Kings Square Pub Deal ‘Pragmatic’: Freo Mayor

COUNCIL’S decision to offer a private company a $500,000 fit-out ‘sweetener’ and two years free rent was a ‘pragmatic reality’ in a tough WA market, according to Fremantle Mayor Brad Pettitt.

On Wednesday, council approved lease conditions for a three-storey venue including a cafe, bar and alfresco area on the ground floor, dining room on the first and function space on the top floor.

But in an awkward interview with the ABC yesterday, Dr Pettitt defended his council’s decision to use ratepayer funds for the controversial 10-year deal with Fremantle Doctor Restaurant and Bar.

“All the independent evidence we have got is that it’s not a bad deal at all,” Dr Pettitt told presenter Geoff Hutchison, who questioned whether it was the role of council to give a private company a ‘leg up’ when there was no shortage of bars and liquor venues in Freo.

Hutchison said: “You couldn’t find anyone else to take the space and you’ve sweetened the deal by nearly $1 million for Freo ratepayers to help it get up and running. Did you consult ratepayers?”

Dr Pettitt said the FDRB proposal had been a “very high profile project” and that debate was ‘very robust’ before council this week passed it following a narrowly defeated motion by South Ward councillor Marija Vuycic to appoint an independent probity auditor before the lease was approved.

“There are no surprises here,” Dr Pettitt said. “It is fair to say the level of incentive made none us excited or happy but it’s just the pragmatic reality of what we live in the moment. This is the best value for ratepayers that we’ve could have got and even better value doing nothing with it.”

Dr Pettitt said when he first saw the proposal, he thought, ‘is that the best we can do’. Under the lease deal, FDRB’s rent for the third year will be based on two per cent of gross income and in the fourth year five per cent of gross income. Full rent will be paid in the fifth year.

The original rent free period of three years was pulled back to two years under an amendment moved by Dr Pettitt. Council has refused to say whether these ‘new’ conditions were presented to the 130 other hospitality venues it approached as part of a ‘targeted’ campaign to attract companies from outside Fremantle. None were interested.

“It is a tough WA market right now if you want to attract businesses to invest in your town you have to be competitive and that’s what we’re doing,” Dr Pettitt said.

Fremantle Society president John Dowson described the project as a scandal and an abuse of public funds when ratepayers expected council to deliver on a new cultural centre: “It’s a civic building. It is 20m from the Anglican Church building and they weren’t even consulted.”

He said the community was never consulted about the ‘major’ variations of the project and that a tavern catering for up to 1000 people would disrupt church services, particularly at weekends.

“We have so many taverns in Freo we are going to become ‘Northbridge by the Sea’.”

Ms Vujcic told council this week its role is not to undermine businesses which already do it tough: “Using ratepayer’s money to give a ‘leg up’ to one business providing a similar service is bad business all round. The business owners in Fremantle may well have a case to ask for similar treatment.”

She added, “all the cultural and civic pursuits are being traded for another alcohol outlet. What a poor return”.

Background

As reported by StreetWise, Council agents Metier began the leasing campaign on December 5, 2018. It included general advertising and ‘targeted’ approaches, “particularly focused on boutique operators and brands that were not currently located in Fremantle”.

Metier developed, “a targeted database of over 100 contacts external to Fremantle”. Yet the only expression of interest the City received was from FDRB, a local company registered in November.

The City says the lack of interest by the 130 hospitality operators was due to the new civic building having come on to the market at a, “challenging time for the retail and hospitality sectors”.

Industry sources told StreetWise the original EOI was overly ambitious: “They changed the game, the scope of the lease has changed significantly. These are not minor variations. The question is how do the 130 operators feel about not having been given the chance to consider the exemptions offered FDRB? Did council stick to due process?”

The City states: “Given Kings Square remains under construction, many have opted to ‘wait and see’ before making a decision to invest. Notwithstanding these immense market challenges, the City in partnership with its leasing agent has been successful in securing a prospective tenant, which aligns with all criteria set by Council in August 2017.”

Not so. The offer of free rent breaches the 2017 criteria. Nor is there any mention of a lump sum payment by ratepayers to fund the fit-out. Metier advised the $500,000 fit-out provision, “is in line with current market expectations”.

The City states: “The intention is the payment of the incentive will been catered for within the current Kings Square contingency budget so there are no additional budget implications arising from the incentive payment.”

Questions council will not answer:

• What feedback did the 130 hospital operators give in regard to their reluctance to do business in Kings Square? Given only one business out of 100 made it through, does this mean the scope was too restrictive in the first place?
• Were these operators offered the same terms and conditions as FDRB? Why are the “new terms and conditions” different to those that were offered and advertised publicly?
• What variations were made to the original EOI for the sole respondent? Are these minor or major variations?
• Do you believe the terms are overly ambitious? For example, it appears the City is willing to risk losing $500k (fit-out) for a guarantee of $75k? Is this correct?
• Has the Council prepared a Risk Management Plan regarding the proposed lease or did it ask the bidders to supply one?