City plans to buy Quar­ter

Pilbara News - - Front Page - Alicia Per­era

The Kar­ratha Quar­ter is likely to be pur­chased by the City in a $20 mil­lion deal af­ter the coun­cil ap­proved a busi­ness plan for the ac­qui­si­tion.

A plan out­lin­ing how the City of Kar­ratha could take own­er­ship and op­er­a­tion of the build­ing from State devel­oper LandCorp, which is sell­ing the Quar­ter, was passed at a coun­cil meet­ing last month and has been put out for com­mu­nity con­sul­ta­tion.

Un­der the plan, the City would pur­chase the Quar­ter on com­mer­cial terms for $20 mil­lion from its City In­fra­struc­ture Re­serve and as­sume re­spon­si­bil­ity for all re­tail and of­fice leases, sub­ject to ex­ist­ing leases, as well as due dili­gence on the build­ing’s con­di­tion.

If suc­cess­ful, it would be­come the City’s sec­ond big in­vest­ment in lo­cal in­fra­struc­ture in re­cent months af­ter it com­mit­ted $27 mil­lion to LandCorp’s Gap Ridge Home­maker Cen­tre, sub­ject to pub­lic feed­back.

Mayor Peter Long said un­like that in­vest­ment, which was de­signed to progress a new de­vel­op­ment, coun­cil be­lieved buy­ing the Quar­ter would gen­er­ate “sig­nif­i­cantly” higher re­turns than the cur­rent main in­vest­ment regime of fixed-term bank de­posits.

“Com­pared with cur­rent term de­posit rates, which av­er­age 2.6 per cent, the pur­chase has the ca­pac­ity to gen­er­ate a re­turn of up to 15 per cent,” he said. “This would pro­vide a sig­nif­i­cant al­ter­na­tive rev­enue source for coun­cil and re­duce its re­liance on gen­er­at­ing in­come from rates.”

Mr Long ad­mit­ted there was some fi­nan­cial risk in­volved given a large per­cent­age of leases at the Quar­ter had not been taken up so far, but he said re­turns were still likely to ex­ceed term de­posits.

“While the re­turns from the pro­posal are po­ten­tially very good, it does come with some level of risk in that full re­turn on in­vest­ment is not guar­an­teed,” he said.

“How­ever, even at the cur­rent 50 per cent oc­cu­pancy, the re­turn on in­vest­ment is likely to be more than 5 per cent or dou­ble what is cur­rently be­ing gen­er­ated from coun­cil’s cash in­vest­ments.”

Pil­bara MLA Kevin Michel said the most im­por­tant fac­tor was whether the pur­chase was in the com­mu­nity’s best in­ter­ests.

Other ben­e­fits iden­ti­fied by the City in­clude in­flu­ence over the use of avail­able floor space by re­tail and com­mer­cial ten­ants and ex­tra of­fice space for City staff if re­quired in the fu­ture.

Pub­lic sub­mis­sions on the busi­ness plan close on May 10.

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