CITY OF PORT PHILLIP REPORT

Transcription

1 CITY OF PORT PHILLIP REPORT ORDINARY MEETING OF COUNCIL 22 AUGUST PROPOSED NEW LEASE - STOKEHOUSE ADDRESS / LOCATION: GENERAL MANAGER: PREPARED BY: 30 JACKA BOULEVARD, ST KILDA JOHN HICKS FILE NO.: 2860/ ATTACHMENTS: DAVID GRAFFEN, PROPERTY COORDINATOR 1. PLAN OF LEASE AREA 1. EXECUTIVE SUMMARY 1.1 On 23 August 2010 Council resolved to negotiate a new lease by private treaty for the property at 30 Jacka Boulevard, St Kilda. 1.2 The negotiations are now complete and the terms and conditions proposed by the current tenant, Stokegroup Pty Ltd, are presented to Council for its consideration. 1.3 This report recommends that the statutory procedures be commenced pursuant to Sections 190 and 223 of the Local Government Act 1989 for a proposed new lease to replace the existing lease. 2. RECOMMENDATION That Council: 2.1 Notes the outcome of private treaty negotiations between Council s negotiating team and representatives of Stokegroup Pty Ltd and the proposed terms and conditions for a new lease for the property at 30 Jacka Boulevard, St Kilda. 2.2 Commences the statutory procedures under Section 190 and of the Local Government Act 1989 ( the Act ) for a new lease with Stokegroup Pty Ltd by publishing a notice in local newspapers inviting interested persons to make a submission under Section 223 of the Act for the proposed lease of 30 Jacka Boulevard, St Kilda on the following terms; Lease area: approximately 1,778 square metres. (Refer to Attachment 1 Plan of the Lease Area) Length of Agreement: 21 years. 1

2 2.2.3 Permitted Use: Restaurant Rental: Commencing at $471,000 per annum with 3% annual increases and reviews to market every 5 years with a discount of $1.089 million over 10 years for landlord structural repairs to be undertaken by the tenant Capital Works: Renovation and refurbishment of the building including new fit out to the value of $6,000,000 by lessee Community Benefit: Cash payment which Council will direct to the St Kilda Life Saving building totaling $500,000 between years 3 and 12 of the new lease. 2.3 Authorises the General Manager, City and Infrastructure Services to undertake the administrative procedures necessary to enable Council to carry out its functions under Section 223 of the Act in relation to this matter, and 2.4 Resolves to hear and consider any submissions received pursuant to Section 223 of the Act at the Council meeting to be held on 14 November BACKGROUND AND CONTEXT 3.1 Council is the appointed Committee of Management under the provisions of the Crown Land (Reserves) Act 1978 (CLRA) for the subject property. The property is currently leased to Stokegroup Pty Ltd for use as a restaurant. The current lease will expire in The proposal may be allowed under the State Government s Leasing Policy for Crown Land in Victoria The Department of Sustainability and Environment (DSE) has advised that the Minister for Environment and Climate Change supports, in principle, a new lease in this case. The tenant has a proven track record (experience, competency and financial capacity), the proposal involves significant community benefit and there will be significant capital works/re-investment into the property. 3.3 Furthermore officers consider that the current tenant is a key tenant with an excellent reputation within the hospitality industry and has worked very well with Council to develop and enhance the current value of the lease. 3.4 On 23 August 2010, Council resolved to enter into private treaty negotiations with the current tenant of 30 Jacka Boulevard, St Kilda for a new lease. The resolution read; That Council: 2.1 Adopts in principle lease terms and conditions for the future use and occupation of 30 Jacka Boulevard, St Kilda including: Lease area: approximately 1,778 square metres. (Refer to Attachment 1 Plan of the Lease Area). 2

3 2.1.2 Length of Agreement: Up to an additional 15 years on the current lease Permitted Use: Restaurant Document Format: Standard Department of Sustainability and Environment (DSE) Crown Land Lease with additional conditions covering liquor licensing Significant Community benefit and capital work program to be provided by the lessee as detailed in the confidential report Lease Negotiation 30 Jacka Boulevard St Kilda Rent to be negotiated in accordance with the confidential report - Lease Negotiation 30 Jacka Boulevard St Kilda The tenant will have no rights to re-assign the lease. 2.2 Authorises the General Manager City and Infrastructure Services to negotiate with the current tenant of 30 Jacka Boulevard, St Kilda, Stokegroup Pty Ltd. 2.3 Finalise the lease negotiation in a form of a document prepared by Council s solicitors being conditional upon the following; Any required planning permit approvals, or other statutory approvals; A further decision by Council on whether to establish a new lease for the property having complied with the legislative procedures set out in Sections 190 and 223 of the Local Government Act 1989 and considered any submissions from any members of the public about the lease proposal; and Approval of the lease by the Minister for Environment and Climate Change. 2.4 Adopts the attached probity plan (Attachment 2). 2.5 Notes the confidential report presented to this meeting Lease Negotiation 30 Jacka Boulevard St Kilda only comprises parameters necessary for negotiation of contributions by the lessee for community benefits, capital works and rental. Lease negotiations 3.5 Lease negotiations have been concluded. The final lease proposal has been received from Stokegroup Pty Ltd. 3.6 The following table describes the outcome of lease negotiations in relation to the various terms and conditions. 3

4 Terms and Conditions Lease area approx 1,778 sq m Length of agreement Up to an additional 15 years on the current lease Proposal Lease area approx 1,778 sq m 21 years Permitted use - restaurant No rights of assignment Significant financial community benefit of a minimum of $500K in the first 10 years of the lease. Capital works investment to a minimum of $4.8M Permitted use - restaurant Subject to hardship, the tenant will have no rights to assignment of the lease or subletting for the first 15 years of the lease The community benefit proposal includes a cash contribution of $500K which Council will allocate to the St Kilda Life Saving building totaling $500,000 between years 3 and 12 of the new lease. Capital works investment of $6M The tenant is to maintain the building for the life of the lease Capital investment is to occur in the first 5 years of the lease Agreement on market rent through respective valuers. The tenant is to maintain the building for the life of the lease Capital investment has commenced and the remainder of the works are to proceed in the first year of the lease The commencement rent reflects a market rent for a tenant that will maintain the building for the life of the lease. The rent will be discounted in the first 10 years to offset the Council liability for structural repairs. 4 CONSULTATION AND STAKEHOLDERS 4.1 Negotiations have been strictly controlled in accordance with the probity plan adopted by Council for the conduct of negotiations. 4.2 Discussions have been held with DSE regarding conditions required to enable private treaty negotiations for a future lease of the property. 4.3 Valuation advice has been received from Charter Keck Cramer. 4.4 This report recommends that the statutory community consultation process be commenced before deciding on a new lease. 4

5 5. DISCUSSION 5.1 OPTIONS The recommended option is to proceed with the process for a new lease as negotiated by the General Manager City and Infrastructure Services. It is considered that the negotiations have secured an outcome which is favourable to Council in the following aspects; Financial Secures a tenant with a good track record and market rental for 21 years Asset Management the building will be renewed at substantial cost and the tenant will be required to maintain the building for the life of the lease Community Benefit there will be tangible local community benefit Alternatively, Council may decide to continue with the current lease. In these circumstances Council would be responsible for major structural repairs to the building. 5.2 ALIGNMENT TO COUNCIL PLAN The Council Plan commits Council to responsibly managing community assets and resources now and into the future. 5.3 POLICY IMPLICATIONS A decision to negotiate privately with the current tenant is supported by recent precedents in negotiating leases in line with DSE guidelines The proposal may be allowed under the State Government s Leasing Policy for Crown Land in Victoria The Department of Sustainability and Environment (DSE) has advised that the Minister for Environment and Climate Change supports, in principle, a new lease in this case. 5.4 FINANCE / RESOURCE IMPLICATIONS Council has been provided with independent professional advice in relation to financial aspects of the negotiations with the current tenant The proposal sees the current tenant undertaking capital works which may be considered the responsibility of Council as the landlord. 5.5 LEGAL & RISK IMPLICATIONS 5

6 5.5.1 Any new lease will be subject to approval by the Minister for Environment and Climate Change. The Minister may decide to modify aspects of the proposal if considered appropriate Council cannot agree to a new lease until it has advertised an Intention to Lease and considered any submissions made by any member of the public under the procedures set out in the Local Government Act A new lease will be subject to a Ministerial exemption from the Retail Leases Act A probity plan was adopted to help manage the risks associated with the negotiations for a new lease. 6. IMPLEMENTATION STRATEGY 6.1 TIMELINE An indicative timeline is shown below should the proposal be ultimately approved. Date Event 22 August 2011 Council resolution to commence the statutory procedures for a new lease in accordance with Sections 190 and 223 of the Local Government Act September October 2011 Advertising period Notice of Intention to Lease. 14 November 2011 Council hears and considers any submissions received in response to Council s Notice of Intention to Lease. 28 November 2011 Council finalises the statutory process and decides on a new lease. December 2011 Early 2012 Lease preparation and execution Minister approves new lease. 7. OFFICER DIRECT OR INDIRECT INTEREST 7.1 No officers involved in the preparation of this report have any direct or indirect interest in the matter. 6