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Project The New Museum in Western Sydney — Development Options Assessment Site Analysis — Consultant Advice

Development Options Assessment — Site Analysis.

The following analysis and commentary has been provided by the architectural, engineering and site due diligence team for the New Museum in Western Sydney Business Case.

A workshop was held on 01 June 2017 to assess the different site location options and issues associated with inclusion of additional large scale development on the site. The workshop was attended by, and supplementary advice during the development of the options has been provided by the following consultants:

· Taylor Thompson Whiffing: Traffic and Access, Flood Engineering;· JBA: Statutory Planning;· Rider Levett Bucknall: Cost Planning;· FKM: Architects.

Assumptions with respect to planning advice, have been made in accordance with the Statutory Planning Framework within the CBRE Real Estate Market Report, provided to Johnstaff on 22 December 2016. The planning controls applied are those within the current Parramatta LEP (2011).

It has been assumed that St George's Terraces will be removed in all scenarios to enable the inclusion of the additional development options, and enable the construction of a functional museum. This is in accordance with the proposed siting options provided by CBRE that conclude that the optimal siting for commercial and/or residential tower is in the South/East corner of the site where the St George's Terraces are located. Willowgrove, has been retained in options 1 and 2.

The analysis undertaken has assumed that the available GFA for the development for the site is based upon the theoretical maximum GFA available in the B4 zone of the site. The B4 site area is 14,387, resulting in an FSR of 6:1 and GFA of 86,322 sqm. If a Design Excellent Bonus of 15% is achieved this increases to an FSR of 6.9:1 or 99,270.3 sqm. If an entirely non-residential Design Excellence Bonus of 25% was achieved there would be an increase to an FSR of 7.5:1 and GFA of 107,902sqm. Where the Design Excellence Bonus is achieved the maximum permissible building heights under the current LEP are 92m for residential developments and 100m for commercial developments.

The scenarios model options that include 1 and 2 towers. An options to model 3 or more towers has been discounted. With consideration to setback and access requirements the available space left to develop a contemporary, functional museum facility on the residual, highly reduced site footprint, would be severely compromised.

Options Modelled

1

Commercial Tower — South East Portion

Option 01 models a commercial tower (in blue) on the South Eastern potion on the site on the corner of Philip St and Wilde Avenue.

In this option the heritage building, Willowgrove has been retained in the centre of the site.

The remaining site footprint is utilised for the

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development of the New Museum (in yellow).

2Residential Tower — South East Portion

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Johnstaff

Option 02 models a residential tower (in green) on the South Eastern potion on the site on the corner of Philip St and Wilde Avenue. . . ..,

`=-., 01has been retained in the centre of the site.The remaining site footprint is utilised for thedevelopment of the New Museum (in yellow).

3

Commercial Tower - North West Portion

Option 03 models a commercial tower (in blue) on the north west portion of the site with river frontage.

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1development of the New Museum (in yellow).

4

Residential Tower - North West Portion

Option 04 models a residential tower (in green) on the north west portion of the site with river frontage.The remaining site footprint is utilised for the

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5

Commercial Tower — South East Portion

Option 05 models a commercial tower (in blue) on the South Eastern potion on the site on the corner of Philip St and Wilde Avenue.

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6

Residential Tower — South East Portion

Option 06 models a residential tower (in green) on the South Eastern potion on the site on the corner of Philip St and Wilde Avenue.

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7

Commercial and Residential Towers — South East and North West Portions

Option 07 models 2 towers on the site, a commercial tower (in blue) in the south eastern portion of the site and a residential tower (in green) in the north

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NB: Options with 2 towers are not considered viable due to the high qualitative risk level.

8

Residential Towers — South East and North West Portions

The option models 2 towers on the site being a residential tower (in green) in the south eastern portion of the site and a second residential tower (in green) in the north west on the river front.


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NB: Options with 2 towers are not considered viable due to the high qualitative risk level.

9

Residential/Commercial Tower — South East PortionThis scheme is based on 60% GFA commercial for the low rise which includes commercial around car parking in the podium, and then 40% GFA residential for the high rise. The option is located on the South Eastern potion on the site on the corner of Philip St and Wilde Avenue.


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development of of the New Museum (in yellow).

10

Commercial Tower — South East Portion (Government Pre-commitment)

Option 05 models a commercial tower (in blue) on the South Eastern potion on the site on the corner of Philip St and Wilde Avenue.The remaining site footprint is utilised for the

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Statutory Planning AdviceThe Statutory Planning Advice has been provided with respect to the compliance of each scheme with consideration to FSR, building height and setback requirements. All schemes modelled are compliant with the current Parramatta LEP (2011).

OptionGFAHeightSetbacksOption 1

48,996m2 proposed 107,902m2 permitted (25% bonus)Compliant

99.5m proposed

100m permitted

Compliant

Setbacks compliant

Option 2

38,278m2 proposed

91.5m proposed

92m permittedSetbacks compliant

Johnstaff

99,270.3m2 permitted (15%bonus)CompliantCompliant

Option 4

38,276m2 proposed 99,270.3m2 permitted (15% bonus) Compliant91.5m proposed

92m permitted

Compliant

Setbacks compliant

Option 5

48,996m2 proposed 107,902m2 permitted (25% bonus) Compliant99.5m proposed

100m permitted

Compliant

Setbacks compliant

Option 6

38,276m2 proposed 99,270.3m2 permitted (15% DE bonus) Compliant91.5m proposed

92m permitted

Compliant

Setbacks compliant

Option 7

86,499m2 proposed 99,270.3m2 permitted (15% DE bonus) Compliant

Residential

91.5m proposed

92m permitted

Commercial

99.5m proposed

100m permitted

CompliantSetbacks compliant

Option 8

75,264m2 proposed 99,270.3m2 permitted (15% DE bonus) Compliant91.5m proposed

92m permitted

Compliant

Setbacks compliant

Option 09

38,842 proposed99,270.3m2 permitted (15% bonus)

As this is a commercial and residential tower the height limit is 92m (15% bonus). The 100m (25% bonus) only pertains entirely non-residential commercial development.

Setbacks compliant

Option 10

48,996m2 proposed 107,902m2 permitted (25% bonus)Compliant

99.5m proposed

100m permitted

Compliant

Setbacks compliant

Design, Place making and Functionality of the site.

Option New Museum Layout Outcomes Development Layout Outcomes1 Commercial Floor plate workable and functional. Tower floor plate GBA 1836m2

Tower — South Heritage item would need to function as the entry to enable Philip St entry to The

Podium floor plate GBA 2400m2street address on Philip and Wilde St corner

East Portion New Museum. Connection possible to the car park access from Philip Streetpublic open space, connecting to Good pedestrian access from Philip andParramatta civic link, via Willowgrove. Wilde St cornerPedestrian entry via River Front WalkNew Museum to benefit from north facing, full river frontage.

2 Residential Floor plate workable and functional. Tower floor plate GBA 1836m2

Tower — South Heritage item would need to function as the entry to enable Philip St entry to The

Podium floor plate GBA 2400m2street address on Philip and Wilde St corner

East Portion New Museum. Connection possible to the car park access from Philip Streetpublic open space, connecting to pedestrian access from Philip and Wilde StParramatta civic link, via Willowgrove. corner

Johnstaff

Pedestrian entry via River Front Walk New Museum to benefit from north facing, full river frontage.

3 Commercial

Tower - North

West Portion

Floor plate workable and functional. Main entry from Philip Street, with Pedestrian entry from Wilde and Philip StreetsThe New Museum benefit from street and river frontage.The space between the New Museum and Residential tower creates circulation /visual link between Philip Street and the River, connecting to Parramatta civic link. The New Museum is less affected by the presence of one tower in terms of functionality of footprint and site amenity.

Tower floor plate GBA 900m2

Podium floor plate GBA 2400m2

Access via River Front Walk

Car access via Philip Street

4 Residential

Tower - North

West Portion

Floor plate workable and functional. Main entry from Philip Street, with Pedestrian entry from Wilde and Philip StreetsThe New Museum benefit from street and river frontage.The space between the New Museum and Residential tower creates circulation /visual link between Philip Street and the River, connecting to Parramatta civic link. The New Museum is less affected by the presence of one tower in terms of functionality of footprint and site amenity.

Tower floor plate GBA 900m2Podium floor plate GBA 2400m2 Residential Access via River Front Walk Residential Car access via Philip Street

5 Commercial

Tower — South

East Portion

Floor plate workable and functional. Heritage item would need to function as the entry to enable Philip St entry to The New Museum. Connection possible to the public open space, connecting to Parramatta civic link, via Willowgrove. Pedestrian entry via River Front Walk New Museum to benefit from north facing, full river frontage.

Tower floor plate GBA 900m2Podium floor plate GBA 2400m2street address on Philip and Wilde St corner car park access from Philip Street pedestrian access from Philip and Wilde St corner

6 Residential

Tower — South

East Portion



7 Commercial and Residential Towers — South East and North West Portions

New Museum Floor plate reduced and less functional.

New Museum entry from Philip Street via public open space to west of commercial tower and pedestrian entry via River Front Walk.New Museum affected by reduced river frontage and reduced street frontage andSouth East Commercial TowerTower floor plate GBA 1836m2Podium floor plate GBA 2400m2street address on Philip and Wilde Streetcornercar park access from Philip Streetpedestrian access from Philip and WildeStreet corner

Johnstaff

smaller footprint to accommodate both towers.Potential for public open space highly limited by two towers, without the acquisition of the GE

North West Residential Tower Tower floor plate GBA 900m2 Podium floor plate GBA 2400m2 Residential Access via River Front Walk Residential Car access via

New Museum Floor plate reduced and less functional.New Museum entry from Philip Street via public open space to west of commercial tower and pedestrian entry via River Front Walk.New Museum affected by reduced river frontage and reduced street frontage and smaller footprint to accommodate both towers.Potential for public open space highly limited by two towers, without the acquisition of the GE

South East Residential TowerTower floor plate GBA 900m2Podium floor plate GBA 2400m2street address on Philip and Wilde Streetcornercar park access from Philip Streetpedestrian access from Philip and WildeStreet corner

North West Residential TowerTower floor plate GBA 900m2Podium floor plate GBA 2400m2

8 Residential Towers — South East and North


Floorplates — This scheme has a1840sqm floorplate for commercial and 900sqm floorplate for residential to make it a comparable option.

street address on Philip and Wilde St corner car park access from Philip Street pedestrian access from Philip and Wilde St corner

9 Mixed Used



10 Commercial Tower — South East Portion (Government pre-

Traffic Engineering

Taylor Thompson Whitting undertook a Traffic and Transport Assessment Report for the Museum of Applied Arts and Science Parramatta, Final Business Case (November 2016). This report comprehensively documents the access, transport and traffic issues related to the site and proposed New Museum development.

TTW has provided the provided the following supplementary advice that considers the issues associated with the impact of additional development on the site (29/06/17):

Main issues for traffic are location of vehicles access points for:Residential and/or commercial and/or Museum car parking facilitiesResidential and/or commercial and/or Museum service and loading facilities

- Museum bus and coach pick-up and drop-off facilities- Museum taxi and private vehicle pick-up and drop-off facilities

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- Emergency services access to any on-site buildings

Critical location considerations for vehicle access points (of any kind) are:- Access via George Khattar Lane underneath the Wilde Avenue bridge is not recommended. The area is flood

prone, provides low vehicle clearance, and the intersection with Phillip Street does not provide good operation. Access in the south-east corner along Phillip Street would likely result in an access point very close to the intersection with Wilde Avenue.Access in the south-east corner along Wilde Avenue would result in an access very close to the intersection with Phillip Street. An access point here would be left-in left-out based on existing scenario (which should not be changed due to impacts on traffic flow) which would present an inconvenience to drivers approaching from the north or departing to the south.Access at the west of the site via Dirrabarri Lane is likely to preferable and creates fewer issues as it removes traffic conflicts from the major intersections. Access to Meriton carpark (including emergency access if necessary) must be maintained.

Other considerations for car park, vehicle areas, and traffic issues include:Pedestrian frontage to connect with proposed Civic Link to station (Norwood Place) including pedestriancrossing measures and/or visual link to the front of the site

o Placement of Museum in south-east of the site would provide most prominent visual positioning within the block for the local area

- Parramatta CBD Pedestrian Strategy:o New driveways should not be planned on main streetso Civic Link expected to be major pedestrian thoroughfare

- Any basement parking areas will need to consider flood protection of the access point

The main issues for traffic are location of any car park access points.· A tower near the south-east would likely also require some kind of car park access in this area, which is very

close to the existing intersection of Wilde and Phillip.· If access was required in south-east, it would likely be left-in left-out for improved traffic flow, which would

present an inconvenience to drivers and cause excess vehicle movements through the CBD for circulation.· A tower at the west (adjacent to Meriton) would be less of an issue, as access could be via the shared service lane.

With Meriton, MAAS, GE, Parkroyal, and the potential residential tower all sharing this lane, the intersection could require an upgrade (e.g. traffic lights) to cater.

· There is a need to also consider maintaining the access to Meriton.

Flooding and Engineering AdviceTaylor Thompson Whitting undertook a Flood Study for the Museum of Applied Arts and Science Parramatta, Final Business Case (November 2016). This report comprehensively documents issues and impact of flooding on the Riverbank site.

TTW has provided the provided the following supplementary advice that considers the issues associated with the impact of flooding on the site (30/06/17):

Building setback from Parramatta River

All proposed options show a reduced setback from the river compared to the original flood study. If the ground floor encroaches into the existing flood extent (see image below) flood storage and flow will be reduced whilst flood levels will increase which will not be acceptable to Council. Previous design options outlined in the original flood study had the ground floor set back outside the 100 year flood extents with suspended levels above extending over the flood extents. A typical section that would be acceptable is below.

Johnstaff

Levels above ground floor can extend into 100 year flood extents

zPMF level 10.39mGround Floor Level to be

setback, outside 100 year

extent, as to not obstruct main

100 year flood level 6.00m

Basement level, car park

access needs to be protected

up to 100yr+0.5m or PMF

..................................................

............

100 year ARI Flood Depth 0.0000 to

ite 0.2000 to 0.4000

0.6000 to

um >1.0000

P h i l li p S t r ee t 7 . 0 m

Overland Flow Path

The existing overland flow path through the site from Philip Street to the river needs to be maintained. The original flood study identified a minimum 12m wide route from the access road off Phillip Street and along the western boundary. This could possibly be reduced subject to further modelling and site design.

Options that have development in the south-east allow the overland flow to be maintained.

Options for development on the north-west corner of the site do not provide sufficient space for overland flow through the site. However these could work if the ground floor level is set back to allow space for the overland path, with floors above suspended.

Johnstaff

Floor Levels

The original flood study identifies that habitable floor levels must be set at 500mm above the 100 year flood level. The maximum 100 year flood level across the site is 7.00m and the ground floor level must be a minimum of 7.50m AHD. Provision must be made for safe internal access and refuge to a floor above the PMF level.

Proposed basements

Councils DCP states that enclosed parking must be protected from flooding up to the 100 year flood level with access ramps provided no lower than 0.5m above the 100 year flood level. It also gives a design principle that basements must be protected up to the PMF level. The PMF level is approximately 3.5-4m above the existing ground levels at Phillip Street and would inundate most of Parramatta CBD. Basement protection up to the PMF level may be impractical and confirmation with council is required to the level of protection that would be acceptable.Using the existing access from George Khattar Lane to a basement car park would not suitable as this level is at 3.5m, well below the 100 year and PMF flood levels.

Johnstaff

JOHNSTAFFAttachment A Qualitative Options Assessment Site Analysis

Option

Town Planning

Design, Place making and Functionality of the site.Engineering Advice

1 Commercial Tower — South East Portion

•

•

lb2 Residential Tower — South East Portion

•

ID•

3 Commercial Tower - North West Portion•

•

•4 Residential Tower -

North West Portion•

•

•

5 Commercial Tower— South East Portion

4i•

•

6 Residential Tower — South East Portion

•

••

7 Commercial and Residential Towers —South East and North West Portions•

•

•

8 Residential Towers — South East and North West Portions•

••

9 Mixed Used Tower — South East Portion

•

•

•

10 Commercial Tower — South East Portion (Government pre-Commitment)lb

411

· The option proposes limited risk to site planning and the functionality of the New Museum

· The option proposes moderate risk to site planning and the functionality of the New Museum

· The option proposes high level risk to site planning and the functionality of the New Museum

Johnstaff

PerthLevel 5, 160 St Georges Terrace Perth Western Australia 6000Telephone: +61 8 9476 3144 Facsimile: +61 8 9476 3188 GPO Box 2753, Perth WA 6001

MelbourneLevel 27, 101 Collins Street Melbourne VIC 3000Telephone: +61 3 9111 0046 Facsimile: +61 3 9111 0045

SydneyLevel 57, MLC Centre, Martin Place Sydney NSW 2000Telephone: +61 2 8355 3690 Facsimile: +61 2 8355 3689

www.paxongroup.com.au

Arts & Culture Division, NSW

New Museum in Western SydneyDevelopment Options Assessment

(Increased FSR Options)

PAXON GROUP

Corporate Finance Perth • Melbourne • Sydney I October 2017 — Version 2.0

Management ConsultingProject Finance and Infrastructure

!AXON GROUP

Table of Contents1 Executive Summary

1.1 Introduction and Process1.2 Options Assessed1.3 Summary Findings

2 Introduction2.1 Overall Assessment Process

4

4

4

466

3 Assessment Methodology7

3.1 Qualitative Assessment Methodology7

3.2 Quantitative Assessment Methodology12

4 Potential Scope Inclusions13

4.1 Assessment of Potential Indusions13

4.2 Scope Items Included in Options14

4.3 Mixed-Use Options14

4.4 Planning Constraints15

4.5 Separation of Museum and Development15

5 Option Definition

166 Modelling Assumptions

176.1 Timing

176.2 Developer and Financial Assumptions

176.3 Construction and Development Assumptions

186.4 Revenue Assumptions

18Assessment of Development Options

207 Option 1

217.1 Description of Scope Item

217.2 Qualitative Assessment

217.3 Financial Assessment

237.4 Summary of Results

238 Option 2





269 Option 3





2910 Option 4





32

New Museum in Western Sydney I Development Options Assessment (Increased FSR) Page 2

IVON GROUP

11 Conclusions & Further Analysis 3311.1 Value Sharing Voluntary Planning Agreement 33

Appendix A - Architectural Tower Options 35

Appendix B - Cost Plan 36


PA I 0 I GROUP

Executive Summary

1.1 Introduction and Process

This document assesses a number of potential development options for their suitability for inclusion on the New Museum in Western Sydney site. The options would be in addition to the New Museum development, and are being assessed to determine whether they could contribute positively to the operating position of the museum or provide a capital contribution to the State.To determine overall suitability for inclusions in scope, a two-part assessment process is conducted, comprising the following steps:

1. Qualitative Assessment: Determines overall risk level for each option against defined qualitative criteria. Options attracting a High risk rating are not considered suitable for inclusion in scope;

2. Quantitative/Financial Assessment: Determines, based on an assessment of the market and financial modelling, the likely Net Present Value ("NPV") impact of each option, and hence its financial viability.

Options attracting a reasonable qualitative risk rating, and that demonstrate an overall positive NPV to the State, are then considered appropriate for further consideration within the development scope for the New Museum site.

1.2 Options AssessedFour options are considered within the development options assessment. The options have been developed based upon the assumptions provided by CBRE and the findings of a workshop involving project architects, planners and cost planners.

Table 1: Descri • tion of 0 • tions Assessed

Option Portion of Site Developed FSR Nature of Development

Option 1 North West Portion 12:1 Residential

Option 2 North West Portion 12:1 Commercial

Option 3 North West Portion 15:1 Residential

Option 4 North West portion 15:1 Commercial

Detail for the financial assessment of options draws on the assumptions provided in CBRE's market analysis and FKM's architectural planning, along with cost plans developed by RLB.

1.3 Summary Findings

The overall findings of the qualitative and quantitative analysis are summarised in the table below. The potential value shown for each option is a likely land value payable by a developer in order to access the development opportunity, and this value can be considered as an offset to the capital cost of the New Museum.


Table 2: Summa of Qualitative Potential Value Overall Assessment

Option 1Option 2Option 3Option 4

ViaNot ViaNot

l'1 ON GROUP

In summary, commercial development does not appear to be viable, due to the low lease rates and the requirement to offer a lease incentive to attract tenants. Were a Government tenant able to commit to a long-term lease, at a rate which did not require a lease incentive, there may be value to a developer in providing this space. However, this would not reflect an overall value-for-money decision for Government.Residential super-tower options are seen to be the most viable potential developmentoptions, delivering between a land divestment value.Achieving a return at the higher end of the range shown will be dependent on a developer becoming comfortable with a low level of risk associated with the project, allowing the developer to accept a return on equity at the lower end of typical development returns. The overall final divestment value will also be contingent on the assumptions from the prior real estate market analysis, cost planning and other inputs remaining valid at the time a transaction is completed.

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2 Introduction

This Development Options Assessment ("DOA") considers the suitability of a number of development options for their potential inclusion on the site of the New Museum in Western Sydney ("New Museum"). These options are in addition to the development of the New Museum on the site, and are assessed to determine whether they may be suitable inclusions and could contribute positively to the operating position of the museum or provide a capital contribution to the State.While options may generate a commercial return on investment, it is important that they are also aligned with the overall direction of the project. This assessment determines the qualitative suitability, and associated risk, of options under a number of qualitative criteria. It then assesses the ability of options to provide a commercial return, should they be developed on the broader New Museum site.This DOA is additional to the original analysis conducted for the site, which considered a number of development scenarios constrained by the current planning limitations on the site. This report considers scenarios under alternative planning controls, to provide an indication of the value that may be achievable under these scenarios.

2.1 Overall Assessment ProcessTo determine overall suitability for inclusions in scope, a two-part assessment process is conducted, comprising the following steps:

1. Qualitative Assessment: Determines overall risk level for each option against defined qualitative criteria. Options attracting a High risk rating are not considered suitable for inclusion in scope;

2. Quantitative/Financial Assessment: Determines, based on an assessment of the market and financial modelling, the likely Net Present Value ("NPV") impact of each option, and hence its financial viability.

Options attracting a reasonable qualitative risk rating, and that can be shown to demonstrate an overall positive NPV to the State, are then considered appropriate for further consideration within the development scope for the New Museum site.A detailed description of the methodology employed in conducting the qualitative and quantitative assessments is provided in Section 3.


GROUP

3 Assessment Methodology

The assessment of potential development options involves a two-staged approach, assessing both the qualitative suitability of the option, and its financial viability.

3.1 Qualitative Assessment Methodology

To undertake the qualitative assessment, each option is evaluated against five criteria. These criteria have been developed to align to the overall qualitative objectives of the project, and are to be endorsed by the Project Control Group ("PCG") and Project Steering Committee ("PSC"). The criteria assessed are the following:

· Alignment with Strategy;· Compliance with Policy;· Sustainability;· Master Plan and Physical Parameters; and· Alignment with Broader Parramatta Strategy.

The approach taken is to consider the alignment of each development option with these qualitative requirements, and to then determine the likely risk of pursuing a specific development option negatively impacting upon achievement of these requirements.Each option is assigned a risk rating of High, Medium or Low against each criteria, with these ratings used to derive an overall risk rating for the option. The overall risk rating determines their qualitative suitability for inclusion on the New Museum site. Options attracting High overall risk ratings would not be considered qualitatively suitable for inclusion, irrespective of the potential commercial outcome.

Table 3 sets out the five criteria against which potential development options for inclusion on the New Museum site are assessed to determine their qualitative suitability. The table also identifies the documents and policies which are referenced in this evaluation, as well as key themes and individual elements of these documents which are specifically considered.


1 Al ignment w i th S t ra tegy

The New Museum in Western Sydney:

Vision; and

Objectives

MAAS Act

GROUP

Table 3: Qualitative Assessment Criteria and Reference Documents

Criteria Documents Description of Approach to AssessmentReferenced

Assess alignment with the New Museum in Western Sydney Vision:

'a world class 21st century museum in Western Sydney, focused on Science and Innovation, that will meet the needs and aspirations of the community and deliver an exciting new cultural destination for the people of NSW and beyond.'

Assess options for alignment to the 10 New Museum in Western Sydney Project Objectives.

Project Objectives1. Create an architecturally iconic, and world-leading museum, which helps to shape each city, and is specifically designed for the

needs of the 21st Century.2. A contemporary museum that facilitates both physical and digital museum experiences through personalisation, innovation,

technology, knowledge sharing and exchange platforms.World-class education and research facilities embedding

3.interactive and emerging technology.

4. Create a facility that is has the capability to operate effectively, including to exhibit and store elements of existing collections and touring exhibitions to internationally recognised standards.

5. Create a museum for that serves the needs of the NSW community and visitors, informed by outcomes of engagement.6. Develop a place that encourages environmental and social sustainability.7. Develop a sustainable MAAS operating model that enables revenue raising and commercial opportunities.8. Investigate the potential for appropriate, large scale commercial development on the site.

Utilise robust planning and delivery strategies to enable transition to the new Western Sydneymuseum environment.

Establish the foundation for a vibrant science, innovation9.

and cultural precinct in Western Sydney.10. The project is to achieve Value for Money and affordability for the Government.

Assess options for alignment with objects and functions of the Museum outlined in section 14 of the Act.

New Museum in Western Sydney I Development Options Assessment (Increased FSR) Page S

2 Compliance Premier's

with Policy Priorities 2016

Arts NSW, Create in NSW: The NSW Arts &

P1XON CROUP


Alignment with NSW Government key priority of increasing cultural participation through the following

actions:· "Participation in the arts promotes personal and

collective wellbeing, as well as contributing strongly to an innovative and robust local economy. Increasing the attendance at our cultural venues and events by 15% will have flow-on benefits for job creation, the visitor economy and education".

· "This requires strategic partnerships acrossgovernment, business, education and the creative industries to ensure NSW continues to lead the country in cultural employment, screen production and cultural tourism".

Create in NSW policy outlines various ambitions for excellence, access and strength, through the following actions:· "Increase strategic investment in Western Sydney"· "Develop creative partnerships in Western Sydney"· "Create a Parramatta Cultural Precinct"· "Support for the NSW Arts and Disability Partnership"Broad alignment with other policy documents including the following:· A Plan for Growing Sydney· Draft West Central District Plan· Better Placed, Draft Architecture and Design Policy· NSW Disability Inclusion Plan· NSW State Health Plan· Create in NSW: NSW Arts and Cultural Policy Framework· Infrastructure NSW, State Infrastructure Strategy Update 2014· Transport for NSW Long Term Masterplan· NSW Ageing Strategy· NSW DEC 5 Year Strategic Plan· Jobs NSW, Jobs for the Future Report


4 Master Plan / Preliminary Consideration of any risk or potential impact on Planning

Physical Planning Due Diligence Advice, including the following keyParameters Advice considerations:

· Building HeightTraffic and • Floor space ratioTransport • Incremental car parking requirementAssessment • Impact on heritage sites

· Overall aestheticThe New Consideration of any risks or constraints presented byMuseum vehicular access to the site and car parking

basement structures, and floor level requirements.Consideration of any risks or constraints presented by the retention and/or demolition of Heritage items on site.Assessment of both the alignment to these studies and the risk of planning related issues will be informed through consultation with the architect and

Heritage Report

TAXI)1 i GROUP


3 Sustainability The New Museum in Western Sydney Project Objectiv

Alignment to environmental and sustainability requirements of the Project, including to 'Develop a place that encourages environmental and social sustainability', and specifically that the Project 'Outcome will enable incorporation of world-leading sustainable Government Alignment to GREP, and general ability to deliver

Resource favourable sustainability outcomes in relation to:Efficiency • EnergyPolicy • Water Use

· Waste· Clean Air


AXON GROUP


Alignment Parramatta Alignment with overall themes of the Parramatta Strategicwith Broader Strategic Framework, and particularly the following Values BasedParramatta Framework Criteria defined in that framework:Strategy • Resilient

· Vibrant· Respectful· Connected· Inclusive· Prosperous

Parramatta City Council, Culture and our City: A Cultural Discussion Paper for Parramatta's CBD

Alignment with specific goals in the Cultural Discussion Paper, as listed below:Goal 1:· Create a regular program of events and

festivals that activate our outdoor, public and natural environment and take maximum advantage of the assets of the City

· Encourage partnerships and inbound investment to grow our annual events and festivals program

Goal 2:· Build on our Statement of Commitment to

Youth Engagement and develop a tailored process for young people in the city to inform, create, curate and occupy

Goal 3:· Identify partners, funding sources and

possible sites for a major new gallery or

I MIN 011011P

3.2 Quantitative Assessment MethodologyThe quantitative, or financial, assessment involves development of a financial feasibility model for each option.The financial model first seeks to assess the likely land value that a developer would be willing to pay for the development opportunity. This modelling develops a cashflow based on developer cashflows including the following:

· Capital cost of developing option;· Revenues achieved from sales or rental; and· Taxes, rates and other expenses.

The modelling then uses a Discounted Cash Flow ("DCF") methodology to determine the land value that a developer would be able to afford whilst still achieving a commercial return from the development.Once the likely land payment is determined, the net value to the State may also be modelled, where applicable. Again, a DCF model is produced, using the following cashflows:

· Revenue from land sale to developer; and· Any altered cashflows for the New Museum.

Consideration of altered cashflows for the New Museum includes any capital costs associated with modifying the building design to accommodate additional development opportunities on the site, as well as recurrent cost impacts on museum operation.Once all cashflows are modelled, the Net Present Value ("NPV") of the development to the State is determined. Where the NPV is positive, this demonstrates that there is value to the State in proceeding with the development option.The modelling will also continue alternative commercial models that may provide a recurrent cashflow benefit, as opposed to a one-off land sale. These would include long term leases or other commercial structures designed to achieve consideration for land value in a recurrent manner.

3.2.1 Impact on New Museum CashflowsThe financial assessment from the State's perspective will not consider any change to the capital and operating cashflows associated with the New Museum at this stage. Changes to the capital cost may arise due to changes in building footprint or configuration, while operating cashflows may be affected by additional commercial or other facilities as part of the respective development options. These aspects may be incorporated into modelling at a future time when the scope and design of potential museum configurations is further developed.

3.2.2 Approach to Land PurchaseThe current proposal for the New Museum involves the State purchasing the full site, with this DOA then contemplating the sale of some of that land to a developer. This approach delivers best value to the State as it allows excess GFA not utilised in the museum development to be sold off as part of a development, which would not be possible if the State did not purchase the full site before seeking planning approval for the museum and any additional development.


INXON GROUP

4 Potential Scope Inclusions

Four broad elements for potential indusion within a commercial development were assessed. These elements were identified based on the findings of earlier development options assessment completed as part of the New Museum Business Case and a preliminary understanding of the market. The elements assessed were the following:· Residential;· Commercial Office Space;· Accommodation (Hotel); and· Retail, specifically Food and Beverage.

4.1 Assessment of Potential InclusionsCBRE were commissioned to undertake a real estate market analysis of potential private development uses for inclusion in a combined museum-private development. This analysis assessed current and future market conditions and the likelihood of private developers having interest in pursuing each potential use. Where there was considered to be potential for interest in private sector development, appropriate assumptions to utilise in financial modelling were produced by CBRE.The findings of the real estate market analysis are summarised in Table 4. Table 4: Summa of Real Estate Market Anal sisPotential Scope Inclusion Summary of Finding

Residential Based on market analysis of benchmark projects, there is potentially appetite for further residential development in the area. Apartment values and take-up rates have been developed based on market

Commercial Office Space In the context of the current market, residential is likely to achieve a higher return than commercial office space. For commercial office, a pre-commitment to a minimum level of use is likely to be required from a Government department to facilitate private developer interest in providing additional office space.

The size of office space suitable for development wouldAccommodation (Hotel) A hotel would not form part of the highest

and best use of the site. This is because there is significant supply coming online by 2020, with the upper end of the market becoming increasingly competitive.

Based on CBRE's experience with other mixed use

development projects, the inclusion of a hotel is likely toRetail / Food & Beverage Gross rental yields for a number of retail

and food & beverage options have been developed based on market evidence. The likelihood of achieving tenancies and commercial returns from these spaces is dependent on achieving a destination precinct at the site to allow access to more

I AXON CROUP

4.2 Scope Items Included in OptionsOn the basis of the analysis completed by CBRE, a hotel was not included inconsiderations as a potential inclusion as part of any additional development on the New Museum site. This is consistent with the findings of the prior Commercial Options Assessment conducted for earlier work on the New Museum Business Case, which found a hotel integrated within the New Museum scope to not be commercially viable.Retail or Food & Beverage has not been specifically included in the options assessment, because the yield on retail or F&B is lower than that for an equivalently sized commercial or residential development. Additionally, there is potential for MAAS to include food and beverage or retail components within the museum facility. Consequently, the options assessment, which is limited to packages of land distinct from the museum facilities, does not consider designated food and beverage or retail within the GFA allocations.Commercial office space was found likely to be of interest to developers only where a Government pre-commitment to long term leasing of office space is in place, this item has been carried forward for further analysis in order to determine whether there may be overall value to the State in such an arrangement.As a result of these findings, the following two scope items are considered as part of potential development options on the New Museum site:· Residential; and· Commercial Office Space (Government tenancy).

4.3 Mixed-Use OptionsThe options modelled and assessed contemplate exclusive use of towers for either residential or commercial use. It is possible to deliver mixed-use developments, with elements of both commercial and residential within a common building.The value of one such development has been assessed, in Option 9. There is potential to alter the percentage of residential and commercial space within the development to provide other options. Should a mixed-use option be pursued, the development value will fall within a range bounded by the value of a purely commercial and a purely residential development.


PAXON GROUP

4.4 Planning ConstraintsThis DOA considers two scenarios for tower development on the site. The scenarios have been modelled based on commercial and residential towers with an FSR of 12:1 and 15:1.The approach to model a tower with an FSR of 12:1 is consistent with modelling undertaken by the City of Parramatta Council for the site, and the height of the adjacent Meriton towers, which are considered an appropriate benchmark.The town Planning consultant has also advised that the site is identified as an opportunity site in the Parramatta CBD Planning Proposal, and therefore is eligible for an FSR of 15:1. This eligibility arises because:· The site has an area of 1,800m2;· The site is 40m wide at the building line; and· The development is assumed to be the product of a

design competition that achieves high performing building bonuses.

The CBD Planning Proposal also provides that there is to be no maximum FSR control for commercial office developments. It should however be noted that these draft planning controls have not been endorsed by the Department of Planning, however the draft controls are consistent with Council's approach to the site.All proposals for additional built form on the site assume podium level parking, rather than basement or underground options. Consideration by TTW, the project structural engineer, and PSM, geotechnical engineers, determined that a deep basement under any development would not be viable for two reasons. Very hard rock would be encountered at those levels, and due to the high water table at the site, tanking would be required to provide a fully waterproof basement. These requirements would be cost prohibitive, and consequently podium level parking is the option considered in design and costing of development options.

4.5 Separation of Museum and DevelopmentThe options considered propose that the museum and any additional development be conducted on discrete areas of the site. The possibility of development of a commercial or residential tower above the museum building was considered, however has been deemed to be unworkable for the following reasons:· Cost impacts on the museum design and build to allow for

significant additional structure on top of the museum building would be cost prohibitive; Such an arrangement would mean that the timeliness and cost of the museum delivery would be at risk due to developer construction works which is not an optimal transfer of risk;

· The likely development cost would be higher, in order to provide a tower which was integrated from a design

and functionality perspective with the museum, which would reduce overall development value; and

· Integration of required car parking for the additional development would be difficult given the museum design requirements.

Consequently, in order to optimise the risk transfer between developer and the State, and to ensure best value-for-money in both the museum delivery and the potential development options, the possibility of development on top of the museum building was not considered further.


l'1XON GROUP

5 Option Definition

Options for development have been defined by consultation and workshops with appropriate consultants, including architects, planning consultants and engineering consultants. The options defined provide a range of options for varying museum and development footprints, and consider site aspects such as vehicle and pedestrian access, interface with heritage elements and required setbacks from roads and other buildings.Four options have been developed for assessment, as summarised in Table 5. The options are depicted in the 'Super Tower Options' developed by FKM, and attached as Appendix A.Table 5: Options Considered

Option

Portion of Site Developed

FSR

Nature of

Development

Option 1

North West Portion

PHLUP

12:1

Residential

Option 2North West Portion

12:1

CommercialOption 3

North West Portion

15:1

ResidentialOption 4

North West portion

15:1

Commercial

All options consider development of the North West portion of the New Museum site, as depicted in Figure 1.Figure 1: Site Area definition


IV N GROUP

6 Modelling Assumptions

The quantitative assessment is conducted by developing a financial model for each option, based on a number of assumptions. These incorporate developer and financial assumptions, residential and commercial capital assumptions and general assumptions that are common to multiple options.

6.1 TimingThe below table shows the timing assumptions applicable to all options in the analysis.Assumption Value Explanatory Notes

Tender Award Date

31-Dec-18

It is assumed the State will announce a

preferred tenderer prior to planning

approval, and the State hold development

risk until the DA is finalised. This allows

the developer to commence pre-sales and

delivers maximum value to the State.Development Approval 31-Dec-2019

Construction Duration 3 years

CBRE report, construction duration

assumed to be 1 year greater than current

planning controls scenario.

6.2 Developer and Financial AssumptionsThe modelling assumes that a developer will purchase the land available and undertake a development of the nature described under each option. This is considered the most likely development method, as the State does not typically undertake real estate or commercial developments, primarily as it seeks to avoid the risk associated with such projects.

It is assumed that the State will enter into an agreement with a preferred developer through a tender process, allowing the developer to commence planning and pre-sales prior to the release of the final Development Approval. This expedites the process of delivering the development, allowing concurrent construction with the New Museum, and delivers the best value outcome to the State.Cash flows to the developer, including outgoings such as construction and maintenance, and inflows in the form of sales and leasing of areas in the development, are discounted at the developer's Weighted Average Cost of Capital ("WACC") to determine the NPV of the development. The NPV of all future cash flows is then the amount that the developer would be willing to pay for the land, whilst allowing for sufficient value to be extracted from the development to ensure the required return to debt and equity hinders.The developers WACC is to be calculated using the assumptions presented in Table 6.

New Museum in Western Sydney I Development Options Assessment (Increased FSR)Page 17

Gearing: Debt Percentage 50% Market precedent

Gearing: Equity 50% Market precedent

GBA m2 Capital CostDevelopment Option

Table 7: Ca ital Costs

Residential Tower (12:1 FSR) 53,600

Commercial Tower (12:1 FSR) 65,225

Residential Tower (15:1 FSR) 57,065

Commercial Tower (15:1 FSR) 70,425

I 1XON GROUP

Table 6: Develo . er WACC Assure . tions

Value

SourceNSW Treasury 10 Year Bond Rate 2.84% NSW Treasury

Debt margin 250 bps Market precedent for similar transactions

The required return on equity for a developer will vary dependent on the project nature, the competitiveness of the market to obtain the land and development opportunity and external market conditions. For the purposes of analysis, a range of developer rates of return on equity between 15% and 20% will be considered, with results presented for both these values.Utilising the assumptions in Table 6 and the range of developer equity returns, the WACC for a developer is calculated to be between 10.17% and 12.67%.

6.3 Construction and Development AssumptionsCapital cost estimates for each of the options were provided by the project cost planner, Rider Levett Bucknall, as a preliminary budget estimate. Consultant fees, council fees, preliminaries, builder's margin, contingency and escalation to completion is included in the total capital cost. The following table displays the

capital costs and gross floor area ("GFA") utilised in the modelling.

The cost estimate is provided in Appendix B.

6.4 Revenue AssumptionsThe developer is assumed to earn revenue either through the sale of residential units, or through the lease of commercial space.Residential sales are based on the assumptions shown in Table 8, with the unit numbers coming from FKM's architectural design work, and assumptions around value sourced from CBRE's real estate market analysis.

New Museum in Western Sydney I Development Options Assessment (Increased FSR) Page 1S

\ X Ili GROUP

Table 8: Residential Product Mix

Product

Option 1

(FSR 12:1)

Option 3

(FSR 15:1)

Value ($/sqm)

Studio Apartments

59

74

12,0001 Bedroom

Apartments

173

218

12,500

2 Bedroom

Apartments

279

354

12,500

3 Bedroom

Apartments

55

70

13,000

The following assumptions are used to model residential sales.

Table 9: Residential Sales Assum . tions

Value Source

Selling Costs 4% of sales price Market precedent

TAXON GROUP

Assessment of Development Options


IAXON GROUP

7 Option 1

7.1 Description of Scope ItemOption 1 considers a single residential tower in the North West portion of the site, with a floor space ratio of 12:1. In this option all heritage buildings are removed to accommodate the New Museum on the remainder of the site.Option 1 is shown in Figure 2 below.Figure 2: Option 1

The residential tower delivers 53,600 sqm of gross building area, allowing for the apartment mix shown in section 6.4.

7.2 Qualitative AssessmentThe assessment of Option 1 against the five defined qualitative criteria is summarised in Table 11.


GROUP

Table 11: Qualitative Assessment 0 . tion 1Criteria Risk Level Reasoning for Risk Level Assigned

Alignment with Strategy

Low The addition of residential development to the site is not aligned with the overall Museum strategy, however this option does not allocate a significant portion of the site for development.There is also a risk of damaging community perception of the New Museum, as it may be seen as a commercial development through the inclusion of additional development at the site. This risk is more material than for options considering commercial space, as there is no potential link between residential development and the museum's activities.

Compliance Low This option is unlikely to impact on policy compliance,with Policy and will align well with aspects of policy such as the

development of the Parramatta CBD and the developmentof the Western Sydney corridor.

Sustainability Low The inclusion of residential development is unlikely toimpact on the sustainability of the overall site.

Master Plan / MediumPhysical

Parameters

This option considers a tower height which is higher than the current planning constraints allow. However, as the overall height is lower than the adjacent Meriton development, there is precedent for such development and it is not considered a high risk.

All heritage buildings are removed to accommodate the

New Museum on the remaining site footprint, which

poses a risk to approvals.The inclusion of residential development will reduce the amount of open space available for the precinct. The reduction in available public space conflicts with the City of Parramatta Council's Parramatta City River Plan and River Square precinct strategy aimed at providing a world-class public domain. This has the potential to reduce the vibrancy of the museum precinct and to affect the overall appeal of the site.Increased traffic and parking requirements, as a result of the residential development, also pose a risk to planning and approvals. Car park access is likely to be via the existing service lane and may require intersection improvements. This may cause inconvenience to drivers or excess vehicle movements through the CBD for


FAXON GROUP

Criteria Risk Level Reasoning for Risk Level Assigned

Alignment with Broader Parramatta Strategy

Low

The addition of further residential development to the

precinct would be consistent with, and hence a low risk

to, the strategies outlined for the Parramatta area,

particularly as it is likely to increase prosperity and

activity in central Parramatta.However, the inclusion of additional development will

reduce the amount of open space available for the

precinct. This has the potential to reduce the vibrancy of

the museum precinct and to affect the overall appeal of

the site, making it a less appealing site and less of a

cultural landmark within Parramatta.

In summary, this option is accorded an overall risk ranking ofMedium, as it does not overly compromise the site or the ability to accomplish the major objectives of the New Museum project. It does however present issues with site master planning and achievement of broader Parramatta strategic planning outcomes for the site.

Table 12: 0 tion 1 ResultsDeveloper Equity Return NPV

15%20%

7.3 Financial AssessmentThe financial assessment was conducted on the basis of the assumptions outlined in Section 6. Results have been determined for a range of developer equity returns, as shown in Table 12The positive NPV, of between______________, indicates the land value that a developer would be willing to pay to access the development opportunity.

7.4 Summary of ResultsResults for Option 1 are summarised in the table below.Table 13: 0 . tion 1 Summa

Qualitative Risk Potential Value Overall Assessment

Option 1 Medium Viable


I 1X 11 IV GROUP

8 Option 2


Option 2 considers a single commercial tower in the North West portion of the site, with a floor space ratio of 12:1. In this option all heritage buildings are removed to accommodate the New Museum on the remainder of the site.

Option 2 is shown in Figure 3 below.

Figure 3: Option 2

8.2 Quali ta t ive Assessment

The assessment of Option 2 against the five defined qualitative criteria is summarised in Table 14.

Table 14: Qualitative Assessment: Option 2

Risk Level Reasoning for Risk Level AssignedCrite ha


Low The addition of commercial development to the site is not aligned with the overall Museum strategy, however this option does not allocate a significant portion of the site for development.There is also a risk of damaging community perception of the New Museum, as it may be seen as a commercial development through the inclusion of additional development at the site.


1110" G 11 0 11 P

9 Option 3

9.1 Description of Scope ItemOption 3 considers a single residential tower in the North West portion of the site, with a floor space ratio of 15:1. This delivers a similar height of development to the adjacent Merton project. In this option all heritage buildings are removed to accommodate the New Museum on the remainder of the site.Option 3 is shown in Figure 4 below.Figure 4: Option 3

The residential tower delivers 65,225 sqm of gross building area, allowing for the apartment mix shown in section 6.4.

9.2 Qualitative AssessmentThe assessment of Option 3 against the five defined qualitative criteria is summarised in Table 17.


FAXON CROUP

Table 17: Qualitative Assessment 0 . tion 3Criteria Risk Level Reasoning for Risk Level Assigned


Low

The addition of residential development to the site is

not aligned with the overall Museum strategy,

however this option does not allocate a significant

portion of the site for development.There is also a risk of damaging community perception of the New Museum, as it may be seen as a commercial development through the inclusion of additional development at the site. This risk is more material than for options considering commercial space, as there is no potential link between residential development and the museum's activities.

Compliance Low This option is unlikely to impact on policywith Policy compliance, and will align well with aspects of policy

such as the development of the Parramatta CBD and the development of the Western Sydney corridor.

Sustainability LowThe indusion of residential development is unlikely toimpact on the sustainability of the overall site.

Master Plan / Medium This option considers a tower height which is higherPhysical than the current planning constraints allow. However,Parameters as the overall height is equivalent to the adjacent

Meriton development, there is precedent for such development and it is not considered a high risk.

All heritage buildings are removed to accommodate the New Museum on the remaining site footprint, which poses a risk to approvals.The inclusion of residential development will reduce the amount of open space available for the precinct. The reduction in available public space conflicts with the City of Parramatta Council's Parramatta City River Plan and River Square precinct strategy aimed at providing a world-class public domain. This has the potential to reduce the vibrancy of the museum precinct and to affect the overall appeal of the site.Increased traffic and parking requirements, as a result of the residential development, also pose a risk to planning and approvals. Car park access is likely to be via the existing service lane and may require intersection improvements. This may cause inconvenience to drivers or excess vehicle movements through the CBD for circulation.


PAM GROUP


Alignment with Broader Parramatta Strategy

Low The addition of further residential development to the precinct would be consistent with, and hence a low risk to, the strategies outlined for the Parramatta area, particularly as it is likely to increase prosperity and activity in central Parramatta.However, the inclusion of additional development will reduce the amount of open space available for the precinct. This has the potential to reduce the vibrancy of the museum precinct and to

In summary, this option is accorded an overall risk ranking of Medium, as it does not overly compromise the site or the ability to accomplish the major objectives of the New Museum project. However, it presents some heritage and planning risks and reduces the overall site area for the New Museum and complementary activities and facilities.

9.3 Financial AssessmentThe financial assessment was conducted on the basis of the assumptions outlined in Section 6. Results have been determined for a range of developer equity returns, as shown in Table 18.Table 18: 0 . lion 3 Results

Developer Equity Return NPV

15%20%

The positive NPV, of between indicates the land value that a developer would be willing to pay to access the development opportunity.

9.4 Summary of ResultsResults for Option 3 are summarised in the table below.Table 19: 0 lion 3 Summa

Option 3 Medium Viable

New Museum in Western Sydney I Development Options Assessment (Increased FSR)Page 29

P\ XO N CROUP

1 0 Option 4

10.1 Descript ion of Scope ItemOption 4 considers a single commercial tower in the North West portion of the site, with a floor space ratio of 15:1. In this option all heritage buildings are removed to accommodate the New Museum on the remainder of the site.

Option 4 is shown in Figure 5 below.

Figure 5: Option 4

10 .2 Qua l i ta t i ve AssessmentThe assessment of Option 4 against the five defined qualitative criteria is summarised in Table 20 below.

Table 20: Qualitative Assessment: O. tion 4Criteria Risk Level Reasoning for Risk Level Assigned


Low The addition of commercial development to the site is not aligned with the overall Museum strategy, however this option does not allocate a significant portion of the site for development.There is also a risk of damaging community perception of the New Museum, as it may be seen as a commercial development through the

I 1XIIN GROUP


Compliance Low This option is unlikely to impact on policy compliance, andwith Policy will align well with aspects of policy such as the

development of the Parramatta CBD and the developmentof the Western Sydney corridor.

Sustainability Low The inclusion of commercial development is unlikely toimpact on the sustainability of the overall site.

Master Plan / Medium This option considers a tower height which is higher thanPhysical the current planning constraints allow. However, as theParameters overall height is equivalent to the adjacent

Meriton development, there is precedent for such development andit is not considered a high risk.All heritage buildings are removed to accommodate the New Museum on the remaining site footprint, which poses a risk to approvals.The inclusion of commercial development will reduce the amount of open space available for the precinct. The reduction in available public space conflicts with the City of Parramatta Council's Parramatta City River Plan and River Square precinct strategy aimed at providing a world-class public domain. This has the potential to reduce the vibrancy of the museum precinct and to affect the overall appeal of the site.Increased traffic and parking requirements, as a result of the commercial development, also pose a risk to planning and approvals. Car park access is likely to be via the existing service lane and may require intersection improvements. This may cause inconvenience to drivers or excess vehicle movements through the CBD for circulation.

Alignment Low The addition of further commercial development to thewith Broader precinct would be consistent with, and hence a low risk to,Parramatta the strategies outlined for the Parramatta area, particularlyStrategy as it is likely to increase prosperity and

activity in central Parramatta.However, the inclusion of additional development will reduce the amount of open space available for the precinct. This has the potential to reduce the vibrancy of the museum precinct and to affect the overall appeal of the site, making it a less appealing site and less of a cultural landmark within Parramatta.

In summary, this option is accorded an overall risk ranking of Medium, as it does not overly compromise the site or the ability to accomplish the major objectives of the New Museum project.

However, it presents some heritage and planning risks and reduces the overall site area for the New Museum and complementary activities and facilities.


Table 21: 0 tion 4 Results

Developer Equity Return NPV

1

20%

l'AkON CROUP

10.3 Financial AssessmentThe financial assessment was conducted on the basis of the assumptions outlined in Section 6. Results have been determined for a range of developer equity returns, as shown in Table 21.

The negative NPV calculated suggests that the return gained from commercial leases is insufficient to cover the cost of construction at the required developer margin, and as such a commercial developer would not be willing to pay for the land to undertake such a development. This result is driven by the lease value determined in the real estate market analysis, and the inclusion of a lease incentive to attract a long term tenant.

10.4 Summary of ResultsResults for Option 4 are summarised in the table below.Table 22: 0 . tion 4 Summa


Option 4 Medium Not Viable


Viable

Not Viable

Viable

IA ON GROUP

1 1 Conclusions & Further Analysis

The overall findings of the qualitative and quantitative analysis are summarised in Table 23 below. The potential value shown for each option is a likely land value payable by a developer in order to access the development opportunity, and this value can be considered as an offset to the capital cost of the New Museum.Table 23: Summ • of Findin


Option 1 Medium

Option 2 Medium

Option 3 Medium

Option 4 Medium

In summary, commercial development does not appear to be viable, due to the low lease rates and the requirement to offer a lease incentive to attract tenants. Were a Government tenant able to commit to a long-term lease, at a rate which did not require a lease incentive, there may be value to a developer in providing this space. However, this would not reflect an overall value-for-money decision for Government.Residential super-tower options are seen to be the most viable potential developmentoptions, delivering between___________las a land divestment value.Achieving a return at the higher end of the range shown will be dependent on a developer becoming comfortable with a low level of risk associated with the project, allowing the developer to accept a return on equity at the lower end of typical development returns. The overall final divestment value will also be contingent on the assumptions from the prior real estate market analysis, cost planning and other inputs remaining valid at the time a transaction is completed.Lowering a developer's rating of project risk may be assisted through the proposed procurement process whereby the State carries development approval risk for the entire site prior to divestment when a DA is granted.

11.1 Value Sharing Voluntary Planning AgreementBased on current practices, there may be a requirement for any development option to undertake in a Value Sharing Voluntary Planning Agreement ("VPA") with local council. It is understood that the VPA will be entered into between the State and the local council, affecting the State's overall net return from divestment of the property.The applicable square meter rates for determination of VPA payments in Parramatta are as follows;· $150 per m2 GFA above 6:1 FSR to 10:1 FSR; then· $375 per m2 GFA above 12:1 FSR to 15:1 FSR; and

· An assumed rate of $250 per m2 GFA above 10:1 FSR to 12:1 FSR has been utilised.


P XON GROUP

Table 24 shows the potential VPA payments applicable to each development option and the resulting impact on net returns to the State from divestment.Table 24: Summ of Results with VPA Liabili

VPA Amount Potential Value

Potential Net Value

Residential: FSR 12:1Coirunerdal: FSR 12:1

Residential: FSR 15:1

Commercial: FSR 15:1

For the purposes of this assessment it is assumed that any VPA outcomes would be reinvested into the New Museum in Western Sydney Project to assist in the realisation of public amenity or benefit from the project.

PAXON (i 11.0 I)

Appendix A — Architectural Tower Options


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