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CITY OF FREMANTLE

CONSULTATION PLAN

December 2013

PROPOSAL TO ENTER INTO A LAND TRANSACTION

THROUGH THE DISPOSAL OF Portion of the parcels of land adjacent to and including Unit 1 J Shed, Fleet Street, Fremantle (Arthurs Head),

known as the “J Shed”

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INTRODUCTION AND BACKGROUND

In November 2012 Council resolved the following; “ the front glass-walled studio of J-Shed to be put out for lease through a competitive process as a bar/café/gallery as a major attractor for the whole area. This should include space for artists in Arthur Head precinct to be able to exhibit their work on a priority basis. At other time the gallery space would be for rent like the Moores building.” Requests for proposals were called in March 2013 in accordance with the above resolution. 5 proposals were received and two were shortlisted for presentation. From the two shortlisted, Sunset Events was chosen as the preferred proposal. The proposal included the establishment of a micro-brewery along with the café and setting up space for the creative industries to be included in the proposal. The proposal sought to upgrade unit 1 of J-Shed and include the surrounding western open area to provide the space needed to satisfy all of the elements for activation of the site. Negotiations took place in relation to the proposed lease provisions that would be applicable to the proposal. Once negotiations had reached a position where the essential elements were agreed a workshop of local stakeholders was held to provide information on the proposal. An agenda item was presented to the November 2013 Council meeting seeking consideration of the essential terms and delegation to the Chief Executive Officer to finalise the lease. Council resolved that the matter be deferred until further consultation with the community can be provided. The resolution sought that an engagement process in line with the requirements under the Local Government Act 1995 for a major land transaction be undertaken. Under the terms of the Local Government Act 1995, should a Council be proposing to dispose a property (including leasing) with a transaction value over 10% of its operating budget then the sale is classified as a “Major Land Transaction”. Before entering into a major land transaction the Council must first prepare a Business Plan, advertise the availability of the Business Plan for comment and then consider any submissions received in relation to the proposed transaction. Whilst the transaction value for this proposal is below the threshold required under the Act, the Strategic and General Services Committee has resolved to develop and advertise this consultation plan and allow community consultation for a period of six weeks, after which time Council will consider the submissions received and consider the merits of the proposal to lease Unit 1 of J-Shed and a portion of its surrounds to Sunset Events.

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SUMMARY OF PROPERTY AND DETAILS OF THE PROPOSED MAJ OR LAND TRANSACTION Brief description: The land is described as ‘Unit 1 J-Shed’ and is shown on

the following Site Plan. The proposed lease is for an approximate area of 1,500 square metres located at the foot of the round house on the northern end of Arthurs Head Reserve. The property is surrounded by Fleet Street, The Round House and Bathers Beach.

Address: Lot 2051 Fleet Street, Fremantle Certificates of Title: Portion of Lot 2051 on Deposited Plan 217075 and

being the whole of the land in Qualified Certificate of Crown Land Title Volume 3037 Folio 511

Site area: 1,500 square metres (approximate and subject to

survey). 185 square metres for J Shed and 1,315 square metres of surrounds.

Registered Proprietor : Vested in the City of Fremantle. Encumbrances: Power to lease for a period not exceeding 21 years.

Management Order land use for the purpose of historical buildings, recreation and community services.

Metropolitan Region Scheme: A Class Reserve (Reserve 21563)

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Heritage Issues: National Trust of Australia (WA)

Australian Heritage Council

Heritage Council of Western Australia

Western Australian Museum

Nature of Major Land Transaction: Lease by the City of Fremantle to Sunset Venues Pty Ltd for a

period of 21 years.

Names of Parties: Lessee – Sunset Venues Pty Ltd

Consideration: Commencing Base Rent of $70,600.00 plus GST per annum. Full details of the consideration to be received by the City of Fremantle for the disposition are contained in the attachments (see below). Building : $18,000 p.a. (ex GST) Land : $40.00 m2 (ex GST) negotiated.

Market Value of The Disposition: The valuation sought relates to the transaction of a lease and not

the valuation for the property itself, nor the improvements which will be provided within the lease. The valuation was provided by Propell National Valuers; Building : $18,000 p.a. (ex GST) Land : $50.00 m2 (ex GST)

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HISTORY OF THE J SHED J Shed is a large timber framed and corrugated iron weatherboard clad structure. It is rectangular in plan form and has a simple gabled roof. The north and west faces have a lower weatherboard dado cladding with vertically fixed corrugated iron sheeting above. The east façade is simply clad in corrugated iron sheeting, and the south façade enclosed by a full glass wall fixed to a secondary light frame structure which is in turn fixed to the original truss and supporting columns. The current J Shed building is half of a 1912 goods shed originally located on Victoria Quay. The building was modified in 1936 and divided longitudinally in the mid 1960s. One half was reconstructed adjacent to Fleet Street in its current location, while the other half was erected at Kwinana. Relocating timber structures around the quays was a common practice. J shed was originally clad in horizontal weatherboards and had a corrugated iron roof. Following the relocation of the 'J' Shed portion of the building these elements were replaced with asbestos sheeting. The conservation works undertaken as part of the Bicentennial Program in 1985 replaced the asbestos with weatherboard and corrugated surface claddings, and included the removal of a fifth bay to the south that was located over extant archaeological remains of the Mews Boat Shed. The southern end was replaced with a glass wall fixed to a light steel-framed structure, which is fixed to the original truss and supporting columns. The adaptive restoration of J-Shed was done for a purpose to provide studios for Fremantle artists in order to add a sympathetic public activity to the site. Studios continue to operate today.

THE PROPOSAL

The proposal is to enter into a lease with Sunset Venues Pty Ltd for a term of 21 years over a portion of lot 2051 Fleet Street, Fremantle – part of the Arthurs Head Reserve.

The site is essentially in a raw state with limited services with Unit 1 being a warehouse space. Sunset understand that the premises is offered on an “as is” condition and that the implementation of required services such as power, water and sewer connection will be the responsibility and cost of the lessee. Sunset will need to provide all infrastructure required to develop the site including commercial kitchen, power and water upgrades, building improvements and land improvements. It is estimated that this will cost in the vicinity of $2.0 to $2.5 million.

Attached is an artist’s interpretation of the possible multiple uses for the area to ensure the property is usable and inviting all year round. Sunset Events expertise is in creating a unique environment and customer experience for its patrons. The proposal is for a family friendly venue, with a core market of 25 years and up.

Ideas include weekend craft and art (flea) markets with a focus on Fremantle artists, Art exhibitions, dedicated space for rotating artists in residence, free wifi to attract students and public for lunch and during the daytime, laid back live music, ticketed events for profile musicians and other performers from across Australia and overseas as well as free

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performances by local artists. Clothes hoists and dog lead rail will be provided so beach goers can hang their towel or secure their pet to the rail and purchase a meal and/or refreshment in a casual relaxed setting.

Value for money and unique street bbq food and beverage options will be offered from the pop up stalls including artisan food vendors during main events and busier periods. The intention is to operate a craft brewery operation where Sunset will brew their own beers off-site and transfer the beer into vats on-site.

The usual business operation will allow up to 850 patrons to attend during busy periods and will seek opportunity to operate 10 to 15 ticketed events per year mainly during the warmer months for up to 1,500 people. During the ticketed events fencing will be placed around the venue to restrict access to ticket sales only and a temporary stage will be erected on the unleased portion of the grassed area to allow numbers into the venue. A tavern license will be sought to allow for this type of operation.

Sunset will commence seeking liquor once a lease is signed and/if planning approvals are granted. The time needed to arrange liquor and planning approvals will take between twelve and eighteen months and Sunset do not intend to commence any physical works until these items have been achieved, therefore the commencement time for operation of the facility is not expected until approximately 2 years after the signing of a lease. Lease negotiations have included a step in process over a period of 2 years to allow this to occur. Up until the period where Sunset would take possession of the property the City and Sunset have agreed that temporary tenants may be placed in Unit 1.

Based on negotiations with Sunset Events the following essential terms and conditions are recommended to provide the commercial agreement to allow Sunset to progress the next steps in seeking planning and liquor license applications;

Land

Unit 1, J Shed, Fleet Street, Fremantle – Portion of Lot 2051 on Deposited Plan 217075 and being the whole of the land in Qualified Certificate of Crown Land Title Volume 3037 Folio 511

Term

Ten (11) years commencing on the Commencement Date

Further terms

First Further Term :

Ten (10) years

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Commencement Date

Date on which conditional grant of Liquor License is achieved, subject to conditions under further obligations of the lease.

Rent

(a) Subject to paragraphs (b) to (d), to be advised.

(b) 25% of the Rent shall be payable for the first 12 months upon completion of the fitout;

(c) 50% of the Rent shall be payable for the months 13 to 18 months upon completion of the fitout;

(d) 75% of the Rent shall be payable for months 18 to 24 months upon completion of the fitout; and

(e) Rent payable on and from month 25 months upon completion of the fitout shall be in accordance with paragraph (a) with no discount.

Payment of Rent shall commence on the Commencement Date, in accordance with the above provisions.

Rent Review Dates

Each anniversary of the Commencement Date to CPI other than the following rent review dates, which shall be market based reviews:

(a) 5th Anniversary of the Commencement Date;

(b) 10th Anniversary of the Commencement Date; and

(c) 15th Anniversary of the Commencement Date.

Use

Bar, café and creative industries exhibitions and performance venue.

Public liability insurance

$20,000,000 (Twenty Million Dollars)

Additional terms and conditions

1. Works to be undertaken by Lessee

Complete scope of works to be provided. It is anticipated the scope of infrastructure improvements will be in the vicinity of $2 to $2.5 million.

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Building (185m2 approx + additions)– The Western end of the building will added to in the fabric of the current building to allow greater indoor space, plus an addition of a decked area which may include temporary enclosure materials such as blinds. The building will be modified to include a commercial kitchen, toilets for patrons, the café and bar facilities and a housekeeping area.

Surrounds (1500m2 approx) – the surrounding area will be used to provide additional space for patrons to use for dining and seating. It will also include semi-permanent facilities for the creative industries and additional food. Artists will be able to rent semi permanent structures to display and/or create in view of the public, additional food vendors will be able to rent semi-permanent structures to provide inexpensive and unique laid back food in addition to the café. Art will be displayed within this space along with eclectic items such as clothes lines to hang your beach towel and materials to create a casual Fremantle style environment. The area will be re-landscaped to cater for usage.

The area will allow for access and visual legibility between Victoria Quay and Bathers Beach.

Sunset Events will be allowed to expand and temporarily fence the entire area for their ticket events. The expansion will take place, generally, over a 24 hour period to allow for bump in and bump out.

2. Public access during ticketed events

Subject to the requirements imposed on the Lessee under the Liquor Control Act 1988, the Lessee shall not impede on the public pedestrian access to the other units of J Shed during tickets events.

3. Conditions Precedent

(1) The grant of Lease is conditional on:

a) the lessor’s compliance with the requirements of the Local Government Act 1995, including but not limited to the requirements pertaining to disposal of property set out in section 3.58 of that Act;

b) The approval of the Minister for Lands being obtained under section 18 of the Land Administration Act 1997;

c) The lessee obtaining planning consent from the City in respect of the development by a prescribed time.

d) The lessee complying with its obligations under Item 9; and

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e) The lessee to obtain an appropriate liquor licence for the premises and the permitted use.

(2) In the event that the conditions precedent are not satisfied by 31 December 2015, the lease shall be of no further force or effect subject to any further written agreement of the parties to extend the time period for satisfaction of the conditions precedent.

(3) The lessor agrees that it will consider any application for planning approval or approval required for the grant of a liquor licence if submitted by the lessee prior to the commencement date

4. Further obligations of the Lessee

(1) The Lessee shall at its own cost:

a) prepare a surveyed plan of the premises for the purposes of the lease and submit a copy of such plan to the City by a prescribed time.

b) submit a full scope of works in respect of the development for inclusion in the lease.

c) submit an application for planning approval to the City in respect of the development by no later than a prescribed time.

d) submit an application for a building permit in respect of the development to the City by no later than 31 December 2015;

(2) The parties acknowledge and agree that the development will be undertaken by the lessee by the 1 March, 2016. (3) In relation to each of the further obligations, the lessee shall use its best endeavours to

meet the relevant deadlines identified.

5. Alcohol

The Lessee COVENANTS AND AGREES that if a licence or permit is granted under the Liquor Control Act 1988 for the premises it must:

a) comply with any requirements attaching to the licence or permit at its cost and where any alteration is required to the Premises shall apply;

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b) comply with the requirements of the Harm Minimisation Policy (as amended from time to time) of the Department of Racing, Gaming & Liquor, which will require, without limitation the following –

(i) the development and implementation of a House Management Policy and Code of Conduct (as defined by the Harm Minimisation Policy) for the Premises, and such policies must be displayed in a prominent position on the Premises at all times; and

(ii) the development and implementation of a Management Plan (as defined by the Harm Minimisation Policy) for the Premises;

a) provide a copy of the licence or permit (as well as a copy of any document referred to in the licence or permit, including without limitation a copy of the House Management Policy, Code of Conduct and Management Plan (as defined by the Harm Minimisation Policy)) to the lessor as soon as practicable after the date of grant; and

b) indemnify and keep indemnified the lessor from and against any breach of the Liquor Control Act 1988, Health (Food Hygiene) Regulations 1993, Liquor Control Regulations 1989 or the licence or permit or any conditions imposed thereupon for which it may be liable as the owner of the Premises.

6. Early Access to Premises

The lessor shall permit the lessee to access the premises prior to commencement of the lease as may be reasonably required for the Lessee to inspect or survey the premises, subject to such access not unreasonably interfering with the use of the premises by any third party.

7. No fetter on discretion of Lessor

The Lessee acknowledges that:

a) no provision of this lease constitutes a fetter on the discretion of the lessor in the exercise by the lessor of any of its powers under any law including those relating to planning, building or health;

b) in the event the development proceeds it shall be carried out at the risk of the lessee and the lessor has not given any warranty or made any representations either as to the suitability of the premises or otherwise for the development; and

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c) it accepts the premises in its present condition relying upon its own enquiries and investigations.

8. Use of Premises by third parties

For the sake of clarity, the parties acknowledge that entry into this agreement shall not restrict the right and entitlement of the City to permit use of the premises by any third party, whether by way of lease or licence agreement, prior to commencement of the lease.

9. Lessor’s Acknowledgement

1. The lessor acknowledges that the lessee may conduct live performances from the premises which will be heard from outside the premises and for which an approval under regulation 18 of the Environmental Protection (Noise) Regulations 1997 may be required.

2. The lessor acknowledges that:

a) the lessee proposes to sell alcoholic beverages from the Premises and will apply to the relevant liquor licensing authority for a liquor licence which permits the sale of liquor from the premises

b) the lessee may apply to the relevant liquor licensing authority for a producer’s licence to permit the micro-brewing of liquor on the Premises, such application to be subject at all times to the further approval of the City, which may be withheld at its absolute discretion; and

c) any liquor licence attaching to the Premises and obtained by the lessee will remain the property of the Lessee and may be removed by the lessee on Termination of this Lease.

10. Exhibition of artist’s work

1. The lessee acknowledges that the premise is situated within the Arthur Heads Arts and Heritage Precinct, as designated by resolution of the Council of the lessor.

2. The Lessee agrees to provide a space within the Premises:

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a) for artists working in Arthur Head Precinct to be able to exhibit their work on a priority basis; and

b) at other times to be available to external artists for hire.

11. Advertised, ticketed events

Without detracting from any separate statutory requirement for approval, the lessee shall not hold more than 15 advertised, ticketed events on the premises in any calendar year during the term of the lease.

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EXPECTED EFFECT ON THE PROVISION OF FACILITIES AND SERVICES (section s.3.59(3)(a) of the Local Government Act) Is the property currently providing any services? This property is currently and has previously been leased to artisans. Agreements are being and have been negotiated for artisans to occupy the remaining 3 units of J-Shed. These artists generally obtain work through commissions and also display their works and provide opportunity for visiting artists.

The adjacent open area to the west is grassed but not maintained to a park standard. It provides opportunity for the local artists to display some of their work but is generally underutilized by the public. It does allow an area of open space which links Victoria Quay to Bather Beach, however this link is not well defined.

What effect will disposal have on that service? The disposal will improve the current service being provided. It will add value by way of :

• improvements to the facility and outside area; • Increased visitation to the precinct thereby increasing awareness of the artists working

there and their work; • Improved wayfinding between the area and Victoria Quay. This will improve

visitation and awareness of the area between Kigodo and Victoria Quay generally. The lease will ensure the portion of open space included in the lease will not impact on tenants in the remaining areas of J-Shed. It is intended that the lease will allow the lessee to increase and fence the portion of open space for a limited time during ticketed events, but otherwise operate within a smaller portion for the general operations of the facility. Access way around the venue will also need to be maintained through the lease provisions to ensure the link between Victoria Quay and Bathers Beach is maintained. What effect will the proceeds of the disposal have on budget and service provision? The proceeds from the lease of this property will be placed into general revenue of the City of Fremantle. The City intends to ensure that revenue achieved from income from Arthur Head tenants is applied back into the maintenance and improvements to Arthurs Head. Provision has been included in the lease agreement for the rental to be reviewed by CPI plus periodic market reviews throughout the term of the lease.

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EXPECTED EFFECT ON OTHER PERSONS PROVIDING FACILITI ES AND SERVICES IN THE DISTRICT (section s.3.59(3)(b) of the Local Government Act) Will the proposal have a positive or negative effect on the local community? This property is currently and has been leased to artisans for similar terms. The area is considered to be under-activated and the intention of the lease is to provide a venue which is a major attractor to the area whilst maintaining the creative industry and historical significance of the area. Through assessing feedback of this Consultation Plan, Council will assess the positive and negative effects and determine whether to proceed with the proposal. Will this proposal put additional strain on neighboring services e.g. car parking, public transport, increased demand for local services, business services The development being proposed will improve the functionality of the current facility for other tenants, the local community and the general public alike. The proposal intends to make use of existing public transport and local parking. The proposal will improve the infrastructure services to the location which should benefit the other tenants. EXPECTED FINANCIAL EFFECT ON THE CITY OF FREMANTLE (section 3.59(3)(c) of the Local Government Act) In financial terms what are the effects on budget The property is currently under a similar lease arrangement and proceeds are being received into general revenue. The draft lease proposes that the consideration of $70,600 per year be applied as rent. This figure will be reviewed by Consumer price index plus periodical market reviews. The intention is to ensure that revenue achieved from income from the lease is applied back into the maintenance and improvements to Arthurs Head. All proposed improvements to the facility and surrounds are to be borne by the proposed lessee. What are the costs associated with the disposal. Costs associated with the disposal are valuation costs, legal costs associated with preparation of the relevant agreements and documentation. The lease will include a provision for the lessee to cover some of these costs. The proposed lease will also include provision to upgrade the building itself to the value of approximately $2,000,000. These funds will be provided upfront by the proposed lessee. Do we currently derive income from the property or will we in future The City of Fremantle has previously leased this property but it is currently vacant. The surrounds being considered as part of this proposal have not been previously leased.

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Will the change have an effect on rates income The proposed lease arrangement will not have a significant effect on rate income. Rates and charges are currently applicable to this property and these charges will remain applicable under this agreement. A provision will be included for the provision of sub-leases to be available to artists and food vendors. Rates may also be applicable to these agreements in accordance with the Local Government Act 1995. If it is a disposal what is council going to do with the money. The disposal is by way of an exclusive use lease arrangement. Proceeds from the lease arrangement will be received annually into general revenue. EXPECTED EFFECT ON MATTERS REFERRED TO IN THE CITY OF FREMANTLE’S FORWARD PLAN (section 3.59(3)(d) of the Local Government Act) What will the impact be? The proposed disposal of the property will contribute to a vibrant economy and the culture and character of the area, which are two of the strategies contained within the City Plan. The proposal will ensure a key location in Fremantle is activated. Revenue received from the lease will assist in the provision of maintenance, improvements and services to the area through the annual budget. Impacts will also be considered by Council in determining its final position after the advertising period. Will any funds be specifically applied to any projects referred to within the plan? Proceeds from the annual rental will be used as general revenue funding to support the provision of Council services, improvements and maintenance in the Arthurs Head Reserve. THE ABILITY OF THE CITY OF FREMANTLE TO PERFORM THE TRANSACTION (section 3.59(3)(e) of the Local Government Act) How will the disposition take place? The proposed arrangement will be formalised by way of legal agreement (exclusive use lease) between the City of Fremantle and Sunset Venues Pty Ltd. This agreement will be registered. How does it fit in with the Local Government Act? The Local Government Act 1995 allows local government to dispose of properties.

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OTHER MATTERS OF WHICH DETAILS ARE REQUIRED TO BE G IVEN (section s.3.59(3)(f) of the Local Government Act) Are there any encumbrances? Power to lease for a period not exceeding 21 years. Requires Ministerial Approval. Management Order land use for the purpose of historical buildings, recreation and community services. Developments are subject to council’s normal planning procedures. Any subsequent development of the property will be subject to all normal planning procedures.