October last year Mr Lee wrote to council asking some questions of the business plan he had read online from the citys website.
Here are those questions he raised, it took council till December 2014 to respond but give no actual 1answers what so ever to the questions he raised.
To: firstname.lastname@example.org; email@example.com; firstname.lastname@example.org
Subject: Kings Square Redevelopment Business Case
Date: Sun, 12 Oct 2014 15:01:37 +0800
City of Fremantle
8 William St
To: Brad Pettitt [Mayor]
Jon Strachan [Cr]
Bill Massie [Cr] 12 Oct 2014
Dear Mr Pettitt
In response to your Council’s recent letter to residents regarding proposed changes to your parking policy, I reviewed the winning bid for the Kings Square development to see whether you have addressed the shortage of parking in central Fremantle with that development, and it would appear that you have no parking included in that design. I cannot imagine any other developer in Fremantle being allowed to construct a A$45 million development in central Fremantle with no provision for parking. This is a wasted opportunity.
However this is not why I am writing to you.
While the design of the new Kings Square is visually appealing and would be excellent for Fremantle (especially if modified to include car parking), and I am supportive of redeveloping this area, when digging a bit deeper into the background of the project, I found some financial matters that I just cannot reconcile.
Having read through your November 2012 Business Plan for the redevelopment of Kings Square, I find the Financial section addressing Net Present Value and Rates of Return so puzzling that I feel the need to bring these concerns to your attention. The NPV and IRR numbers you have presented to justify this development defy logic. I suspect there may be a fundamental error in the evaluation methodology, which I will explain in more detail in the attached document. If I am correct, you have overstated the NPV of the Kings Square development, perhaps by more than A$30 million (you have stated that the project has a NPV of A$4.5 million). If so, this project will significantly destroy value rather than add to the value of the City of Fremantle’s property portfolio. As a rate payer, I find this deeply concerning.
I have laid out my reasoning in the attached document and will give you an opportunity to respond. I have explained the financial concepts in simple terms, and I would expect anyone who is in a decision making position for a A$45 million development project to fully understand what I have written.
In particular I would like you to provide commentary on the following:
Confirm that the project NPV (A$4.5 million) does not include proceeds from the sale of three Council owner properties (if it does, there is a fundamental error in your analysis)
Explain why you have not presented the project NPV using the City of Fremantle’s investment policy benchmark discount rate (you have used an arbitrary 5.5%, which just happens to derive a positive NPV)
Explain why a proper independent and comprehensive analysis of the optimal financing structure has not been completed and presented in the 2012 Business Plan
While I accept that a new Business Plan will be required ahead of a final investment decision, the current activities are all based on the 2012 Business Plan. If the financial analysis is as I suspect it to be, this should revisited as a priority as it throws into doubt the financial viability of the whole Kings Square redevelopment.
I would be more than happy (and relieved) for you to demonstrate that in fact the financial evaluation you have completed is correct. However, should I not be satisfied with your response, I will take this further along alternative channels.
I would appreciate a satisfactory response to this query within 14 days, after which I will follow alternative routes to ensure it does get the attention it deserves.
The next posting will have the attached letter, with more detailed questions.