.by Dave Reeve
I posted the following piece to the ACAQ Facebook page as part of our investigation into the proposal by Brisbane City Council to grant a 99 year lease over the Howard Smith Wharves precinct to HSW Nominees Pty Ltd.
HSW – anatomy of the deal
The submission for the latest proposed development of Howard Smith Wharves was presented for approval at the Council Meeting of 21st October 2014. We can examine both the document and a transcript of the debate that ensued.
I’ll try to explain what the submission means in simple terms, and in another post detail the objections that were raised by the opposition.
The submission document says this –
To seek Council approval to enter into a Project Agreement with HSW Nominees Pty Ltd, ACN 166 209 874 (trading as HSW Consortium), for the Howard Smith Wharves Revitalisation Project. The Project Agreement is summarised at section 7.5 and includes the granting of:
– A construction lease for a term of three years commencing after HSW Consortium has obtained development approval for its concept plan; and
– A base lease and associated precinct leases for a term of 99 years commencing after the completion of construction.
Council wishes to revitalise the 3.43 hectare Howard Smith Wharves site and has sought development proposals. A developer is being procured to fund, construct, operate and maintain the finished development in return for long-term leasehold rights over the site, at minimal cost to Council. The project is expected to create a vibrant, welcoming and safe public space that delivers economic benefits to Brisbane in a high quality riverside parkland setting.
There is much to like, and certainly not a lot to dislike about the above. In any universe, a dream come true is always to be welcomed, and the idea that the developer should “fund, construct, operate and maintain…. at minimal cost to Council” is surely good value for the rate-payers. However, even a cursory parsing shows that the key desired outcome “to create a vibrant, welcoming and safe public space” is at odds with the developer having “long-term leasehold rights over the site”. It is indeed dreaming to think that such a long term commercial lease over a public estate does other than transfer it into the private estate.
Yet, this is the nature of the deal.
But, I hear you ask, what of other clearly successful projects that employ mixed use of parkland – Southbank is surely awesome? Indeed, Southbank sets a high bar for future projects. But wait on a minute, whilst Southbank is situated on Council’s freehold estate, [not strictly correct – see update], the commercial entities located there lease no more than the footprint of their premises, and the parklands remain public space. Most importantly, parkland development, design and upkeep bows to the public will – albeit ponderously – via the local political process. The same situation is not proposed for HSW, presumably, because Council is not prepared to pay for it.
A large section of the submitted document describes the process of firstly calling for proposals, and then the process of selecting the most appropriate candidate. These processes follow the usual strict rules for tendering within the public domain, and gives no cause for concern.
Moving onto the list of reasons for selecting the winning proposal we get an insight into the selection committee’s thinking. Note that I say selection committee because it was not Council proper, ie a meeting of duly elected Councillors, that made the selection, but a committee of unelected civil servants drawn from the State and Council apparatus. They say –
The major reasons why the HSW Consortium achieved the highest score for their concept design are:
– The design included a covered event space which would activate the site yet not be closed off to the public when events were not being held;
– The event space was low level compared to other proposals which resulted in more of the cliffs being visible from the river;
– The hotel was smaller than other proposals and the façade design blended the hotel into the cliffs;
– HSW Consortium’s proposal to Build, Own and Operate including maintenance obligations within the park and other public areas, was viewed more favourably than proposals that sold on the development and obliged Council to maintain the park and other public areas;
– The extent of development is significantly less than proposed in the other shortlisted proposals which would be more acceptable to the community but also consistent with heritage principles; and
– The public spaces would be activated by events and were more extensive than shown on other shortlisted proposals.
The first point to jump out is the fact that Council surrendering control of public space is seen as desirable, with “proposals that sold-on the development and obliged Council to maintain the park and other public areas” less so. If this is the case, are we to assume that somewhere within Council Executive there was a desire to avoid the establishment of Council-controlled parkland [not strictly correct – see update], as per Southbank? Assuming the Executive doesn’t act outside the Lord Mayor’s direction, how is it we come to this pass after years of public consultation, consultation that made clear the desire amongst rate-payers for parkland development at this site?
The second point is the spruiking of the fact that the so-called “public space” won’t always need to be closed to the public. I guess this means that it will be open, except when it’s not… I’m glad we’ve got that one clear.
In the document there is a lot of stuff enumerating what will be built, and the scaling of monetary returns to Council. This seems all very reasonable.
Turning to the public space requirements, which need to be our area of focus, we find a number of requirements that must be met, presumably by the end of the development lease, and before the 99 year lease is granted. This includes a spend of $13.31M on improvements including at least the following –
The scope of park and public space improvements will be further refined prior to development application (DA) approval being sought, however, they will include the following elements:
(i) refurbishment of existing air-raid shelters
(ii) pedestrian and shared paths throughout the site
(iii) turfing and other soft landscaping
(iv) a kayak ramp
(v) public amenities
(vi) public space furniture such as bollards, bins, seating and cycle racks;
(vii) two lifts and one set of stairs to the top of the cliffs
(viii) public board walk structure adjacent to the river
So we don’t see rock climbing on the list, but in my opinion, that fact is neither here nor there. It doesn’t matter what is on the list if “free and fair” access to it is constrained by the leaseholder.
We note that Council, for their part, undertake to add a further $4M to the $13.31M above.
Listed as a key consideration we find the following
(c) Use of Parklands Precinct
The parkland and public space will be leased to the developer who will be responsible for maintaining these areas. The conditions of the lease have been drafted as such that these areas will be generally open and accessible for use by the public. There will be periodic events, functions and other activities carried out in the parkland and public spaces to activate the site; however Council can require proposed events to be cancelled if it considers that the proposed activities will result in the parkland and public spaces not being available to the public.
Once again we note that the “parkland and public space will be leased” which means these components will be transferred from public to the private ownership. Assuming such a process occurs, it is misleading to refer to them as public spaces. Rather they are spaces where the public will be permitted entry according to the exact wording of a draft lease document, one that was not made available at the Council Meeting where approval was sought, and, at this point in time, is not available for public inspection.
Notice how this is a reversal of the usual order of things for carrying out private functions or group activities in a public park. The default position is the park is open for “free and fair” access by individuals, but may be used from time to time for private functions via a permitting system. Is it true then, that Council considers the price tag of $17M too high to develop the site for “free and fair” access? Really? Yet they are prepared to spend $4M to see it end up in private hands.
Another key consideration from the list we have –
(d) Conditions precedent to the Project Agreement
The Project Agreement contains a number of conditions precedent which must be satisfied to enable the Project Agreement to continue. These conditions precedent are as follows:
(i) DA approval – The proponent is obliged to lodge a DA within eight months and then has a further 18 months to obtain DA approval.
(ii) The parties agreeing on the terms of the four separate leases for the retail, park, hotel and car park precincts. These separate leases must be created within two weeks of the signing of the Project Agreement but will be based on agreed principles stated in the Consolidated Form of Lease that is included in the Project Agreement.
Note that HSW Consortium have 18 months to get DA approval (development application approval) from when the DA is first lodged. I’m guessing that they intend to lodge sometime in early June, that is, following the current public consultation phase.
Note that there will be four leases executed, one for each of the four components of the development, and that these leases extend an underlying base lease for the site. In some ways this might simplify matters, given our concerns centre on the public space component. However, without sighting the actual lease, we have no way of judging the impact on public access. One has to ask why wasn’t the Project Agreement tabled at the Council Meeting, and why isn’t it available for public inspection? After all, from the timing below, it would appear to have been executed
Execution of Project Agreement
70. The Project Agreement has been prepared, including the conditions precent summarised above. HSW Consortium is expected to sign the Project Agreement to formalise its offer to Council on 10 October 2014. The Project Agreement will then be ready for execution by Council, should this post market submission be approved.
Up to this point, I have concentrated on what this deal means for public access if all goes according to plan. However, in the real world, things rarely go according to plan, and we need to consider the nature of the fall-out should the development run into financial difficulty. Some of this is covered in the proposal document, and I’ll explain what all this means in a subsequent post.
I looked into the land ownership structure at Southbank in a bit more detail, and found that some serious thought had gone into the issue. Most strikingly, the structure used to guarantee its open and public nature makes the proposals for Howard Smith Wharves look amateurish.
Council vested land into the South Bank Corporation, a child of the South Bank Corporation Act 1989, thereby handing control of the precinct to the State. The membership of the board of this corporation, and the way in which South Bank is to be managed are all laid out in the legislation.
The question of whether or not the legislative framework is a good one is unimportant compared with the simple fact it exists. If it exists, then there is a well established process by which the will of the people can be exerted. In short, a public corporation exists to serve the public good whilst a proprietary company, by very definition, exists to serve its private owners. To believe that a proprietary company, HSW Nominees, is a suitable vehicle for the management of “public parkland” is naïve in the extreme.