Pentridge Coburg - Building 15 (Jul-17) · Pentridge Coburg Building 15 development: Economic...
Transcript of Pentridge Coburg - Building 15 (Jul-17) · Pentridge Coburg Building 15 development: Economic...
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
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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
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• 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
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• 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.
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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.
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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.
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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).
Section 2: Approved Masterplan
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Figure 2.1
Section 2: Approved Masterplan
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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.
Section 2: Approved Masterplan
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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.
Section 2: Approved Masterplan
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Figure 2.2
Section 2: Approved Masterplan
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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
Section 2: Approved Masterplan
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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.
Section 2: Approved Masterplan
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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.
Section 2: Approved Masterplan
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Figure 2.4
Section 2: Approved Masterplan
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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.
Section 2: Approved Masterplan
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Figure 2.5
Section 2: Approved Masterplan
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Figure 2.6
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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
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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
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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.
Section 4: Economic feasibility of Masterplan
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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
Section 4: Economic feasibility of Masterplan
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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.
Section 4: Economic feasibility of Masterplan
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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.
Section 4: Economic feasibility of Masterplan
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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.
Section 4: Economic feasibility of Masterplan
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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.
Section 4: Economic feasibility of Masterplan
Pentridge Coburg Building 15 development: Economic implications for total project
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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
Section 4: Economic feasibility of Masterplan
Pentridge Coburg Building 15 development: Economic implications for total project
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.
Section 4: Economic feasibility of Masterplan
Pentridge Coburg Building 15 development: Economic implications for total project
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
Section 4: Economic feasibility of Masterplan
Pentridge Coburg Building 15 development: Economic implications for total project
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