Creating Cities from Newcastle to Freo
September 8, 2015 2 Comments
Over the last week I have been reading a fantastic new book by Marcus Westbury called Creating Cities which is largely about the lessons learnt from Renew Newcastle and how the lessons learnt from this innovative approach might be applied to cities more generally. It has some fascinating parallels to Fremantle. Take for example this extract on why owners leave shops empty including the logic of tax and financing arrangements:
In some cases, the owners of property were in no position to
rent the properties even if they wanted to. For artificial reasons
many properties had a nominal (but in practice unrealistic) rate
below which the rent could not fall.
As best as I could understand it, some owners were highly
leveraged. They’d borrowed against the property in an environment
where valuations and lease values were linked. They
couldn’t lease them for less than they were supposed to be
worth. To do so would risk writing down the value of the asset
and, in extreme cases, risk insolvency if the bank decided to write the value down proportionally.
Better to maintain the fiction that the building was temporarily
empty at a high potential rent than to admit it could only
be occupied at a low one. The small returns from rent weren’t
worth opening up that risk.
Behind the opaque walls of the individuals, companies,
and trusts that owned the properties there were also, in many
cases, a lot of very specific reasons for not doing much. In some
circumstances, properties were worth as much if not more as
a tax loss than as a going concern. Writing off the losses on a
property might actually be the most productive thing an owner
could do with it.
Against these big structural challenges there were also some
decidedly human ones. Families, with all the politics they
involve. Cousins who had inherited a property from their
grandfather but didn’t talk to each other. Individuals with idiosyncrasies,
agendas and vendettas. Owners too old and frail
to do anything much; trusts, partnerships or structures of convenience
designed by dealmakers who had long cut and run.
Too often properties were owned by dysfunctional entities.
Some were designed with a view to tax minimisation, or to
bundle up the ownership into units that small investors could
buy into. They had no real management and little direction. It
was no one’s job to think strategically. Sometimes a property
was handed to an agent in the hope that they could figure it
out, and other times properties were effectively left unmanaged
in any practical sense…
I had once assumed that the properties must all be owned
by shrewd and cunning speculators, with complex agendas
and forward-looking plans. Often the reality was the opposite
and much more mundane. Much of the property was owned
by people who were literally amateurs: lawyers, doctors, accountants,
small businesspeople, retirees and self-managed
It sounds, in part, a lot like Fremantle did a few years ago. Pleasingly this is changing in the right direction and there is a new level of proactive collaboration.
I’ll share some of Marcus’s impressive insights down the track. If you are interested in creativity and cities I highly recommend getting yourselves a copy.