The Board has resolved to proceed with the new facility at Burwood East.
Excavation on the site should begin next week. We plan for the building to be ready for us to move in early 1993.
At last it is becoming a reality.
We have planned, prayed, dreamed, had anxiety attacks, looked at every option under the sun (and a few in the shade), worked, talked and argued.
And, at last, we are resolutely committed to moving.
Still, of course, there will be doubts.
In many ways it is a big decision. Including the land cost, the whole project will require around $12 million. Although we shall get a lot of this back by selling 161 Sturt Street, and in the residual value of the unused land at Burwood East.
All along we have wanted to be sure that this was the cheapest way to provide an acceptable roof over our heads.
There are many ways to look at a project like this. Value of the final asset, net present value of the cash flows, payback period, impact on expenses, return on investment, internal rate of return.
We have used all these analytical tools and some more. They have pointed us in the same direction.
Often the simplest things in life are the best. And that's true of project analysis as well as Corn Flakes.
Let's look at this as a series of simple choices we have had to make.
First, can we stay here? That was our first plan back when we started to think that one day soon the present building would not be big enough for us.
The answer was Yes, but at a price. It would cost us close to $20 million. It would have been a good investment because the value of the final building would have been much more than our investment. I said at the time that World Vision wasn't too much interested in owning an expensive building. We did not want to be rich with assets. We wanted to own the cheapest building that was sensible for us, and use our money to do more projects. Not to build finer buildings in more expensive places.
Second, can we rent? A building ties up money. That's money we could spend today on projects.
If we rent space, it will cost us about $1 million this year (and every year too, of course).
But that means we won't have to find quite a few million more this year.
We worked out that over just a few years, rent becomes very expensive. As we grow, rent rises. With inflation, rent rises.
In contrast, a building built in 1992 at 1992 prices rises in value. It doesn't rise in cost.
Look at 161 Sturt Street. We bought it for $2 million in 1981. We spent around $2.4 million doing it up. We got around $1.5 million for our previous building in Coventry Street.
All up, moving here cost us around $2.5 million.
That's about 2½ years rent at today's prices.
We have had to maintain the building of course. This last year that has cost around $125,000. Although some years it has been more.
But I am sure you can see that 161 Sturt Street has been a brilliant way to deal with our accommodation needs. We have been here for 10 years
Even if this building were worth nothing, it would still have been the cheapest way for us to be accommodated.
But why do lots of companies rent? One reason is the impact of tax on business expenses. Most companies can claim tax deductions on their running expenses. Rent is tax deductible.
But World Vision doesn't pay tax. So there is no advantage for us to rent, compared to buying. In almost every case, it is better stewardship for World Vision to buy something than to lease or rent it.
And so, to Burwood East. There is still much work to do. I want to be sure that we end up with a building that is pleasant, functional and modest.
It will be a big building, simply because we are a big organisation. Right now, including part-timers there are 193 people at the national office (83 interstate too).
I am keen to have a facility that represents the best of World Vision's values of stewardship and commitment to the poor, yet demonstrates the value we place on staff and on organisational effectiveness.
This philosophy continues to be the foundation of the building's design.
When shall we sell 161 Sturt Street? The Board accepted my recommendation to be patient. We are working with Burns Bridge Australia to do the work that presents this building in the most attractive way to the market. And then to pick the best moment to sell. For a time, we shall own two buildings. Our present one will have tenants in it, paying World Vision rent. When the time is right, we shall release the investment in a way that ensures that, over the long term, the most money has been released for our real work of empowering people transformation here in Australia and overseas.