Property overvalued: Suncorp
FINANCIAL services major Suncorp is taking legal action against property valuers LandMark White for "gross overvaluation" of a Sydney office building before the financial crisis hit in 2007.
Suncorp alleges LandMark was negligent when it provided Allco with a $115 million valuation of a 13-storey office building at 149 Castlereagh Street in Sydney's CBD, according to documents lodged with the Federal Court in New South Wales.
Allco purchased the property for about $33 million in 2006, according to reports at the time, then applied for and received a $90 million mortgage from Suncorp to renovate the building based on the $115 million valuation.
However, Suncorp now believes the renovated building was worth $65.6 million in February 2007 and Landmark was negligent, partly because its valuation relied on a 100 per cent occupancy rate as soon as the renovations finished.
"A reasonably competent valuer would not have assumed that the property would be more than one-third leased on practical completion," Suncorp said in its statement of claim.
LandMark also failed to take into account poor pedestrian traffic flow and access, poor natural light and an excess of columns in the building, and the lack of vehicular access "with the result that all goods, including waste removal, would have to be carried in and out of the building at the street frontage".
The case is expected to come under close scrutiny among the property sector after a sharp fall in commercial property values when the global financial crisis hit.
Suncorp claims it was left $40.2 million out of pocket after Allco collapsed and is seeking compensation and damages.