How successful was The Block Port Melbourne as a development?

GUEST OBSERVER

Washington Brown has crunched the numbers on The Block’s latest development in Melbourne’s inner-city bayside suburb of Port Melbourne, and something just doesn’t add up.

From a financial point of view the development, which consisted of transforming a 1920s art deco building into a luxury apartment block, was one of the worst I have ever seen.

While I understand the magic of television, Channel 9 have outdone David Copperfield in creating the illusion of a profit to the public!.

Let's look at the numbers:

According to reports Channel 9 bought the site for around $5 million, which allowed for 6 apartments. Only 5 were sold on TV and for calculation purposes let’s say the acquisition costs is $4.2 million.

The construction cost and depreciation allowances totalled over $11 million, for the 5 apartments.  

That’s $15.2 million alone in construction and acquisition costs.

It’s worth noting that under the Income Tax Assessment Act 1997 the initial vendor (ie. the developer) has an obligation to pass on the actual costs of construction to the purchaser, where the costs are known.

Let’s not forget there’s then a variety of other costs involved in buying and selling, and undertaking the development, including:

• Stamp duty
• GST on the sale
• Demolition
• Marketing
• Agents’ fees
• Legal fees
• Interest
• Rates

Whilst some of these costs may have been avoided due to contra deals, the bulk would have to be outlaid by Channel 9.

I estimate these additional costs to conservatively be $2 million, which brings the total cost to $17.2 million.

The Block’s total sales realised just a little over $12 million, leaving the development in the red by around $5 million, yet it has been indicated that profits of up to $715,000 were made by the contestants. 

That something David Copperfield would be in awe of.

You know it’s the peak of the market when reality TV shows are pulling rabbits out of a hat to show a profit.

Whilst the contestants may have walked away with some ‘profit’, if the numbers are to be believed as shown on the show that development was a stinker.

Tyron Hyde is director, Washington Brown, and can be contacted here.