Kings Square Update

Today City of Fremantle’s Chief Executive Officer Graeme Mackenzie released a detailed response to community concerns regarding the business plan for the $220m Kings Square Project in central Fremantle.

His full response can be viewed on the City website at www.fremantle.wa.gov.au/kingssquare

I think the CEO has done a good job of going back through the many questions asked on the project over the past few months and bringing all the answers together into one coherent document. I appreciate a discussion of discount rates, NPVs and economic modelling is dull and confusing for many but I would encourage everyone to take the time and read through this response and even the business plan itself. After all this is the biggest single project the City of Fremantle has undertaken in generations.

The Minister for Local Government’s parliamentary response to the questions asked by FRRA was also released today and in summary he states that the:

“…materials that have been forwarded to me do not demonstrate that the City has acted unlawfully or in a manner that is contrary to the [Local Government] Act”

I had hoped the Minister and/or the Dept of Local Government would have gone into more detail on the content to give the doubters some greater comfort but I also understand it is the process that he has to be comfortable with under the Act not the content.

The $220 million question now is when will this project actually happen? I can’t help but feel like a cracked record on this but we are making progress on finalising tenants and an announcement is getting closer.

About Mayor of Fremantle Brad Pettitt's blog
City of Fremantle Mayor

8 Responses to Kings Square Update

  1. Craig says:

    Brad

    What an incoherent confusing seven page response when one page would have done.

    There is no date on the response document…would that be on purpose.

    Will the $45m expenditure on civic and administrative facilities really have a recoverable value of $97m in 20 years? The NPV figure assumes that the expenditure on buildings will appreciate constantly in value at 3.5% pa and never depreciate…is this really supportable? This goes against the council’s accounting policy which depreciates buildings over 40 years. The facilities are purpose built for council purposes and won’t have a ready commercial buyer now or in future years.

    How long ago were the current council facilities built? The current facilities have depreciated and will have nil recoverable value when shortly demolished. I imagine councillors telling ratepayers way back then …don’t worry about the expenditure …the facilities will be worth $$$plus in 20 years. However these same current council buildings will soon be a pile of rubble with nil value for the next new council edifice.

    Perhaps the CEO can explain again (see issue 4b section) how “property” prices which includes both land (which is not depreciating) and buildings (which are depreciating) have increased at 7% over the past 20 years as an analogy for just building expenditure.

    Perhaps the CEO can also more clearly explain the difference between “a real value” and “an accounting value” in accordance with Australian Accounting Standards used in the NPV calculation as doesn’t make sense to me.

    Regards
    Craig

    • Craig
      As the CEO states: “The reason the City’s facilities should be included is because they are on freehold land and the building has both a real and accounting value. The land value has not been included in any NPV assessment so there is no growth factor applied to the land value, however the buildings have:
      a real value – because the City could sell this asset (albeit highly unlikely) and decide instead to lease property for its administration, library etc. (It would then be faced with commercial leasing costs). The City’s facilities will also have retail and commercial spaces for lease, providing the City with a revenue stream through rent.
      an accounting value – because the value of this asset MUST be included in the City’s balance sheet. To not do so would be in breach of Australian accounting standards.
      There has also been suggestion that the future value assigned to the City’s buildings was inflated. The value of the City buildings at completion (without land value) was estimated at $44.75m: the value in 20 years was assessed at $97.23m, calculated by applying a 3.5% price indexation rate each year.
      The City believes this figure is conservative given that historically property prices increase at better than CPI. The business plan includes an appropriate annual maintenance charge for the facilities to ensure they are kept in good condition and retain their value. Just think about your own house – it has probably increased in value by something closer to 7% per annum (cumulative) over the past 20 years, so again a 3.5% growth in value is very much at the conservative end of the estimates.”

      cheers
      Brad

      • Lionel says:

        Property prices increase due to the land value increasing. As the CEO says, the land has been excluded as the city already owns it and will get the appreciation regardless of whether it is developed. You can’t then go and apply appreciation to the building – show me a single building that has ever appreciated over 20 years.

      • Lionel
        Not sure I entirely agree. Building prices go up to due to inflation and other increasing costs. Of course this means you need to build a building that the future community will want to keep. The international architectural competition has meant we have got a building of the highest quality. The Freo Town Hall cost around 13,000 pounds to build in 1885 and it is certainly worth a lot more than that now.
        cheers, Brad

  2. Nick says:

    Is the current department of housing in East Perth?
    How many people does it employ?

    • Nick says:

      Is the Queensgate building about 5,500 sqm?
      And how many levels will they be allowed to build?

      I can only imagine what 80 apartments in downtown freo would be worth, and given the cheapness of construction of some recent developments…Sirona are absolutely going to kill the pig on this deal.

      6.5million is so cheap, Maybe I should get together with 10 mates and buy it! Who’s in?

      • Nick
        Under the business plan apartments can’t be built on the Queensgate site.
        It can however be retail, office and entertainment and I think up to 6 or 7 levels but i would need to check. A DA has already been approved for this site which is the photo shown in the West today

        cheers, Brad

    • Nick
      Yes they are mostly in East Perth. Not sure how many exactly on that site but there has been talk of bringing around 1000 staff to Fremantle but the final figure is still been negotiated.
      thanks, Brad

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: