Download - Pentridge Coburg - Building 15 (Jul-17) · Pentridge Coburg Building 15 development: Economic implications for total project i Executive summary • Shayher Properties Pty Ltd (Shayher)

Pentridge Coburg

Building 15 development: Economic implications for total project

Ju ly 2017

MacroPlan Dimasi

MELBOURNE

Level 16

330 Collins Street

Melbourne VIC 3000

(03) 9600 0500

SYDNEY

Level 6

39 Martin Place

Sydney NSW 2000

(02) 9221 5211

BRISBANE

Level 15

111 Eagle Street

Brisbane QLD 4000

(07) 3221 8166

GOLD COAST

Level 2

89 – 91 Surf Parade

Broadbeach QLD 4218

(07) 3221 8166

ADELAIDE

Ground Floor

89 King William Street

Adelaide SA 5000

(08) 8221 6332

PERTH

Level 1

89 St Georges Terrace

Perth WA 6000

(08) 9225 7200

Prepared for: Shayher Group

MacroPlan Dimasi staff responsible for this report:

Ellis Davies, Manager – Retail

Table of contents

Executive summary i

Introduction iv

Section 1: Site ownership history and approval process 1

Section 2: Approved Masterplan 2

2.1 Masterplan Vision and key elements 2

2.2 Heritage and public realm considerations 7

Section 3: Overview of Building 15 14

Section 4: Economic feasibility of Masterplan 18

4.1 Development components of Masterplan 18

4.2 Financial/economic feasibility of Masterplan 20

4.3 Significance of Building 15 24

4.4 Net community benefit 25

Appendix 1 28

Pentridge Coburg Building 15 development: Economic implications for total project

i

Executive summary

• Shayher Properties Pty Ltd (Shayher) has submitted a permit application to

Heritage Victoria for the development of the proposed Building 15 and the restoration of

the southern part of the Administration building in the south‐western part of the

Pentridge Coburg site. This independent report provides an assessment of the economic

implications if the permit application is refused.

• Preserving the heritage value of the former Pentridge Prison is of great importance, and

provides the overarching identity for Pentridge Coburg. The approved Masterplan details

the overall planning/urban design principles for redevelopment of the Pentridge site,

which include:

‘Achieving a density of development that is sustainable having regard to

physical, social and economic considerations, including ensuring the long term

retention of important heritage assets.’

• The preservation of its heritage value and the public realm objectives for the site go hand

in hand with the joint objectives of creating a vibrant and sustainable urban hub,

facilitating a major urban renewal project, and enabling the community at large to both

appreciate and respect the heritage value of the site.

• One of the significant opportunity costs of the site remaining undeveloped, and having

been undeveloped for more than a decade, is the fact that the community at large is not

able to enjoy these benefits. While this opportunity cost is not a direct economic cost for

Shayher per se, it should nonetheless be regarded as an additional factor which is

impeding the reasonable or economic use of the Pentridge site, i.e. any unreasonable

delay in the development of the site, in line with community expectations as already

expressed in the approved Masterplan, is imposing further economic costs, and making

the viability of the adaptive re‐use of the site more difficult to achieve.

Executive summary


ii

• The analysis outlined in this report demonstrates that restricting or significantly delaying

the development of Building 15 and the restoration and reuse of the southern part of the

Administration heritage building will pose risks to the economic feasibility of the

Masterplan. Because of the constraints of the site, not least those imposed by the need

and desire to protect its heritage value,

and if this permit application is refused it would clearly affect the reasonable

or economic use of the registered place.

• This conclusion is supportable by a number of key reasons which are set out in this

report, in particular the following:

-

-

- The development requires significant investment, much of it already expended by

Shayher, relating specifically to the heritage value of the site and public realm

requirements, many of those in turn also associated with the heritage value.

-

- The restoration of the Administration building, together with Building 15, will provide

an important feature at the main pedestrian entrance to Pentridge Coburg from

Champ Street. The development is expected to generate an estimated of

revenue each year over the life of the project, .

Executive summary


iii

• In addition though, it should not be ignored that such refusal can also result in significant

net community disbenefit, for a number of reasons. The site has sat undeveloped for well

over a decade, and thus its heritage value, as well as its broader potential to deliver a

major urban renewal project, remains untapped. More directly, there will be community

disbenefits suffered as a result of employment opportunities foregone in the event that

the approved Masterplan is unable to be implemented, or is significantly delayed.

• Overall, the project is estimated to create almost 8,000 jobs, of which approximately

3,600 will constitute direct employment on the site, with 4,270 jobs attributable to

multiplier induced indirect employment. Therefore, there will be a very large community

disbenefit, in the form of such employment opportunities foregone, if the approved

Masterplan is unnecessarily delayed or, worse, is unable to be implemented.


iv

Introduction

Shayher Properties Pty Ltd (Shayher) has submitted a permit application to Heritage Victoria

for works in relation to Building 15 and the restoration of the southern part of the

Administration building, which are located in the south‐western part of the Pentridge Coburg

site.

This independent report provides an assessment of the extent to which the application, if

refused, would adversely affect the reasonable or economic use of the Pentridge site which

is owned by Shayher and for which an approved development Masterplan is in place. In

particular, it provides information in accordance with s.73(2) of the Heritage Act 1995,

namely, in relation to s.73(1)(b) of the Heritage Act 1995, consideration of ‘the extent to

which the application, if refused, would affect the reasonable or economic use of the

registered place….’

The report is presented in four sections as follows:

• Section 1 provides an overview of the recent history of the site, since it was first acquired

for development in 1999, as well as discussing the approval process for the proposed

development.

• Section 2 details the latest Masterplan for the site which was prepared in February 2014

and approved in July 2014 as part of Amendment C154 to the Moreland Planning Scheme.

• Section 3 provides an overview of the plans for Building 15 and the southern part of the

heritage Administration building.

• Section 4 outlines the economic feasibility of the Masterplan, and sets out the reasons

why the subject permit application, if refused, would significantly affect the reasonable or

economic use of the subject site, as well as drawing conclusions as to the consequent

implications of such refusal.


1

Section 1: Site ownership history and approval process

Pentridge Prison operated from 1851 to May 1997, when it was officially closed. In 1999 the

Victorian State Government sold the former jail and around 30 hectares of adjacent

Crown Land to two developers – Pentridge Piazza (Crema) and Pentridge Village – with the

site planned to be developed for residential and mixed‐use accommodation.

Due to a number of reasons, development of the site was delayed, such as in 2002 when an

impasse between the local Council and developers over heritage protection saw planning

work for the site cease for a period of time. The only developments on the northern land

parcel of Pentridge completed by Pentridge Piazza were the QM building and Industry Lane.

Valad Property Group (Valad) purchased 6.7 hectare of land in the northern part of the site

from Pentridge Piazza in June 2007, which covered the majority of the decommissioned

prison. Valad prepared a Masterplan for the site, which was endorsed by Moreland City

Council in August 2009 and given formal approval in December 2009 with the

C125 Amendment to the Moreland Planning Scheme. However, for various reasons,

including the onset of the Global Financial Crisis (GFC), Valad did not proceed.

Shayher Group acquired the northern 6.7 hectare site from Valad in May 2013 and prepared

an amendment to the Masterplan. This amendment was approved by the Victorian Minister

for Planning in February 2014 and is reflected in the Pentridge Coburg Design Guidelines and

Masterplan as it currently stands. The 2014 Masterplan sets the framework for the ongoing

development of the Pentridge site over the next decade. It supersedes the previous

Masterplan for the site, and now forms part of the Moreland Planning Scheme through the

incorporation of Planning Scheme Amendment C154 in July 2014.


2

Section 2: Approved Masterplan

The Pentridge Coburg Design Guidelines and Masterplan (the Masterplan) of February 2014

was incorporated into the Moreland Planning Scheme in July 2014 under Planning Scheme

Amendment C154. The Masterplan sets the framework for the development of the Pentridge

Coburg site. The subject site covers an area of 6.7 hectares, located in the north‐western

part of the former Coburg Prison Complex, generally to the north of Pentridge Boulevard and

west of Stockade Avenue.

2.1 Masterplan Vision and key elements

The Masterplan outlines the plan to develop the site into a vibrant and sustainable mix of

residential, retail, commercial, entertainment and leisure/tourism uses. On page 2 of the

Masterplan the vision for the Pentridge site is stated:

“The Masterplan is seeking to create a vibrant and sustainable urban hub, a place

for the shared use of its residents and workers, the neighbouring community and

tourists. To ensure the ongoing success of Pentridge and its broad convenience

function, a diverse range of commercial and community uses are anticipated. The

renewed life within the prison will be expressed through the careful placement of

contemporary architecture adjacent to historically significant Pentonville prison

model buildings. These old and new elements will combine to facilitate a major

urban renewal project that will complement other development contemplated by

the Central Coburg 2020 Structure Plan.

The public realm will be enlivened through the active integration of the proposed

uses, within both new buildings and restored heritage prison buildings. The range

of activities expected in and adjacent to the public realm, both permanent and

temporary, will generate one of Melbourne’s memorable urban experiences.”

A number of heritage listed buildings are located throughout the subject site, with the main

heritage buildings including the Division B and B Annexe buildings (which is to be integrated

with Building 16), Division A (located in the northern part of the site), Division E (central), the

former Wardens Residence (Building 14) and the Administration building in the western part

of Pentridge Coburg (refer Figure 2.1).



3

Figure 2.1



4

One of the major land uses under the approved Masterplan will be residential, with the

project to provide some 1,300 dwellings in a number of medium and high density buildings,

housing a projected population of around 3,000. A majority of the residential housing will be

provided in the northern part of the site in the Coburg Lake precinct along Murray Road

(Buildings 3 – 8) and in the southern Sentinel precinct. The project is planned to deliver high

quality homes for the community, and will provide a range of housing choices such as 1, 2,

and 3 bedroom apartments, terrace homes and home‐offices. Pentridge Coburg will also

seek partners to deliver affordable housing options, and will target various groups such as

first‐time buyers, low income workers and older residents.

A large piazza will be at the heart of the project, located between the Division B and

Division E heritage buildings, within the Piazza precinct of the development. The Piazza will

be the primary public open space of Pentridge Coburg and is designed to be an engaging

place and a meeting point for the community. It is planned to host a range of community

events and functions. Retail and associated uses will surround the Piazza and will be critical

in ensuring the piazza can be activated and be a vibrant place to visit. A large component to

be provided in the multi‐level Building 9, and a total of some 12,000 – 14,000 sq.m retail

floorspace to be provided throughout the site.

The retail facilities to be provided within Pentridge Coburg will be distinctive, and will be a

critical element of the iconic, historic and heritage listed site. The retail component will

include a range of food and drink premises, while a supermarket, non‐food specialities and

non‐retail shopfront specialties are also likely to be provided to serve local workers and

residents, as well as visitors to the site. A childcare centre, a medical centre and community

services may also be provided within the Piazza precinct of the development.

Between 15,000 – 20,000 sq.m of commercial floorspace is also planned to be provided

under the Masterplan. The majority of the commercial floorspace will be located within the

central Mixed Use precinct, which fronts Champ Street and includes the heritage Division A

building.



5

The buildings to be developed at Pentridge Coburg, as detailed in the Masterplan, range in

height. Figure 2.2 outlines the Masterplan Building Envelope, which details the planned

building footprints and heights across the site (page 26 of the Masterplan). As set out in the

Masterplan, Building 15, which is the subject of this report, is to be 2 levels and located

adjacent to the Administration building.

The overall land use vision for the site is summarised on page 40 of the Masterplan. It details

the importance of rejuvenating the former prison complex and creating a sense of place for

residents, workers and other visitors. The plan is for a vibrant, mixed‐use environment

providing a diverse range of uses which are well integrated. The piazza will form the central

community meeting place, which will be surrounded by a range of functions including

residential, retail, a hotel, offices, as well as tourism, leisure and community facilities. All the

facilities, though particularly retail, will contribute to the life and activation of the public

realm throughout Pentridge Coburg.

The retail, hotel and commercial facilities will also provide on‐site job opportunities for the

local community and will provide a substantial daytime population at the site, creating the

much needed activation.



6

Figure 2.2



7

2.2 Heritage and public realm considerations

The Pentridge Prison site is listed as a place of State significance on the Victorian Heritage

Register (H1551). In accordance with these heritage listings the key heritage buildings

throughout the site will be retained and maintained, together with the perimeter bluestone

walls. Through adaptive re‐use, the heritage buildings are planned to accommodate a mix of

retail, office and community uses, while the historic significance of the site will be preserved.

Figure 2.3, which is a replication of Figure 4.1a on page 21 of the Masterplan, shows the

primary heritage elements within the Pentridge Coburg site, including the bluestone walls.

Figure 2.3



8

Preserving the heritage value of the former Pentridge Prison is of great importance, and

provides the overarching identity for Pentridge Coburg. Section 4.1 Heritage and Built Form

of the Masterplan details the overall planning/urban design principles for redevelopment of

the Pentridge site, which include:

“Achieving a density of development that is sustainable having regard to physical,

social and economic considerations, including ensuring the long term retention of

important heritage assets.”

The preservation of its heritage value and the public realm objectives for the site go hand in

hand, with the joint objectives of creating a vibrant and sustainable urban hub, facilitating a

major urban renewal project, and enabling the community at large to both appreciate and

respect the heritage value of the site.

One of the significant opportunity costs of the site remaining undeveloped, and having been

undeveloped for more than a decade, is the fact that the community at large is not able to

enjoy these benefits. While this opportunity cost is not a direct economic cost for Shayher

per se, it should nonetheless be regarded as an additional factor which is impeding the

reasonable or economic use of the Pentridge site, i.e. any unreasonable delay in the

development of the site, in line with community expectations as already expressed in the

approved Masterplan, is imposing further economic costs, and making the viability of the

adaptive re‐use of the site more difficult to achieve.

Some of the key urban design principles include:

- maintaining the significance of the recognised heritage elements of the site;

- creating a high quality civic urban space;

- creating opportunities for the viable re‐use of the heritage buildings; and

- creating a functional, high quality built form and public realm.



9

The Central Coburg 2020 Structure Plan outlines a vision for sustainable development in

Coburg. Section 3.1.6 Sustainability Analysis of the Masterplan details the environmental,

economic and social sustainability nature of the proposed development, and the opportunity

to create a neighbourhood that:

• Encourages social interaction and improves social cohesion;

• Is based around an interconnected street network that reduces dependence on

cars, improves connection and viability of public transport, and specifically aims

to attract a high level of use by pedestrians and cyclists by creating safe and vital

spaces;

• Provides on‐site employment opportunities through a combination of uses;

• Builds upon the heritage assets to generate a sense of place through design; and

• Creates a safe and secure public realm by creating streets and footpaths that are

well used and under constant neighbourhood surveillance.

A key component of the development to ensure that it is environmentally and socially

sustainable is the inclusion of a significant amount of public realm and open space. The

Masterplan details that the public realm should complement the existing heritage buildings;

link a network of open spaces; be inviting and easily navigated to encourage visitors to

explore the spaces; and be attractive and comfortable with high levels of amenity.

Figure 2.4, which is a replication of Figure 4.5a at Page 51 of the Masterplan, shows the

extensive areas of open space to be provided in the development. As highlighted in red,

there is planned to be 16,889 sq.m of primary public open space within the site, more than

one‐quarter of the 6.7 hectare site. The primary public open space will be open to the

broader community, and will include areas for passive recreation. It will include the piazza,

two local parks adjacent to the Division A building and other public areas. The areas will

include public seating, picnic tables, and lawn areas, and landscaping will be integrated into

these spaces.



10

Figure 2.4



11

A further 3,989 sq.m of secondary public open space is contemplated within the site,

highlighted orange in Figure 2.4. The secondary public open space includes the future

laneways between buildings and other areas surrounding some buildings. In total, therefore,

approximately one‐third of the total site will be devoted to open space.

Shayher Group has invested considerably in the restoration of the heritage buildings and the

public realm throughout the Pentridge Coburg site. Since acquiring the site in May 2013 to

June 2016, Shayher Group spent a total of on public realm and heritage

maintenance. A further is budgeted to be spent on public realm and heritage

maintenance as the project is delivered, taking the total to at completion. In

addition, approximately will be spent on restoring the exterior and interior of the

heritage buildings located throughout the site in order for them to be opened to the public

and accommodate commercial and community uses. This takes the total investment in

public realm, heritage maintenance and heritage restoration to some .

Figures 2.5 and 2.6 are artist’s impressions showing the overall vision for the development at

Pentridge Coburg, described as follows:

• Figure 2.5 shows the future piazza together with the heritage Division E building (central)

and the heritage Administration building on the left; and

• Figure 2.6 is a point of view between the future retail buildings 12 and 9 toward the

south, showing Division E building on the right and Division B building in the distance.



12

Figure 2.5



13

Figure 2.6


14

Section 3: Overview of Building 15

Building 15 is proposed to be developed near the main entrance to Pentridge Coburg on

Champ Street, in the south‐western part of the site. The building will be integrated with the

southern part of the heritage Administration building, ensuring that the historic building is

activated and open to the public. Building 15 will be surrounded by a number of historic

bluestone walls, which will be restored as part of the development.

Building 15, together with the Administration building, will provide a high quality and

engaging entrance point to the Pentridge Coburg development. The main pedestrian

entrance to Pentridge Coburg is located on Champ Street, and visitors to the complex need

to walk through the Administration building to access the site from Champ Street. The new

Building 15 will occupy a strategic site at this entrance.

Building 15 will front a courtyard to its north, while a key pedestrian thoroughfare runs

between the subject site and the courtyard. The main piazza of Pentridge Coburg, which will

form a key meeting/focal point in the overall development, is located immediately to the

east of the site for Building 15. The piazza will provide the main public open space at

Pentridge Coburg, and is to be surrounded by retail uses to ensure it is a vibrant and

engaging place for the local community.

The restoration and reuse of the southern part of the historic Administration building also

forms part of the Building 15 development. It is important to find appropriate uses to active

the existing heritage building throughout Pentridge Coburg, to ensure that they can be

accessed by the public and their historic context appreciated.

Building 15 and the southern part of the Administration Building is planned to include

around 613 sq.m of gross leasable floorspace. Zero 95 Wood Fire Pizza is to be the tenant of

the building, and will provide residents of Pentridge Coburg and other visitors with a popular

restaurant and meeting place. An attractive and lively entrance is considered critical for the

project, to ensure that local residents, visitors and tourists are attracted into Pentridge

Section 3: Overview of Building 16


15

Coburg. A wood fire pizza outlet at Building 15 will provide an important anchor for

Pentridge Coburg and will clearly mark the entrance to the site.

The following images provide an artist’s impression for Building 15, prepared by PRO‐ARK

Architects, and described as follows:

• Figure 3.1 illustrates the vision for the northern front of Building 15 (i.e. looking south).

The Administration building and the key pedestrian entrance to Pentridge Coburg is

located to the right of Building 15 in the image; and

• Figure 3.2 provides an indicative view from the west, looking towards the internal

bluestone wall.

The images illustrate the indicative plan and impression for Building 15, and how the building

will fit within the historic context of the overall development of Pentridge Coburg.

Figure 3.1

Figure 3.2


18

Section 4: Economic feasibility of Masterplan

The final section of this report commences with an analysis of the various development

components of the approved Masterplan before setting out the financial/economic

feasibility of the Masterplan and then considering the economic implications if the permit for

Building 15 and the restoration and reuse of the Administration building is refused.

4.1 Development components of Masterplan

Table 4.1 below sets out the income generating components of the Masterplan, comprising:

• of retail floorspace (GLA), to be distributed across the six retail

buildings. is planned within Building 15 (which is the subject of this report),

while the majority is to be provided in Building 9. A further of retail floorspace

to be provided within the mixed‐use Building 12.

• A total of some apartments provided across nine residential buildings (AIR and B1‐

B8), with a further apartments provided in the mixed‐use buildings 12, 13 and 16.

• A range of residential, retail and commercial uses, as well as a hotel, to be

accommodated within the mixed‐use buildings 12, 13 and 16. Building 16 will be the

largest mixed‐use building, and together with the restoration and reuse of the Division B

and B Annexe buildings, is to deliver a 114 room hotel and 52 residential apartments.

• A total of of “Heritage” floorspace, which is to be provided in the range of

heritage buildings located throughout the site including the Administration building

(which is the subject of this report), Division A, Division B, B Annexe, Division E and the

former Wardens Residence (Building 14). The adaptive re‐use of these buildings will pose

considerable challenges and the final uses of some of the buildings are still to be finalised,

though are expected to include commercial, hospitality and retail uses.



19

Residential Gross leasable Net leasable % of usage % of total

Building Usage units (approx.) area (sq.m) area (sq.m) NLA NLA

Retail buildings

B15 Retail

B9 Retail

B11 Retail

B14 Retail

B17 Retail

B18 Retail

Total retail buildings

Residential buildings

AIR Residential 190

B1 Residential

B2 Residential

B3 & 4 Residential

B5 Residential

B6 Residential

B7 Residential 53

B8 Residential

Total residential buildings

Mixed-use buildings

Total B12

• B12 Residential

• B12 Commercial

• B12 Retail

Total B13

• B13 Residential

• B13 Commercial

Total B16

• B16 Hotel (114 rooms)

• B16 Residential

Total mixed-use buildings

Heritage buildings

Div. A Heritage

Div. E Heritage

Div. B Heritage

B Annex Heritage

Admin Heritage

Total heritage buildings

Total

Source: Shayher Group; MacroPlan Dimasi

Table 4.1

Pentridge Coburg - Planned usages and indicative floorspace



20

4.2 Financial/economic feasibility of Masterplan

MacroPlan Dimasi has modelled the feasibility of the approved Masterplan, having regard to

all available information, and utilising estimates of costs for each component of the

Masterplan provided by Shayher Properties Pty Ltd.

The key information and estimates/assumptions utilised for the purposes of this feasibility

assessment are set out below:

1. Expenditure to date

In the first three financial years to June 2016, Shayher spent a total of on

the project, comprising the following elements:

• Site acquisition

• Acquisition costs

• Finance costs

• Holding costs

• Heritage & public realm maintenance

• Other costs

Total costs

Therefore, Shayher has already invested a significant amount on the Pentridge site, and

has borne these costs over a period of more than three years, having acquired the site in

May 2013. This is a significant cost burden which Shayher has carried to date, as it has

worked within the parameters of the approved Masterplan to develop the site in a way

that is both acceptable to approval authorities and the community at large and

economically/financially feasible to a reasonable developer/investor.



21

2. Development costs

Detailed development costs have been made available by Shayher for each element of

the Masterplan. These estimates show a total eventual development costs of

including the spent to mid 2016. The key elements of this total

development cost (in constant 2015/16 dollars) are the following:

• Building costs of for the development of Building 15 and the restoration

and reuse of the southern part of the Administration building (subject site);

• Total costs of for the development of the Air Apartments building;

• Total costs of for the B7 (Horizon) residential building;

• A total project cost of for Building 16, with a further for the

Division B, B Annexe heritage buildings;

• Combined costs of for the other heritage buildings – Division A, Division E,

and Administration (northern part);

• A cost of for the B9 Retail building, and a further for the other

retail buildings;

• Total costs of for the B12 and B13 mixed‐use buildings;

• Costs of for the B1 and B2 residential buildings;

• for the apartments to be delivered in the B3 and B4 buildings; and

• Combined costs of for the B5, B6 and B8 residential buildings;

3. Period of development

We have adopted a 14 year timeframe for delivery of the Masterplan from 2013. We

consider this is a reasonable, although arguably optimistic, timeframe within which all

elements of the Masterplan are likely to be completed, having regard to the complexities

of the development as well as likely market conditions.



22

4. Estimated revenues

Revenues have been estimated by MacroPlan Dimasi for each component of the

Masterplan, having regard to current and expected market conditions, and to the quality

and location of the total project. The key elements of the estimated revenue streams are

the following:

• Year 1 revenue of for the sale of the residential apartments;

• Year 1 revenue of for the proposed retail floorspace;

• Year 1 revenue of for the future leasing of the refurbished heritage

buildings;

• per room in the first year for the hotel (Building 16), increasing to for

year 2 and for year 3; and

• Year 1 revenue of for the future office floorspace.

Allowances have also been made for escalation in future revenues at the annual rate of

for the apartment revenues and for the retail floorspace and the other uses on the

site.

5. Other assumptions regarding revenue

Other key assumptions made regarding the generation of revenue for the project are as

follows:

• Each apartment building is assumed to be sold out in full within a period of around

one year from its date of completion.

• For the purposes of calculating an internal rate of return, the various non‐residential

elements of the Masterplan are valued, at period end (i.e. at the conclusion of the

development period), adopting a capitalisation rate which is applied to the net income

being earned at that date. The capitalisation rates adopted, which are considered to

be reasonable having regard to all relevant factors, are for retail floorspace, and

for all other uses such as the commercial and heritage buildings.



23

Details of the feasibility modelling are provided at Appendix 1 to the report.

The outcome of our feasibility modelling shows an anticipated net rate of return for the

project, over a 14‐year period including the 4 years elapsed since site acquisition by Shayher,

of The following comments are made in relation to this estimate:

• This internal rate of return should be considered against the fact that the site owner has

already spent in excess of in relation to the site in the first three years.

• The total estimated development cost is in excess of , while the period of

exposure, for the developer, is 14 years, if not longer. These factors represent

and an internal rate of return of under these

circumstances,

•

• There are other large financial risks, for the developer, associated with the development,

relating to the site itself and the various constraints which it imposes, not least the

heritage and public realm considerations, as well as market conditions. The fact that the

subject site still remains essentially undeveloped some 17 years after its initial acquisition

by Crema and then subsequently Valad and some three years after Shayher, which is now

the third owner of the site, has acquired it, highlights the difficulties associated with its

timely development.



24

4.3 Significance of Building 15

Building 15 is important to provide a feature building at the main pedestrian entrance to

Pentridge Coburg. It will also provide a suitable commercial use for the southern part of the

heritage Administration building, enabling the historic building to be restored and open to

the public.

Given the project analysis outlined above, it is evident that any obstacle to the development

of this project represents a threat to the economic feasibility of the Masterplan,

Therefore, the permit application for Building 15 and the

southern part of the Administration building, if refused, would clearly affect the reasonable

or economic use of the total project.

This conclusion is supportable by a number of key reasons, which have been set out in this

report and include the following:

• The total development will require an investment, over the development period, of some

•

• The development requires significant investment, much of it already expended by

Shayher, relating specifically to the heritage value of the site and public realm

requirements, many of those associated with the heritage value.

•

• Building 15, together with the southern part of the Administration building, is expected to

generate an estimated of revenue each year over the life of the project, which

is



25

If Building 15 is unable to proceed, it would greatly restrict the ability of the Administration

building to be activated and made available to the general public and would put the

economic feasibility of the total Masterplan at serious risk.

Those risks will include:

•

• A significant extension in the period of delay before implementation of the Masterplan

can proceed further, imposing additional costs and additional risks on the project, again

potentially putting the entire project at risk of not proceeding; and

• Setting a pattern of further obstacles to the reasonable completion of other elements of

the Masterplan, thereby again potentially imposing further delays and further costs on

the project, and imperilling its future delivery.

4.4 Net community benefit

Refusal of the permit required to build Building 15 and restore the southern part of the

Administration building at Pentridge Coburg will affect the reasonable or economic use of

the registered place, as detailed above. In addition though, it should not be ignored that

such refusal can also result in significant net community disbenefit, for a number of reasons.

First, as discussed previously in this report, there is a significant opportunity cost, borne by

the community, due to the site remaining undeveloped, or remaining undeveloped for a

longer period of time. As already noted, the site has sat undeveloped for well over a decade,

and thus its heritage value as well as its broader potential to deliver a major urban renewal

project remain untapped. In particular, the development of Building 15 is critical in providing

a feature building near the main pedestrian entrance to Pentridge Coburg, as well as

delivering a suitable use for the southern part of the Administration building.



26

More directly, there will be community disbenefits suffered as a result of employment

opportunities foregone in the event that the current masterplan is unable to be

implemented, or is significantly delayed.

Table 4.2 details the estimated on‐site employment that would be created by the

development, which would be in excess of 1,200 jobs.

Table 4.3 shows the total employment generating potential of the development, including:

• Long term on‐site employment to be accommodated in the retail, hotel and commercial

uses.

• Construction employment during the period of construction of the project.

• Induced employment due to economic multiplier effects.

Estimated Pentridge CoburgType of use employment GLA Employment

per '000 sq.m (sq.m) (persons)

Retail 739

Commercial 63

Heritage 455

Hotel 78

Total 1,335

Net increase* 1,268

* Net increase includes an allowance for reduced employment levels at impacted centres, estimated at 5% of the total increaseSource: Shayher Group; MacroPlan Dimasi

Table 4.2

Pentridge Coburg - Estimated ongoing employment levels



27

Overall, the project is estimated to create almost 8,000 jobs, of which approximately 3,600

will constitute direct employment on the site, with 4,270 jobs attributable to multiplier

induced indirect employment.

Therefore, there will be a very large community disbenefit, in the form of employment

opportunities foregone, if the approved Masterplan is unnecessarily delayed or, worse, is

unable to be implemented.

Original stimulus Direct Direct Supplier Totalemployment employment employment (long-term) (const'n period) multiplier effects

Ongoing employment1 1,268 507 1,776

Construction of project 2,349 3,764 6,113 Job years2

Total 1,268 2,349 4,271 7,889

* Employment totals include both full-time and part-time work1. Indicates the estimated number of net additional ongoing jobs as a result of the proposed development2. Indicates the estimated number of jobs over the life of the construction project, for the equivalent of one yearSource: Shayher Group; MacroPlan Dimasi

Table 4.3

Pentridge Coburg - Estimated future employment levels*

Appendix 1