Financial viability of market redevelopment in question

The recent fracturing of partisanship around the market redevelopment has called into question its underpinning financial assumptions.

Firstly, it has flushed out Lord Mayor Robert Doyle who says the council’s $76 million investment in the Munro site last year was never intended to contribute financially to the wider project.

Had the C245 planning panel allowed the council its preferred 200 m height for the development there, he probably wouldn’t be saying this now.

But, with a 100 m height limit to work with, the council is facing potential losses on the Munro development in the tens of millions of dollars.  Cr Doyle says the council needs 130 to 140 m to break even on the deal.

No doubt it can recover these losses on the southern development site when (and if) the time comes because it doesn’t have to pay for the land there. But it’s similarly limited to 100 m there, where it was again asking for twice that height.

The fuzziness around the council capacity to earn big dollars for the project by cashing in on the rezoning of the surrounding area from a 20 m height limit by a factor of five, leads to more questions.

The fundamental question is: where did the $250 million project estimate come from in the first place?  What were the assumptions?  Who were the advisers? And how could they cost the project on some high-level expectations with very little detail and without planning certainty?

Is the $250 million figure a gross or net cost?

There are so many more questions around this project.  Some may have been adequately addressed, but who would know?  The councillors?  You would hope so. But, with all their deliberations taking place behind closed doors and the threat of criminal charges if they reveal any of it, we are none the wiser.

It appears that even the planning minister hasn’t been kept in the loop.  He is clearly angry and is threatening to play the heritage card to stymie the council’s vision.

It is a noble ambition to redevelop the market so its traders can be profitable and, at the same time, deliver public open space and community assets.

But at what cost?

The market redevelopment is a massive gamble by the City of Melbourne.  Effectively, it believes that it can turn around the flagging fortunes of its 728 traders by upgrading the facilities.  What if it is wrong?  What if the retail revolution continues at the same pace in the next five years as the last five?

The implementation framework reveals that half the cost will be expended by putting essential services underground.  Based on servicing exactly what type of retail?  The same as the current mix? Which is failing?

What happens if it still doesn’t work and the money is wasted?  And what does the council know about retail anyway (especially market retail)?  Probably about as much as it knows about real estate investment!

And what is the justification for spending (at least) $250 million of public funds to improve the private businesses of 728 people?  In the real world, a shopping centre landlord would expect a commercial return.  In this case a commercial rate of return is clearly impossible (you’d think the traders would be grateful for such a generous public donation!).

The City of Melbourne needs to open itself up to public scrutiny.  It needs to let people with more knowledge, expertise and experience than themselves have a look at the current state of play.

The council is contracted with the state government to deliver on the deal, but it needs to assure the public it knows what it is doing before proceeding further.

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