This Wednesday Council will be debating buying up to 5 units in Heirloom which will undoubtedly be controversial for some so here are some likely FAQs:
What is the recommendation before Fremantle Council?
Council is asked to consider purchasing up to five apartments (one and two bedroom) in their Heirloom Development on Queen Victoria Street (aka Fort Knox) to assist with the development achieving the required sales target to begin development.
Would it set a precedent for other developments?
Not in any significant way. Heirloom is a special case as it is a significant heritage building. It is a Level 1A building on the City of Fremantle heritage list and also on the WA state heritage list and that is a key reason it is getting special consideration. A significant heritage building like this is often more complicated and expensive to adapt into apartments than just building a standard new, tilt-up apartment block. This means that banks are more cautious in lending and require higher pre-sales before any development gets the go ahead. It is on this unique basis that the Fremantle Council is considering supporting the development by buying up to five units.
Thankfully Heirloom has already sold 118 out of the 187 apartments and needs to sell 125 to finalize finance for the development. The Fremantle Council will play a key role in closing this final gap and therefore enable development to start as soon as possible – hopefully in the next month or so. Match haven’t asked for any height bonuses or another development incentives so this a key way the Council can proactively support this important heritage development of the East End.
We wouldn’t repeat this with a standard apartment development so I am not concerned about the Fremantle Council setting a problematic precedent.
Will it cost ratepayers money?
Potentially the opposite. The cost is expected to be around $75k in interest each year based on current interest rates. The development however will however generate at least 4 times this in new rates – over $300k per year. This investment is therefore more likely to generate income than it costs the City of Fremantle. Granted a fair chunk of the rates are to provide specific services to those residents but a fair chunk also goes into general city revenue to be spent on things that all ratepayers benefit from.
It is also important to include the positive economic impact of another 250+ people in the inner east end of Fremantle and the key role it will play in bringing that area back to life. The City of Fremantle spent $1.9 million upgrading the streetscape in that area a couple of years ago and the new apartments and office at 11 Queen Victoria Street are getting close to completion. I think it is good timing for that part of town.
Why is the City of Fremantle in the property market at all?
You may not know but the City of Fremantle already has an impressive commercial property portfolio with dozens of properties. Council has been active in the past to use this commercial portfolio to do more than just deliver a good financial return. In the past, the City has purchased strategically located properties to make them available for redevelopment. In the 1990’s the City purchased a few small shops on Queen Street and amalgamated these with the former Treasureways building on Adelaide Street so as to create a site that could be redeveloped. More recently, the City successfully acquired the few properties it didn’t own in the street block that included the Point Street Car Park and the Port Cinema. Again, a super block was created and made available for a very important redevelopment for the City – the Doubletree by Hilton Hotels.
In these instances, the Council looks beyond chasing a purely commercial profit and considers the longer term strategic benefits to the City itself. Using the commercial property portfolio to catalyse development can create immediate and ongoing benefits to the rate base for the City. Given that the Council heavily invests in its own City, there is merit in gaining additional benefits by using the commercial property portfolio in ways that also assist with the implementation of our strategic imperatives of CBD revitalisation, affordable housing and the like. (thanks to Andrew Sullivan for his words for large parts of this question)
Conclusion
Investments of this kind are clearly an area where the council should act conservatively and be extremely confident that ratepayers money is not going to be put at risk. The more I look at this the more I am convinced it is a smart and strategic investment that will be of direct benefit to the City of Fremantle and the ratepayers as whole. That said, I’d love to hear your views before we vote on this Wednesday night.
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