The billion-dollar private school: Dilworth's archaic road to riches

The Countdown national distribution centre, with a rateable valuation of $85m, is one of Dilworth Trust Board's many Auckland property investments. Photo / Supplied

A low-profile private school operating under an archaic trust deed has over the past century become one of Auckland's largest landlords, and is verging on becoming the country's first billion-dollar school.

Recently-filed financial statements with the Charities Register for Dilworth School, an application-only boys boarding school offering full scholarships to its roll of 586, show
net assets surged by $49 million over the previous 12 months - largely thanks to capital gains - to reach $957m by January 31.

Dilworth chairperson Aaron Snodgrass said in his report accompanying the accounts that "the endowment fund is large by any measure".

A Herald investigation into the finances of New Zealand's private education sector found Dilworth was easily the country's richest private school. The second-richest, Auckland's exclusive King's College, reported net assets of only $277m. On a per-student basis, Dilworth's endowment fund is equivalent to that of Eton College in the United Kingdom.

The 2020 accounts also reconfirm that Dilworth's executives are the highest-paid school administrators in the country, with six staff reported to be earning average salaries of $282,000 (up from $260,000 the previous year).

In September, police charged seven former Dilworth teaching staff with a raft of sexual offending against students between the 1970s and mid-2000s. The launch of proceedings prompted dozens of further calls from former students at Dilworth, and police have expanded their investigation, dubbed Operation Beverly.

Snodgrass and Dilworth CEO Ewen Anderson declined repeated requests for an interview over the past two months. A media liaison for the school said: "In light of the current criminal proceeds concerning historical allegations by former staff members, we are providing responses in writing."

The school's assets are largely tied up in real estate - $166m is in school land and buildings and $668m in investment properties, mostly located within Auckland - and another $116m is held in managed funds.

The level of Auckland property holdings places Dilworth in the same ballpark as large local landlords Precinct Properties ($2.8b in total real estate) and SkyCity ($1.5b).

Investment generated returns of 10.7 per cent last year, down from a peak of 17.5 per cent in 2018, largely because of the performance of the Auckland real estate market. Property holdings last year comprised 84 per cent of its entire investment portfolio.

Investment properties are largely clustered near its two school campuses in Remuera. Nearly all titles between the Remuera train station and Broadway - occupied by a cluster of luxury car dealers, including Porsche and Mercedes Benz, and a string of motels - are owned by the Dilworth Trust Board.

Additional property holdings include the $85m national distribution centre for Countdown in Wiri and the $37.5m storage yards for truck hire giant TR Group in Penrose.

Questions to Dilworth about its lack of investment diversification - a correction in the Auckland property market could prove catastrophic for the school - were rejected in a statement which praised "the far-sighted vision of James Dilworth and subsequently trustees over many decades to retain significant central Auckland landholdings".

Returns, largely capital gains, have substantially exceeded school and trust board operating expenses in recent years, and since 2016 the surplus has helped Dilworth increase its net assets by $243m.

Dilworth School in Epsom, Auckland, whose trust board has accumulated nearly $1b in local real estate. Photo / Dean Purcell

The origins of the school and its concentrated investment base date back to an 1894 bequest from farmer and land speculator James Dilworth worth £100,000 ($20m in today's dollars). The school opened its doors to students in 1906 and has gone on to educate future prime ministers (Mike Moore) and Cabinet members (Michael Bassett).

The original bequest - written only 12 months after the first general election in New Zealand in which women were allowed to vote - specified that only boys of "sound bodily and mental health" from Auckland, or the Irish province of Ulster, could be admitted to a school that must be constructed of "either brick or stone or concrete".

Its trust deed has been amended a handful of times by Parliament, boiling down a bewildering range of restrictions on property management to requiring the bulk of its endowed capital to be invested in property within "15 miles" of the Auckland Post Office.

Original instructions for student applications were also limited to "either destitute orphans or children of parents in straitened circumstances" but have evolved to those whose families are facing "challenging times financially or personally". The school also stopped admitting students from Ireland in the 1930s, but has expanded its local intake beyond Auckland city.

The focus on educating only boys, however, remains - making Dilworth one of a vanishingly small minority of single-sex schools in New Zealand.

In 2018, the school began fundraising in attempts to generate a parallel $350m endowment fund to open a girls' school operating on a similar full-scholarship boarding model to that offered to boys. A statement from the school said those efforts were still in their "early stages".

Trustees have also regularly - at least six times since 1985 - gone to the High Court to increase their own pay. Recent accounts show its six trustees received a total of $555,417 in remuneration last year.

The high-powered board has Snodgrass - CFO of East Coast investment company Eastland Group - as chair and includes SkyCity chief property officer Peter Alexander, former Fonterra CFO Jonathan Mason and - until his retirement in August 2019 - rich-list scion Hugh Fletcher.