Kelly Tarltons Underwater World
Auckland Botanical Gardens
Auckland Zoo
Wellington
Auckland
Auckland
Auckland
Auckland
Auckland
B
C
C
C
Butterfly Creek
Rainbow's End theme Park
Zealandia/Karori Wild Life Sanctury
Single tick et admissions
Auckland
Auckland
Wellington
Auckland
Auckland
Auckland
Christchurch
Adult
Child
Family Pass
Senior
Student
Admission prices for individual exhibitions
Admission free
Admission free
Admission free
Admission free
Admission free
$
$
$
$
$
$
$
$
$
$
16
25
43
46
14
10
25
5
14
10
$ 8
$ 8
$ 22
$ 21
$ 8
$ 35
$ 49
$ 116
$
$
8 $
15 $
$ 35
$
7 $
$
Admission free (charges apply for some exhibitions)
Education programmed students - $8, Weekend kids
8 shows - $10 per adult, $8 per child
13 Primary - $6, Secondary - $8
Based on single cave admission prices
8 $65 Annual Family Pass
This is a suggested donation
8 Child/student range is $4 - $8
This is a suggested donation
11
$10 donation is for visitors from outside Auckland
Admission Free (Donations welcomed)
$
8
$
7
$ 36
$
11
$
$ 16 $
8
$ 32
$
12
$
$ 34 $ 10
$
26
$
$ 20 $ 10
$
16
$
$
$
$
$
16
24
17
12
$
Admission free
26 Education programme students - $10
Admission free
16 Education programme students - free
(Based on Combo Ticket) Education programme
16 students and Teachers - $10
$
$
19 (Based on Combo Ticket)
17
Admission free (charges apply for some exhibitions)
$
$
$
$
20
47
29
19
$ 11
$ 37
$ 15
$ 9
$ 57
$ 156
$ 71.5
$ 46
12
62
Admissions Pricing Calculation
Pricing Structure
Rating
Relevance Category
A
1
2
3
4
5
6
7
8
Claphams Clocks- The National Clock Museum
Kiwi North - Museum. Kiwi House. Heritage Park
Waipu Museum
Russell Museum
Far North regional Museum
The Kauri Museum
Howick Historical Village
Auckland Museum
Adult
$
$
$
$
$
$
$
$
Average Price $
8.00
10.00
8.00
7.50
4.00
17.00
14.00
10.00
Child
$
$
$
$
$
$
$
$
9.81 $
4.00
5.00
3.00
2.00
1.00
4.00
7.00
-
Senior
Citizen
Family Pass
$
$
$
$
$
$
$
$
20.00
25.00
20.00
15.00
8.00
35.00
36.00
-
Student
$ 6.00 $
$
$
$ 6.00 $
$
$
$
$
$ 15.00 $
$ 11.00 $
$
$
3.71 $ 22.71 $
6.00
6.00
15.00
11.00
-
9.50 $ 9.50
Average price over all other Categories
B
C
4.46 $
1.76 $
2.00 $
0.98 $ 1.16
$ 15.14 $
$
7.29 $
7.21 $
2.79 $ 2.70
4.25 $ 10.64 $
4.42 $ 4.45
Total Average Price $
9.80 $
We have categorised a variety of attractions from the Whangarei District, Northland Region
We have classified these attractions as either A, B or C:
A Relevant to Hundertwasser (either
B Semi-relevant to Hundertwasser
C Not overly relevant to Hundertwasser
In arriving at our recommended Admission Price we have focused on the information
obtained from our Category A attractions. These have been ranked in descending order in
relation to relevance to Hundertwasser and provide a strong indication of how admission
into Hundertwasser's Art Centre should be priced.
63
Appendix 3 – Financial Modelling Assumptions
The following are some of the key assumptions used in developing the financial model and projections.
Visitor numbers and pricing are as in the main document and Appendices 1 and 2.
Revenue Assumptions
Spend per each ticket sold
$
Gross Margin to be at:
3.00 [Adjusted per CPI per annum]
60% [Margin achieved by Whangarei I-site]
Cafe Lease Income
Cafe & Terrace Floor space
Rental per Square Metre
283.22 m2
$
400.00 [Assumed unadjusted for 5 years, then adjusted per CPI 5 yearly]
64
Expenditure Assumptions
Overhead Expenses
[CPI to be applied each year]
Accountancy fees
Advertising
Audit fee
Bank fees & charges
Computer expenses
Consultancy Fees
General
Legal Fees - Year 1
Legal Fees - Year 2 onwards
Postage & Courier
Printing and Stationery
Seminars & Conferences
Telephone & Tolls & WiFi
Transport
Travelling & Accomodation
Uniforms
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
18,000.00
100,000.00
5,000.00
300.00
3,000.00
5,000.00
5,000.00
20,000.00
10,000.00
1,000.00
3,000.00
2,000.00
8,000.00
5,000.00
4,000.00
$
[Nominal]
[Nominal]
[Marginal cost on top of Whangarei Art Museum]
[Nominal]
[Nominal]
[Nominal]
[Nominal]
[Nominal]
[Nominal]
[Nominal]
[Nominal]
[Nominal]
[Nominal]
[Nominal]
[Nominal]
300.00 [Cost per Employee]
Credit Card Commisions
1.00% [Percentage of sales]
Insurance
Capital Value
Insurance - General Percenatge of Capex
Insurance - General
Art Works - Hundertwasser
Art Works - Maori
Insurance - Art Works of Value
Insurance - Art Works
$
$
$
$
$
12,200,000.00
0.10%
12,200.00 [Based on value of capex]
10,000,000.00
2,000,000.00
0.07%
8,622.00 [Based on % of artworks value - Percenatge based on what other
public art galleries are paying for insurance premiums]
65
Exhibitions & Freight
Exhibitions
Freight - Set up
Freight -Year 2 of operation onwards
$
$
$
40,000.00 [Advised by WDC]
$
79,260.00 [CCTV operation during opening hoursonly, after hour patrols and alarm monitoring]
Security
Security
[Security to be tied into new security measures for the Whanagrei Basin afterhours service. Patrols in Basin at no charge to Hundertwasser.
Security monitoring based on opening times of aprox 60 hours a week @ $23.50 per hour (52 weeks a year) ($73,320 per annum), plus patrols at $450 per month
($5,400 per annum) and alarm monitoring at $45 per month ($540 per annum). [Advised by Security company & WDC]
Property Maintenance Expenses
Rates & Taxes
Additional Insurances
Air Conditioning
Fire Protection
Lifts & Energy
Cleaning
Repairs & Maintenance
Management
Miscellaneous
1,643.00 m2
1,643.00 m2
1,643.00 m2
1,643.00 m2
1,643.00 m2
1,643.00 m2
1,643.00 m2
1,643.00 m2
1,643.00 m2
5.20
4.55
0.65
8.45
8.45
1.95
8.45
7.80
$
$
$
$
$
$
$
$
$
13,970.00
8,543.60
7,475.65
1,067.95
13,883.35
13,883.35
3,203.85
13,883.35
12,815.40
[Advised by WDC]
[cost per sqm]
[cost per sqm]
[cost per sqm]
[cost per sqm]
[cost per sqm]
[cost per sqm]
[cost per sqm]
[cost per sqm]
66
Personnel Costs
[Wage inflation to be applied each year]
FTE Value
Salary - Curator/Director
Receptionist/Ticket Counter 1
Guide 1
Guide 2
Guide 3
Shop Manager
Shop Assistant 1
Shop Assistant 2
Backroom Assistant
Security Guard 1
Security Guard 2
Insurance - ACC
Kiwisaver
Subscriptions & Levies
Recruitment Expenses - Set up
Full Cost
Salary Costs
72,000.00
36,000.00
35,100.00
35,100.00
35,100.00
35,100.00
35,100.00
35,100.00
37,440.00
37,440.00
37,440.00
37,440.00
37,440.00
37,440.00
43,290.00
43,290.00
35,100.00
35,100.00
35,100.00
35,100.00
35,100.00
35,100.00
10.50
402,210.00
0.50
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00%
4.00%
1.00%
5.00%
[Half cost - Shared with WAM. No additional salary cost to region]
[New cost - estimated]
[%
[%
[%
[%
of salary
of salary
of salary
of salary
costs]
costs]
costs]
costs]
Security personnel were initially considered to be employed by the Trust, but in respect of rostering staff, covering sickness etc, and hand
over between day and afterhours staff, it would be more practical for the Trust to outsource security.
Working Capital Assumptions
Debtor Days
Debtor Days
Debtor Days - Lease Income
0
30
Creditor Days
Expenses (Excluding Wages)
Salaries & Wages
Capital Expenditure
30
0
30
GST Creditor/Debtor Days
0
67
Capital Expenditure Assumptions
Costs are based on those provided by Griffiths & Associates Limited.
Splitting of Capital Costs
Summary of Costs
Construction Costs (pre inflation)
Professional Fees (pre inflation)
Contingency (pre inflation)
Inflation
Shell (Including site preparation)
Hard Fitout
Mechanical Services
Electrical Services
Lifts
Fire Services
Siteworks
Fixtures & Fittings
7,636,124
7,636,124
2,563,876
1,000,000
2,417,000
13,617,000
4,291,951
2,123,633
991,650
275,600
190,000
105,000
285,890
372,400
8,636,124
Direct Costs
3,794,974
1,877,732
876,824
243,688
167,999
92,842
252,786
329,279
7,636,124
Building
Consent &
Professional
Fees
Contingency
Escalation
Total
1,274,186
496,977
1,201,192
6,767,330
630,460
245,901
594,343
3,348,436
294,399
114,826
277,534
1,563,583
81,820
31,912
77,132
434,552
56,407
22,001
53,175
299,582
31,172
12,158
29,386
165,559
84,874
33,104
80,012
450,777
110,557
43,121
104,224
587,181
2,563,876
1,000,000
2,417,000
13,617,000
Depreciation Rates
Shell (Including site preparation)
Hard Fitout
Mechanical Services
Electrical Services
Lifts
Fire Services
Siteworks
Fixtures & Fittings
50 years
25 years
15 years
25 years
15 years
25 years
50 years
10 years
2.00%
4.00%
6.67%
4.00%
6.67%
4.00%
2.00%
10.00%
[Straight
[Straight
[Straight
[Straight
[Straight
[Straight
[Straight
[Straight
Line Depreciation
Line Depreciation
Line Depreciation
Line Depreciation
Line Depreciation
Line Depreciation
Line Depreciation
Line Depreciation
Rate]
Rate]
Rate]
Rate]
Rate]
Rate]
Rate]
Rate]
Allowances have been made for some capital expenditure by the Trust for IT equipment and some fit-out costs such as cash registers,
Point of sale terminals, shelving, etc which are separate from the main construction costs and fit-out. The Trust is also purchasing the land
from WDC for $2m and will be via a grant to allow the purchase to proceed.
68
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69

Hundertwasser Feasibility Report

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