HUGE FINANCIAL INCENTIVE FOR FREMANTLE CIVIC CENTRE HOSPITALITY VENUE
I had another read of the Fremantle Council FPOL committee agenda item about leasing the triangle part of the new Civic Centre at Kings Square to the Fremantle Doctor Restaurant and Bar Pty Ltd, and it becomes evident that the proposed hospitality operators are expecting a large financial incentive from the City of Fremantle.
The commercial rent for the three levels is $ 233,100 per annum, but the proposed venue operators want the first three years to be rent free, and the fourth year to pay only 5% of the gross income of the venue, plus they want a $ 500,000 contribution from the City for the fit out.
I am aware that it is common to offer rent free periods for long commercial leases, and this one is 10+10 years, but I believe that paying half a million dollars on top of three rent free years, and only a relatively small rent for the fourth year is asking the cash-strapped City of Fremantle for too much.
Reading between the lines it appears that not many hospitality operators were willing to commit to Kings Square before it has proven to be a success, and of course the City is keen to lease out the space that will be close to the new playground, but is a cash incentive of $ 500,000 realistic?
New venues, such as the Old Synagogue and Freo.Social, have become immediate attractions from the start, and presumably run profitable businesses, so how far should Fremantle Council go financially to lure an operator for its Civic Centre hospitality part?
In that context I was disappointed to read in the Sunday Times today that the FOMO retail and food concept by Sirona Capital is now only due to open in June/July, while it had been on the cards for April this year, after the initial marketing for the Kings Square Redevelopment Project mentioned late 2019 as the opening date. I do however understand very well that in the current retail climate it must be a huge challenge for Sirona to find enough tenants willing to sign long-term leases.
The Civic Centre construction is well underway to be completed in the last quarter of this year, and the State Housing Department is moving in in April with approximately 1,500 staff, so it is all pretty good, but it needs to hurry up.
The item is on the FPOL Committee agenda for this Wednesday and will then go to full Council in a few weeks for a final decision.
Roel Loopers
12 Responses
Subscribe to comments with RSS.
Comments are closed.
FREOVIEW - Fremantle's only daily 
The hospitality mono-culture is something I wrote about last year, asking how many taverns, etc. are sustainable for the Fremantle CBD, and that is something Fremantle Council should try to curtain.
I am not in a position to judge if Freo City has undercut the market, as this is a rather unique position at the future new playground and as part of the new civic centre. there is no doubt that there will be traders who believe in the future of Kings Square and will be moving there, but it has always been the case that traders go where they attract the most foot traffic.
The new Civic Centre from the very start was going to have some street level commercial spaces, and it seems absurd that those who are against the City building the new community centre, because of the high cost, now don’t want the City to earn money from it to recover some of those costs.
Progress and change is always a fine balance and we’ll only find out if Council made the right decision in 5-10 years from now.
Roel
LikeLike
Hi Roel, you said it yourself – “that will then create unwanted vacancies elsewhere in Fremantle.” If FCC, by offering a deal that substantially undercuts the market, and causes an established player to relocate for free, as Shane is suggesting, there is ZERO net gain for Fremantle, and a significant loss for ratepayers.
Even if it is an entirely new offering that comes in to this space because it is effectively so cheap, I am concerned by 1. the fact that FCC is competing against its own ratepayers (gambling those rate payers’ own funds); 2. doing nothing (in fact undercutting) the attempts to combat commercial vacancies within Fremantle – empty shopfronts in the city; and 3. pushing us towards a hospitality mono-culture in Freo. Can’t we already see how well that worked out for Northbridge? (I don’t go there, and won’t go there).
LikeLiked by 1 person
You make it sound as if Council is someone else, Shane, but Council is the community and it operates with ratepayers’ funding, and they should try to take every advantage to create something for the benefit of the community.
Every shopping centre, every commercial property owner tries to get as many tenants as possible as lures them from other locations with better deals, so I can’t see a problem there, but I do see a potential problem that there will be a concentration for businesses to move to Kings Square and that will then create unwanted vacancies elsewhere in Fremantle.
Roel
LikeLike
Come on Roel! This isn’t in anyway reflective of operating in a capitalist free market – the Council has a massive competitive advantage as it can fund its decisions backed by our rates! Foolish comment!
The Council hopes to hide the $500,000 in the current budget but will probably add it to next financial years bill (as written in their documents) – so much for a ‘guaranteed’ budget. I hope the construction documents are water-tight or we will be looking at some variations as well.
Plus no income for another 4 years – and we are already being warned by the State Auditor about our financial affairs. Today we just got another bill for $200,000 for a temporary fix to Port Beach.
As I mentioned Andrew, you are not activating the public realm – just starving one area to feed another (namely your ego trip). Sirona is doing the same thing to other businesses on High Street – retailers disappearing into a shopping centre – excellent sustainable urban planning…
It is not the Council’s job to build spaces to then speculate on the private property market. Why would private individuals bother?
LikeLike
I have no issue with Fremantle City offering a good commercial lease deal, even if it undercuts whatever else is available, that is just the way capitalism works. In the interest of a much bigger picture it is all about the activation of Kings Square, and Fremantle Council has committed to invest in that future.
Roel
LikeLike
Roel are the chickens coming home to roost? A free kick of $1million plus for a local business owner to move in? Plus across 3 levels vs the initial proposal of a cafe on I believe the ground floor? Thus it appears that ratepayer assets are being proposed to be used excessively? Also the RIA being leased the top floor with from what a previous poster states a private landlord being undercut?
LikeLike
The City’s proposed $500k fit out contribution will be far exceeded by the investment the tenant will make if this goes ahead. Rental values reflect the condition of the building as handed over by the owner. The higher percentage contribution towards the fit out, the greater the return that is commanded in the annual rental. That said, it remains a tenant’s market out there and rent free periods are just normal business at the moment. The secret is to strike the right balance where both parties are happy with the finances. Beyond that, the most important issue is the activation of the public realm!
LikeLike
Do a record search on ASIC…
LikeLike
I could not find anything on the preferred operators for the Civic Centre hospitality venue, just that the business was only registered late last year, presumably when they put an EOI in.
Roel
LikeLike
Great work by the Council officers, Andrew Sullivan. Basically 6 years free rent. And who is the preferred tenant – suggest you do a records search to see that the council is simply shifting an already existing business – killing one area to save another.
Similar to the situation with the Rottnest Island Board – who was negotiating with a private landlord who was undercut but the councils offer.
Add to this the free rent that Spacemarket got for Victoria Hall, and the Council is undercutting the commercial rental market to make itself look as though it’s able to fill its spaces. And Sirona can’t fill FOMO.
LikeLike
The incentive is already some $ 700,000 saved on not having to pay rent for three years, so if we added the $ 500,000 that comes to over one million dollars to get a cafe and bar at Kings Square. That is over the top, in my opinion.
Roel
LikeLike
That seems excessive…. !!!
What’s to stop them folding their tents and stealing away in the night after 4 years, taking their profits with them, and leaving FCC back at square one and out of pocket as well?
LikeLike