Auckland’s SkyCity says Macquarie Group is entitled to $188 million compensation on loss of its 29 year car parking concession, following SkyCity’s devastating 2019 convention centre fire. Macquarie argues for at least $240 million. For aficionados of discounted cashflow analysis, a $52 million difference might lie in the assumptions used. For Justice Campbell, finding in favour of SkyCity, it was a case of deciding what their car parking contract actually said.
In 2019, Australian investment bankers Macquarie Group agreed to pay SkyCity $220 million upfront for the right to collect car parking fees from SkyCity customers for the next 29 years. This agreement covered 3200 car spaces: nearly 2000 spaces already available at the main casino site and a further 1200 spaces becoming available on completion of SkyCity’s nearby convention centre.
Six months after signature, convention centre construction was set back years following a fire starting in the building’s roof.
The High Court was told terms of the parking concession contained a formula compensating Macquarie for loss of parking spaces, known colloquially as a ‘ticking fee.’ After the fire, this fee was costing Sky City about $30,000 per day. Macquarie was still earning revenue from unaffected parking spaces.
In 2022, Macquarie cancelled the concession, as it was entitled to do, because of delays in reinstating car parks at the convention site. This triggered a contractual right to compensation; part-repayment of the $220 million paid upfront for a 29 year carpark concession which did not run its full course.
Macquarie says it is entitled to $240 million dollars compensation, being the correct value of future cashflows now lost. This was based on the market value of its concession being valued as at the November 2022 termination date. SkyCity says valuation date should be October 2019, date of the fire.
The $52 million difference in potential compensation arises because of differing economic conditions three years apart. Markets and market conditions change. Macquarie complains that using SkyCity’s date means it is being compensated for cashflows lost since 2022 calculated on a valuation set in 2019 dollars.
Justice Campbell pointed out that their 237 page parking concession contained nine different definitions of ‘compensation sum,’ with differing definitions applying to differing circumstances. He ruled the relevant date for determining the concession’s ‘market value’ on termination was date of the fire, with discounted cashflow methodology to be used to value future cash flows lost from 2022 to 2048 but discounted to date of the fire in October 2019.
Justice Campbell said Macquarie’s claim to $240 million was based on how it considers the parking concession should have been drafted, rather than how it was in fact drafted.
The High Court was not asked to decide the exact amount of compensation to be paid by SkyCity to Macquarie. It was asked to rule on how the contract is to be interpreted, with calculation left to an arbitration process.
Evidence was given that Macquarie reserves the right to challenge how the now-interpreted contract is to be applied to its on-going claim for compensation.
SkyCity Entertainment Group Ltd v. MPF Parking NZ Ltd – High Court (30.11.23)
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