Community, Kings Square Presentation

 Kings Square Project Presentation

Below are the slides presented to various community groups at a presentation I attended a couple of weeks.

The idea of the presentation was not to say if the project is good or bad, whether it should proceed or not but to bring to a better or clearly understanding of the questions being asked about the projects business plan and the financial position is leaves the City of Fremantle(COF) in. It brings into question whether the NPV is a positive outcome that the COF states of $4million plus situation, or whether it leaves the COF with a $30million loss as has been questioned now quite publicly over the last months, or maybe somewhere in between?

The number that seems to get the COF to their positive NPV is the $97 million value in 20yrs time, is it just the building, land or both together, that’s seems also to be in debate? The other question is who came up with this figure to put into the spreadsheet, the consultant Leedwell or did it come from the COF? As it appears to be what gives them a positive NPV?

Now due to the COF keeping documentations and meetings secret, the questions asked, have not been answered and are still awaiting a clear informative response giving the facts needed to support the COF business case. All of the councillors would have had access to these documents as it was their vote that made them confidential and to keep them from our perusal.

There are some more questions that have come up since this issue started.

The city claims over its 20 year window their new planned city chambers, library etc., will double in value, not the land just the building. Yet the value given to the one building they now occupy is more or less worthless, how can a building that is not built double in value and the one they actually use is worthless?

They claim the Queensgate building site is also only worth land value though in 2013 it was producing an approx. $750,000 a year return, over 11% return on the asset. Now it is a worthless building only to be demolished and to be sold for land value?

The city has also chosen to ignore some of its own policies like SG14. Which is design to give guidance and a system to projects like this, but the committee SG14 calls for don’t seem to have met since 2008?

Anyway have a read, I hope this presentation makes the questions clearer for you and provides you a better understanding of what the business plan says and the questions that still more than 8 months after Mr. Lee started asking questions remain UNANSWERED.

The other startling outcome is the Minister for local government Tony Simpson who failed to answer the questions in parliament on these issues raised and it seems has no powers to even ask questions about the COF dealings in this Kings Sq issue. Ministers who can’t ask questions thats a new one or maybe he is worried about opening Pandora’s box and finding what else is hidden inside?

If ministers can’t even ask questions of an area they have fiduciary duty over, its not hard to see why Barnetts government is in the financial mess it is in?

A quick couple of quotes for the Ministers DLG websiteThe Department continues to play a key role in supporting local governments to plan for strong and sustainable communities, as well as promoting good governance and regulation. The highlight passage is from the ministers webpage, so in the rate payers and residents of Fremantle case the ministers has clearly failed to promote good governance and regulation.  “Established on 1 July 2013, with a clear mandate to deliver tangible outcomes in local communities.” as long as the tangible outcomes don’t require the minister to ask any questions or even worse seek out the answers.

This is slightly smaller version of what was shown covering the same info as presented by Mr Lee.

Slide1

graphics from the COF business plan

Slide2 Slide3 Slide4 Slide5 Slide6 Slide7 Slide8 Slide9 Slide10 Slide11 Slide12 Slide13

Graphics from the COF business plan

Slides and presentation by Martin lee

Questions to Council on Kings Square October 2014

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: mayor@fremantle.wa.gov.au; jonst@fremantle.wa.gov.au; billm@fremantle.wa.gov.au

Subject: Kings Square Redevelopment Business Case

Date: Sun, 12 Oct 2014 15:01:37 +0800

City of Fremantle

8 William St

Fremantle

To:          Brad Pettitt                         [Mayor]

cc:

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.

Regards,

Martin Lee

 

The next posting will have the attached letter, with more detailed questions.

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