Is council signing off on 'poor deal' for major development?
OPINION: Sunshine Coast property developer Geoff Glanville raises concerns over the Sunshine Coast Council development deal for the Brisbane Rd carpark.
I HAVE been in property my whole working life starting as a registered Rural and Urban Valuer during which time I was a member of the then Australian Valuation and Land Economics Institute.
I left valuation to purchase a hotel and then sold that to enter the real estate sales industry working as the principal of five Ray White agencies at Alexandra Headland, Maroochydore, Caloundra, Kawana and Mooloolaba between 1982 and 1999.
During that time I was also the Sunshine Coast REIQ president and an active commercial property investor and developer. After leaving Ray White, I continued as a property developer and investor and was a real estate trainer at TAFE.
My developments including The Sanctuary at Alexandra Headland, and the Natuzzi (now Westfund Health) premises in Plaza Parade at Maroochydore. I also started the first "on-line” real estate agency in Australia called RAAS.
After a cancer diagnosis I sold my interest in the RAAS Group which has grown into the largest real estate agency by salesperson numbers in Australia.
I don't have access to all the consultants and resources available to Council. I also don't have all the facts, given so much has been hidden from the public by Sunshine Coast Council's overuse of the term, "Commercial in Confidence.”
But I didn't spend close to 50 years in property without developing a good nose for what represents a good deal and what represents a poor one.
The Brisbane Road deal unfortunately, in my estimation, falls into the latter category. As they say in the classics, "It doesn't pass the pub test.”
Doing nothing on that site was an unacceptable option, but that is no excuse for entering into a poor deal.
Set out below is a series of observations and as yet unanswered questions.
AS of February 2018 we have 441 public car spaces in Mooloolaba however 132 of these are the recently-released temporary ones from the closure for future park development of the old caravan park site.
Given the caravan park spaces are temporary they should be excluded. So our public car parks comprise 130 Beach Front parks situated below the main shopping strip and 179 in the Brisbane Road car park, for a total of 309. All are regulated parks but free and were insufficient for the last Christmas-New Year period even when supplemented to 441 by the temporary ones in the old van park.
We now have 309 and know even 441 are insufficient. I believe there is an estimate that 1000 are needed to adequately service Mooloolaba.
Everyone wants to know if the Abacus deal represents value for money. Step one in that assessment is what is the land worth. We have heard the formal valuation of the site was between $17-$18 million and been told the industry feels its value was closer to the $20-$25 million mark.
As an old valuer I can tell you a few things about such a valuation. Firstly what a valuer would determine as the valuation depends on his instructions from the owner.
Question: Did the Council ask for a valuation based on some assumptions or restrictions relating to the site or was it an unconditional request for a current market valuation?
As importantly, what a property like this is worth will be determined by what can be developed on it. We only now know what the Council has allowed to be developed, so only now can the site be valued to its highest and best use.
Even with its potential use now established, a valuation would be a difficult exercise as there would be little if any comparable sales evidence for such a site.
Standard practice in such situations is to do a hypothetical redevelopment exercise.
This involves working from Gross Realisations backward to establish what a prudent developer should pay for the land making allowances for the time frames involved, yield (allowed development on the site), interest rates, development costs and profit and risk allowances.
Question: Was such an exercise undertaken and was a fresh valuation done that took allowance of most recent approved uses on the site?
I KNOW from discussions I have had, that the Council considered a multitude of options proposed by various development firms.
I fear that as matters moved further and further away from simple solutions, the Council became trapped in ever more Byzantine proposals and associated solutions.
All this seems to have been based on the proposition that Council needed to retain the ownership of the car parking spaces. This then lead to the creation of the stratum titled car parks.
Question: Can someone please explain why the Council seems to believe there is some benefit in the comment that they own the ground below and air above these titles?
THERE is a term in business and law called Ocham's razor, sometimes called the "law of parsimony.”
Essentially it is the problem-solving principle that says when presented with competing hypothetical answers to a problem, the one based on the fewest assumptions was likely to be the best solution.
In essence the simplest solution is often the best.
Obviously the law of parsimony was not utilized in these negotiations. Even if the site is worth only $18million, something I seriously doubt, particularly as the Council approval offers generous development opportunities, the Council should have ended up with the capacity to develop close to 950 "unencumbered” car parking spaces on Council-owned land and would have had to make no contribution to any development. #Based on information in the Daily article that it cost of the University approximately $20,000 per park to develop their car park.
From what I can gather from the information that is available, the Council (Community) will get only 432 "unencumbered” spaces.
They also get ownership and the right to charge fees on an additional 272 spaces developed for the commercial uses. Against this however Council has to contribute many unannounced millions of dollars toward the actual development.
Everything else aside, this is the nub of the problem. On the face of it, this is a woeful financial outcome for the community and gets progressively worse the greater the Council cash contribution.
Of course if information was released that might prove this assessment incorrect, I for one would be happy to see it.
Question: Exactly how much is Council contributing to the cost of providing these car spaces?
I appreciate you need not only the construction cost, but the land on which to create these parks. It would also be best not to have all the spaces we need in the one location.
Question: Would it not have been easier to create and sell a premier lot with ocean-view potential of circa 3400m2 on the Brisbane Road-First Avenue corner?
THE remaining rear land fronting Smith Street could have been developed by Council for a standalone car park.
As I say I don't have access to Council's resources, but I recall that spaces in a multi-level car park work out at around 40m2 each after allowing for the parking space, ramps and traffic lanes. The rear 3300m2 site would then yield around 80 spaces per level or 400 spaces over 5 levels. Using the university rate of $20,000 per space, this would cost $8 million. Again assuming the low-ball valuation for the whole site of $2700 a square metre, then the premium portion of 3400 m2 should be worth say $3500 a square metre or say $12 million.
After building the 400 spaces on Smith Street, the remaining $4million could create 200 spaces on the car park site in River Esplanade with provisioning to go higher in the future.
Question: Would not the Council then own 600 unencumbered spaces and still not have contributed one cent to the Abacus development?
It would seem from discussions that the Council was very keen to see a quality hotel development in the heart of Mooloolaba. I concur that this is needed but additional car parking and road access are the main priority in Mooloolaba.
As it now appears, this development is to proceed before the road system is upgraded, and the car parking shortfall is to be managed to some extent by temporary measures. In the usual fashion Abacus will likely develop first what it can on sell to give them a return. So the care facility, units and commercial space will be done first.
The hotel will be their last priority as it has to be run under their management company and hotels historically take time to show a positive return.
Question: What has the Council done inside the contract terms to ensure that the hotel is actually developed or can this be put on the back burner by Abacus for as long as they require?
Fit For Purpose
I have heard the designs of the entries to the Brisbane Rd car park are not optimal. I haven't seen them so can't comment. I am aware as a long-time resident however that a large proportion of cars using the current open car parking spaces, carry surf boards, surf ski and bicycles on their roofs.
Question: Can cars requiring these clearances be accommodated in multi storey car parks?
CAR PARK MANAGEMENT
Questions: (1) How will the Council manage a 704 space car park when 272 of those are already nominally assigned to the commercial/hotel uses?
(2) Will these 272 spaces be specifically set aside for these commercial uses and how will that be managed?
(3) Will there be a free car parking period for beach goers and Mooloolaba visitors and locals?
(4) Will John Connolly as the Mooloolaba Division Councillor come out now and put on record what he would vote for in Council.
(5) Is he prepared to say: "While I John Connolly don't make the final decision, I will be recommending to Council that there will be a Two - hour free limit followed initially by $2 per additional hour or part thereof.” If not why not?
While some may say I am late to the party, I can assure them that from the many locals I speak with, the details of this matter had until recently, largely passed unnoticed. I don't have "skin in the game.” I live locally but have no financial interest in the Mooloolaba tourist precinct. All residents and visitors want the best development outcome on the site and the best financial outcome for the local community. Without acceptable answers to a lot of these questions I don't think the current proposal delivers either.