adelaide hills council ordinary council meeting … · 2018. 9. 3. · adelaide hills council –...

ADELAIDE HILLS COUNCIL ORDINARY COUNCIL MEETING

Tuesday 24 October 2017 CONFIDENTIAL AGENDA BUSINESS ITEM

Item: 19.1 Originating Officer: Richard Fox, Senior Property Projects Officer Responsible Director: Terry Crackett, Director Corporate Services Subject: Sale of land at the Adelaide Hills Business and Tourism Centre For: Decision

1. Sale of land at the Adelaide Hills Business and Tourism Centre – Exclusion of the Public

Pursuant to section 90(2) of the Local Government Act 1999 the Council orders that all members of the public, except:

CEO, Andrew Aitken

Director Engineering & Assets, Peter Bice

Director Strategy & Development, Marc Salver

Director Corporate Services, Terry Crackett

Director Community & Customer Service, David Waters

Executive Manager Governance & Performance, Lachlan Miller

Manager Property Services, Natalie Westover

Minute Secretary, Pam Williams be excluded from attendance at the meeting for Agenda Item 19. Sale of land at the Adelaide Hills Business and Tourism Centre in confidence. The Council is satisfied that it is necessary that the public, with the exception of Council staff in attendance as specified above, be excluded to enable Council to consider the report at the meeting on the following grounds: Section 90(3)(b) of the Local Government Act 1999, the information to be received, discussed or considered in relation to this Agenda Item is Information the disclosure of which could reasonably be expected to confer a commercial advantage on a person with whom the council is conducting, or proposing to conduct, business, or to prejudice the commercial position of the council and would, on balance, be contrary to the public interest. Accordingly, on this basis the principle that meetings of the Council should be conducted in a place open to the public has been outweighed by the need to keep the information and discussion confidential.

swatson

Text Box

RELEASED 03 SEPTEMBER 2018

Adelaide Hills Council – Ordinary Council Meeting 24 October 2017 CONFIDENTIAL ITEM – Sale of land at the Adelaide Hills Business and Tourism Centre

2. Sale of land at the Adelaide Hills Business and Tourism Centre – Confidential Item SUMMARY

This report has been prepared to progress the negotiations for the sale of the southern site of the Adelaide Hills Business and Tourism site (AHBTC). The Council has previously received a number of reports in relation to the progression of the AHBTC Masterplan including the divestment strategy contained in the report of 20 March 2016. The recommendations from the 22 March 2016 report in relation to the tenants of the southern site have been actioned and finalised, being the granting of a first right of refusal for the proposed Lot 702 to Henstock Technologies Pty Ltd (Henstock) and action initiated to sell the proposed Lot 703 to Blisstrade Pty Ltd (Blisstrade) and Lots D & E to the adjoining owners. The land division plans have been lodged for development approval and it is expected that a conditional development approval will be granted in November or December 2017. The development approval will be conditional upon various works being undertaken to meet building code requirements and service separations achieved for the new allotments. The progression to obtain conditional contracts at this time is to provide certainly to both the purchasers and the Council before funds are expended to undertake the required works. The proposed contracts will be conditional upon a number of outcomes including approval of the land division application for the southern site, the deposit of the land division plan to create the proposed allotments, finance approval and the clarification of ongoing lease arrangements.

RECOMMENDATION Council resolves: 1. That the report be received and noted

2. A contract for the Sale and Purchase of proposed Allotment 702 substantially in accordance

with the draft plan attached as Appendix 1 be negotiated and entered into between the Council and Henstock Technologies Pty Ltd for a sale price of $806,750 subject to the following conditions:

a. Issuance of an approval for the land division application of the draft plans attached

as Appendix 1 b. Deposit by the Registrar-General of the plans attached as Appendix 1, subject to

minor boundary realignments resulting from a road closure process to reflect the physical location of the existing buildings

c. Finance approval for the purchaser


d. The purchaser entering into a lease with Council for Building 31a at market rental for five years, with a right for the Lessee to terminate with six month’ notice in writing and with a right to sub-lease to community organisations

e. Vacant possession of Buildings 30 and 35 f. The removal from Building 29 of all material not belonging to Henstock

Technologies Pty Ltd.

3. A contract for the Sale and Purchase of proposed Allotment 703 substantially in accordance with the draft plan attached as Appendix 1 be negotiated and entered into between the Council and Bliss Trade Pty Ltd for a sale price of $403,000 subject to the following conditions:

a. Issuance of an approval for the land division application of the draft plans attached

as Appendix 1 b. Deposit by the Registrar-General of the plans attached as Appendix 1, subject to

minor boundary realignments resulting from a road closure process to reflect the physical location of existing buildings

c. Finance approval for the purchaser d. The purchaser entering into a lease with Council for Building 26 at market rental

for five years, with a right for the Lessee to terminate with six month’ notice in writing and with a right to sub-lease to community organisations.

4. The land identified in blue and labelled D in the draft plan attached as Appendix 1 be transferred to Mr A and Mrs K Huxter for $1 by merger with their current property to form Allotment 704

5. The land identified in green and labelled E in the draft plan attached as Appendix 1 be transferred to Ms A Tolcvay for $1 by merger with her current property to form Allotment 705

6. The CEO has delegation to finalise negotiations with Henstock Technologies Pty Ltd and Bliss Trade Pty Ltd for the preparation of a Contract for Sale and Purchase for each purchaser on terms that are industry standard for this type of contract

7. The Mayor and CEO to sign all necessary documentation to affect to this resolution including the division of the land substantially in accordance with the plan attached as Appendix 1, the sale and settlement of proposed Allotments 702 and 703 and the transfer and merger of the relevant portions of Lot 704 (identified in blue) and Lot 705 (identified in green) in the draft plans attached as Appendix 1.

1. GOVERNANCE

Strategic Management Plan/Council Policy Goal 2 Activities and opportunities to connect Strategy 2.4 We will implement the Adelaide Hills Business and Tourism Centre (Old

Woollen Mill) Masterplan to stimulate local job creation, boost tourism and create a vibrant cultural hub.


This report focusses on the sale of the entire southern site consistent with Council’s adopted divestment strategy for AHBTC. The Disposal of Land Policy governs the manner in which Council disposes of land. The proposed Contracts for Sale and Purchase align with the progression of the land division and divestment strategy presented to Council in the reports of 19 January 2016, 22 March 2016 and 25 July 2017. Legal Implications Compliance with requirements of the Real Property Act 1886 and the Land and Business (Sale and Conveyancing) Act 1994. Risk Management Implications The AHBTC Masterplan was adopted by Council on 23 June 2015 and there is an expectation from the tenants of AHBTC and the community to progress with the actions identified in the Masterplan. As set out in the Estimates of Sale Proceeds and Costs presented to Council at the budget workshop in April 2017, the costs to undertake the building upgrade/compliance works and survey and sale costs for the southern part of the site are likely to be in the vicinity of $475,000, the proposed conditional contracts provide certainty to Council that the land is secured under contract before significant monies are expended. As set out in the resolution of Council of 22 March 2016, the building upgrade/compliance works for the Northern part of the site are likely to be in the vicinity of $1.4M, the proposed conditional contracts provide certainty to Council that funding is available to undertake these works once a development approval is obtained.

The proposed Contracts for Sale and Purchase will assist in mitigating the risk of community/tenant expectation not being met and financial uncertainty in relation to the project for Council. The key risk identified for the AHBTC site that is relevant to this report is as follows:

Ageing and potentially failing infrastructure possibly resulting in site safety implications leading to safety hazards, reductions in service levels/fitness for purpose and increasing cost profile.

Inherent Risk Residual Risk Target Risk

EXTREME (4B) HIGH (3B) HIGH (3C)

Lack of strategic direction/commitment by Council to the AHBTC site leading to community/ business concern.


EXTREME (4B) HIGH (3B) HIGH (3C)


Lessees that are proposing to purchase leased premises and adjoining premises are not in a financial position to purchase the subject property


Extreme (4B) High (3B) High (3C)

Financial and Resource Implications Financial Implications The expenditure for Council in relation to the progression of the proposed Contract for Sale and Purchase are primarily for legal fees for the preparation of the contract and associated documentation to complete the sale of approximately $5k. Noting that as the land is being sold by a direct negotiation there are no Real Estate Agent fees. The proposed Contracts for Sale and Purchase secure a combined purchase price of $1,209,750 which reflects a midpoint between the valuation obtained by Council on 22 March 2017 and 21 April 2017 and the valuations obtained by Blisstrade and Henstock on 21 May 2017 and 1 August 2017 respectively. As previously advised to Council there are substantial costs involved to enable the titling of the site (including the northern site) and subsequent divestment to occur. Achieving certainty in relation to sales of the proposed allotments will enable these works to be progressed. Resource Implications The progression of the proposed Contracts for Sale and Purchase will be managed within existing resource allocations for this project. Customer Service and Community/Cultural Implications There is a community expectation that Council will be involved in the management and renewal of AHBTC, especially in the ongoing care and control of the public use component within the site. Community expectation remains high, that the Masterplan will provide and implement the vision and objectives for the future of AHBTC. The Masterplan does however clearly outline that little work can occur at AHBTC until more capital has been raised and/or funds are allocated from the current budget. There is therefore a risk that community expectations will not be met if the divestment strategy is not progressed. Environmental Implications A Baseline Contamination Assessment was undertaken in June 2017 following the removal of the underground storage tank in 2016. The Assessment concluded that there had been a significant reduction in contaminant concentrations in the perched groundwater since the UST was removed and this information has been provided to the Environment Protection Authority for their records.


Further, there was no evidence of contamination in any of the soils assessment that would pose a risk to human health or the environment for ongoing commercial and industrial land uses. Engagement/Consultation with Committee, Regional Subsidiary, Advisory Group

and Community

Considerable consultation has been undertaken with the community on the development of the Masterplan for the site including the proposed divestment of the land parcel described within this report. Both the AHBTC Advisory Group and the Property Advisory Group have been regularly updated on the status of the implementation of the Masterplan.

2. BACKGROUND There are a number of previous reports detailing the progress of the divestment strategy at AHBTC and the following are relevant to this report. The report of 22 March 2016 where it was resolved as follows, with 4j and 4k being particularly relevant:


A further report was provided to Council on 25 July 2017 where the updated draft land division plans were presented and endorsed.

3. ANALYSIS The sale of the southern site at AHBTC is a critical component of the divestment strategy for the whole AHBTC site and therefore the implementation of the AHBTC Masterplan. The proceeds from the sale of the southern site are required to fund the necessary works on the northern site to complete the strategy. The proposed divestment will result in the current land parcel being divided into two major parcels and two small vestigial areas to be merged with other land in private ownership. The division, and where relevant, the merging of the land is shown in Appendix 1. As identified on Appendix 1, two of the existing buildings, being Building 27 and the brick toilets adjacent to Building 23 encroach onto the public road reserve. To rectify this, there is also a road process order now in progress pursuant to the Roads (Opening and Closing) Act 1991. The wording ‘subject to minor boundary realignments’ in recommendations 2 and 3 is for this purpose. There have been extensive negotiations by Council staff with the proprietors of Henstock Technologies Pty Ltd and Bliss Trade Pty Ltd in relation to their proposed purchase of land on the southern site. Valuations The Council obtained an original valuation in October 2014 which attributed a value of $1.2M for the southern site as a single saleable allotment. Subsequent valuations obtained by Council attributed a combined value of between $1,410,000 to $1,680,000. The valuations obtained by the Council and the proposed purchasers are based on the expected return for sale as the highest and best use of the land. The valuations do not provide any form of concession or acknowledgement of the increase in market value due to the capital improvements made by the proposed purchasers. Allotment 702 A valuation obtained in July 2017 attributed a value of between $930,000 - $1,110,000 to Allotment 702. Henstock was provided with this valuation for consideration and subsequently sought their own independent valuation. A copy of this valuation has been provided to Council and this has been reviewed by Council staff. The valuation obtained by Henstock for Allotment 702 attributed a value of $730,000 as the likely return for sale as the highest and best use of the land. Henstock have advised that they have expended approximately $200,000 on capital improvements and fit out to Building 27 which will have increased the saleable value of the land which is not taken into consideration in the valuation reports.


Henstock have advised that they agree to the adoption of a midway position between the valuations, that is $806,750, as a fair reflection of market value and an agreed purchase price. Allotment 703 A valuation obtained in September 2016 attributed a value of $480,000 to $570,000 to Allotment 703. Blisstrade was provided with this valuation for consideration. Blisstrade sought their own independent valuation and have provided copy of this to Council and this has been reviewed by Council staff. The valuation obtained by Blisstrade for Allotment 703 attributed a value of $350,000 as the likely return for sale as the highest and best use of the land. Blisstrade have advised that they have expended approximately $50,000 on capital improvements and fit out to Buildings 23 & 24 which will have increased the saleable value of the land which is not taken into consideration in the valuation reports. Blisstrade have advised that they agree to the adoption of a midway position between the valuations, that is $403,000, as a fair reflection of market value and an agreed purchase price. Allotment 704 This allotment will be created from the land currently owned by Mr & Mrs Huxter together with the area identified in blue and labelled D on the plan attached as Appendix 1 to form one allotment. Allotment 705 This allotment will be created from the land currently owned by Ms Tolcvay together with the area identified in green and labelled E on the plan attached as Appendix 1 to form one allotment. Overall The combined purchase price is $200,250 less than the low point of the most recent valuations obtained by Council in August 2016 and July 2017 however the combined purchase price is in line with the 2014 valuation. Both Valuers acknowledged that there is very limited data from which comparative values can be assessed and both have had to make assumptions that are necessarily speculative and cannot be tested. This is particularly the case in relation to the future revenue streams that each purchaser may obtain from the land to be purchased. Both valuers also considered sales evidence and cited a number of sales in the Adelaide Hills and Mount Barker Council areas. Some of the sales were common to both valuations, but very different values resulted. AHBTC is a unique site and none of the sales considered were for comparable sites.


A major difference in the valuations relates to the allowances that have been made for tenant vacancies, which result in reduced revenue streams for the purchasers. Liquid Pacific has made an allowance of 25% for vacancies, while m3property has made an allowance of 10%. The valuations obtained by the Council and the proposed purchasers are based on the expected return for sale as the highest and best use of the land. The variances in the valuations is a result of the interpretation of the available sales and rental data for sites in the Adelaide Hills by each of the valuers and the application of the said allowances for vacancies. The valuations do not provide any form of concession or acknowledgement of the increase in market value due to the capital improvements made by the proposed purchasers. The amount spent by the prospective purchasers on capital upgrades is in the vicinity of $250,000 which has increased the value of the land by an undetermined amount. Current estimations indicate that the works required to be undertaken on the site to achieve the division of the land and sale will be up to $100,000 less than currently budgeted for. The net difference from the previous budget for the divestment of the south side is likely to be in the vicinity of $300,000 taking into account the $395,250 difference in valuation/sale price and an expected reduction of separation costs of $100,000. On this basis the sale prices recommended within this report are seen as appropriate. If the recommendations in this report are supported, it is anticipated that settlement will occur in March 2018.

4. OPTIONS Council has the following options: I. Resolve to approve the sale of the Southern Site of AHBTC in furtherance of Council’s

adopted divestment strategy (Recommended) II. Resolve to not approve the sale of the Southern Site of AHBTC, which will

compromise the adopted divestment strategy and facilitation of the AHBTC Masterplan (Not Recommended)

5. APPENDICES (1) Draft plan of division for the AHBTC Southern Site. (2) Numbered buildings on the Southern Site.

Appendix 1 Draft plan of division for the AHBTC Southern Site

nwestover

Callout

Area of building encroaching onto public road to be rectified by road closure process

nwestover

Callout

nwestover

Polygonal Line

nwestover

Text Box

D

nwestover

Polygonal Line

nwestover

Text Box

E

nwestover

Line

nwestover

Line

nwestover

Text Box

Huxter

nwestover

Text Box

Tolcvay

Appendix 2 Numbered buildings on the Southern Site

Adelaide Hills Council – Ordinary Council Meeting 24 October 2017 CONFIDENTIAL ITEM – 19.1

3. Sale of land at the Adelaide Hills Business and Tourism Centre – Period of Confidentiality

Subject to the CEO, or his delegate, disclosing information or any document (in whole or in part) for the purpose of implementing Council’s decision(s) in this matter in the performance of the duties and responsibilities of office, Council, having considered Agenda Item 19.1 in confidence under sections 90(2) and 90(3)(b) of the Local Government Act 1999, resolves that an order be made under the provisions of sections 91(7) and (9) of the Local Government Act 1999 that the report, related attachments and the minutes of Council and the discussion and considerations of the subject matter be retained in confidence until the earlier of settlement of the property transactions or 12 months.

Pursuant to section 91(9)(c) of the Local Government Act 1999, that Council delegates the power to revoke the confidentiality order either partially or in full to the Chief Executive Officer.

adelaide hills council ordinary council meeting … · 2018. 9. 3. · adelaide hills council –...

Documents