CM66/07 PROPOSED CLOSURE AND SALE OF …€¦ · Ordinary Meeting of Council 16 April 2007 Page 27...

Ordinary Meeting of Council 16 April 2007 Page 27

Wollongong City Council

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REF: CM66/07

PROPOSED CLOSURE AND SALE OF VARIOUS AREAS OF PUBLIC ROAD IN WOLLONGONG TO THE GENERAL PROPERTY TRUST GROUP Report of Manager Commercial Projects and Property (WD) 22/03/07 05.02.09.016

PRECIS

Council, at its meeting of 29 May 2006, resolved to enter into an Option Agreement with the General Property Trust Group (GPT) for the closure and sale of various portions of public road in Keira Street, Wollongong, and Richardson Street, Wollongong, subject to a further report being submitted outlining the terms and conditions of the proposed sale for consideration prior to entering into the Option Agreement. Negotiations are now complete and this report outlines details of the financial aspects of this proposal for Council’s consideration.

RECOMMENDATION

1 Council amend condition 1 of Minute 143 of Ordinary Meeting of Council of 29 May 2006 to provide as follows: “Council authorise the sale and lease of those areas of public road as shown in attachment 1 and enter into an Option Agreement and Agreement for Lease with the General Property Trust (GPT)”.

2 Council accept the offer from GPT as set out below and incorporate the details as more fully

set out in the report in the Option Agreement and Agreement for Lease:

a $1,500,000 (GST exclusive) for the sale of Richardson Street, Wollongong. b $850,000 (GST exclusive) as a one off lump sum payment for the lease of the stratum

below Keira Street, Wollongong. c $350,000 (GST exclusive) as a one off lump sum payment for the lease of the stratum

above Keira Street, Wollongong. 3 Authority be granted to affix the Common Seal of Council to the Option Agreement,

Contract for Sale, and Agreement for Lease and Lease Agreements.

BACKGROUND

Council, at its meeting of 29 May 2006, considered a report on the proposed sale of an area of Richardson Street, Wollongong, and stratum areas above and below Keira Street, Wollongong, to The GPT Group to enable that company to undertake a significant development on the west side of Keira Street, Wollongong. At that meeting, Council resolved as follows: “1 Council enter into an Option Agreement with The General Property Trust Group (GPT) or its

nominee for the sale of those areas of public road and stratum, excepting the Crown Lane, Wollongong portion on the Attachment.

2 The Option Agreement shall provide for the sale to be conditional on:

a The approval by the Department of Lands to the application for the closure of those areas of public road and stratum; and

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b The issue of development consent that includes these areas of road for the development

by General Property Trust on the west side of Keira Street, Wollongong. 3 Council make an application to the Department of Lands for the closure under the Roads Act

1993 of those areas of road and stratum as shown on the Attachment. 4 Upon closure, those areas be classified as Operational under the provisions of the Local

Government Act 1993. 5 A report be prepared proposing the terms and conditions of the proposed sale and the

proposed sale price be in accordance with independent valuation advice obtained in accordance with Council’s “Valuations for the Sale of Council’s Land” Policy.

6 The above report be submitted to Council for consideration. 7 The proposal for the sale and closure of Crown Lane, Wollongong, be the subject of a

separate report to Council when the applicants have further advanced their proposal.” In implementing this resolution, Council engaged Mr Rob Aubin of Martin Morris & Jones to undertake a valuation of the areas in conjunction with Mr Mike Covey of LandMark White, consultant valuers from Sydney. Initially, the sale of the stratum areas was considered the best option for Council, but after further review of the options available, Council’s valuers recommended that in lieu of an outright sale, consideration be given to entering into a long term lease similar to the lease of the bridges in the Crown Street Mall, Wollongong. This option will give Council the best long-term outcome as at the expiration of the lease term, the stratums and improvements within will revert back to Council and Council can consider future options for these sites at that time. It was agreed between the parties that negotiations would proceed on this basis and valuation reports were prepared for Council as shown in Attachments 2 and 3. A summary of those valuations is set out below: • Area of Richardson Street, Wollongong to be sold $1,200,000 (600 sqm) • Stratum area of Keira Street, Wollongong for bridge $25,000 pa Rental • Stratum area of Keira Street, Wollongong for the tunnel $90,000 pa Rental In assessing the lease options for the stratums areas, Council’s valuer, LandMark White also recommended that Council consider a premium upfront lump sum payment rather than annual rent. The benefit of these upfront payments is that Council has immediate access to the funds, and will eliminate the ongoing administrative costs of the lease and eliminate the process of dealing with disputes with market rent reviews over the term of the lease. Extensive negotiations were undertaken including consultation with the consultant valuers and agreement has been reached for GPT to pay Council the following: • Purchase of part of Richardson Street, Wollongong $1,500,000 (GST exclusive) • Stratum above of Keira Street, Wollongong for bridge $350,000 (GST exclusive)

Lump sum payment • Stratum below Keira Street, Wollongong for tunnel $850,000 (GST exclusive)

Lump sum payment

Details of the terms of this agreement are set out under Proposal.



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PROPOSAL

It is proposed that:

1 The portion of Richardson Street, Wollongong, comprising approximately 600m2 be sold to The GPT Group or its nominee for the consideration of $1,500,000 (GST exclusive).

2 The portion of airspace above Keira Street, Wollongong, between RL 27.0 AHD and RL

35.5 AHD (subject to confirmation in the development application), proposed to be occupied by a bridge and comprising an area of 485m2, be leased to GPT or its nominee on the following terms and conditions:

Term: 50 years Commencing date: Registration of Stratum Plan or 3 months after issue of

development consent, whichever is earlier Permitted use: Retail space, pedestrian and vehicular access Annual rent: $1.00 Rent review: Not applicable Outgoings: Lessee liable for all outgoings GST: Lessee liable for GST Special conditions: • Lessee to pay a lump sum of $350,000 in lieu of paying an

annual rent

• No advertising signs will be permitted on bridge

• Lessee to hold public liability insurance to the value of $10,000,000 (or such other amount as required by Council) and indemnify Council against all claims

• Lessee will be responsible for all maintenance and cleaning of the structure and services connected to the overbridge; and

• Lessee to hold building insurance for the full replacement value of the structure constructed within the stratum.

3 That stratum of land below Keira Street, Wollongong, between RL 15.5 AHD and RL 19.2

AHD (subject to confirmation in the development application), proposed to be occupied by a tunnel and comprising 825m2, be leased to GPT or its nominee on the following terms and conditions:

Term: 50 years Commencing date: Registration of Stratum Plan or 3 months after issue of

development consent, whichever is earlier Permitted use: Retail space and pedestrian access Annual rent: $1.00 Rent review: Not applicable Outgoings: Lessee liable for all outgoings GST: Lessee liable for GST Special conditions: • Lessee to pay a lump sum of $850,000 in lieu of paying an

annual rent

• Lessee to hold public liability insurance to the value of $10,000,000 (or such other amount as required by Council) and indemnify Council against all claims arising from the occupation of the leased area

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• Lessee be responsible for all maintenance and cleaning of

the structure and services connected to the structure; and

• Lessee to hold building insurance for the full replacement value of the structure constructed within the stratum.

These provisions will be included in the option and lease agreements that will be conditional on the issue of development consent for The GPT Group development incorporating these areas of public road. CONSULTATION AND COMMUNICATION

This matter has been the subject of negotiations between The GPT Group, Council officers and Council’s consultant valuers Martin Morris & Jones and LandMark White. Consultation has also occurred with Council’s DAC, Works & Services and Design Divisions in relation to the proposal, and the recommendations of this report are consistent with Council officer’s response to the Department of Planning referral of the development proposal under the provisions of the State Environment Planning Policy - Major Projects. As Keira Street, Wollongong is a classified road, the approval of the RTA will be necessary to the lease agreements and in discussions no objections have been raised by the RTA to date. PLANNING AND POLICY IMPACT

There is no policy of Council relating to the leasing of stratums above or below public roads. Although the leasing of airspace above the road has been previously approved by Council at other locations within the CBD, the technical issues related to the tunnel construction and future servicing requirements of the road reserve above the tunnel will need to be addressed to Council’s satisfaction in the development application. Council is advised that this development falls within the guidelines of the State Environment Planning & Assessment Act - Part 3A - Major Projects and the Department of Planning will be the consent authority for this development application. Consultation has occurred between Council and the Department of Planning on this project and the negotiations have taken into consideration any variation from the concept plans previously presented before Council. However, the Option Agreement and Agreement for Lease will incorporate the terms and conditions as recommended in this report based on concept drawings submitted by GPT. In the event that the development consent varies significantly from these concepts to the extent that it impacts on the proposed sale and lease, a further report will be submitted to Council. The valuation for Council has been undertaken in accordance with Council’s policy on the Valuations for Sale of Council Land by utilising the expertise of both Martin Morris & Jones and LandMark White to assist Council officers in the negotiations. The proposed income arising from this proposal is in line with the Corporate Plan objective to coordinate the sale of identified surplus land to maximise revenue and achieve market return on commercial leased/licensed premises.

ECOLOGICAL SUSTAINABILITY This matter is consistent and complies with the principles of Ecologically Sustainable Development (ESD) as outlined in the Protection Administration Act 1991, as amended by the Protection of the Environment Operations Act 1997. ESD is interpreted to mean development that improves the quality of life, both now and in the future, in a way which maintains the ecological processes upon which life depends.



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The four principles of ESD have been considered and the effect of this proposal on them is as follows: Precautionary Principle Council is undertaking action which will mitigate any environmental impact and enhance the current amenity without any scientific evidence of environmental impact. Inter-generational Equity Council, through this proposal, will enhance the quality of life for current and future generations. Ecological Integrity This proposal will not affect the ecological diversity of the existing life systems and will enhance and maintain the essential ecological processes and life systems of the local area by adhering to environmental safeguards. Pricing

The ecological, social and economic costs of this proposal have been considered and adequately assessed as part of this project. RISK ASSESSMENT

There is no identified risk to Council in this matter. FINANCIAL IMPLICATIONS

The net return to Council in adopting the recommendations is $2,700,000 (GST exclusive). These funds will be paid to Council within three months of development consent being issued for the proposed development. This amount is generally consistent with the advice from Councils consultant valuers (see Attachments 2 and 3) and also takes into account initial comments from the Department of Planning following the determination that this development will be formally assessed by that Department of Planning under the provisions of the State Environment Planning & Assessment Act - Part 3A - Major Projects. In this regard, it is likely that the use of the bridge above Keira Street, Wollongong, will be restricted to pedestrian use even though the valuation advice was based on the use of that bridge to also include vehicular access. Council’s Financial Strategic Plan 2006-11, Strategic Area 1A Future Fund identifies the need to: “To create a capital pool comprising Council’s income generating assets and businesses and to set performance targets that ensures maximised returns on investment(s) and to provide increasing dividend flows to Council to fund major projects and commercial business reinvestment.” An element of the Future Fund is the Land Bank Reserve, which would see the sale of surplus land assets as contributions. It is proposed therefore that the proceeds of three sales would be placed in the Future Fund. GPT will be responsible for all survey and legal costs in this matter. OPTIONS

1 Council proceed with the recommendations of this report. 2 Council can vary the recommendation and proceed with the sale of the stratums rather than

enter into lease agreements as proposed. This option however will not significantly increase the compensation to Council and will have the effect of alienating these areas permanently from Council’s ownership.

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3 Council can resolve not to accept the offer from GPT and not proceed with the sale and

lease as proposed. CONCLUSION

The negotiated outcome will provide Council with a significant financial return and reflects the special value that GPT will gain by incorporating these areas into the major development as proposed.

Name Position Title Date Signature This report provides Councillors with all the relevant information and is correct at the time of writing.

This information has been relied upon in preparing the report and its recommendations. Signed by:

Wayne Douglass Property Services Manager 23/3/07

Peter Coyte Manager Commercial Projects & Property 27/3/07

Stephen Payne Chief Financial Officer

3/4/07

ATTACHMENTS

1. Site Map 2. Valuation for Richardson Street, Wollongong, by Martin, Morris & Jones Pty Ltd dated

17 October 2006. 3. Valuation of Subsurfaces and Airspace Stratum by Martin, Morris and Jones Pty Ltd, dated

3 November 2006.

ATTACHMENT 1 - Site Map Page 33


ATTACHMENT 2 - Valuation for Richardson Street, Wollongong, by Martin, Morris & Jones Pty Ltd dated 17 October 2006.


ATTACHMENT 2 - Valuation for Richardson Street, Wollongong, by Martin, Morris & Jones Pty Ltd dated 17 October 2006. Page 35


ATTACHMENT 2 - Valuation for Richardson Street, Wollongong, by Martin, Morris & Jones Pty Ltd dated 17 October 2006. Page 37


ATTACHMENT 3 - Valuation of Subsurfaces and Airspace Stratum by Martin, Morris and Jones Pty Ltd dated 3 November 2006. Page 39


ATTACHMENT 3 - Valuation of Subsurfaces and Airspace Stratum by Martin, Morris and Jones Pty Ltd dated 3 November 2006.


CM66/07 PROPOSED CLOSURE AND SALE OF …€¦ · Ordinary Meeting of Council 16 April 2007 Page 27...

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Transcript of CM66/07 PROPOSED CLOSURE AND SALE OF …€¦ · Ordinary Meeting of Council 16 April 2007 Page 27...