confidential reports by officers 15.2 town of gawler ...€¦ · the current dewnr office is...

CONFIDENTIAL REPORTS BY OFFICERS

In accordance with Sections 83(5) and 84(6) of the Local Government Act, 1999 – the Chief Executive Officer considers that this item may be considered in confidence by the Council on the grounds set out below (and therefore will remain confidential until the Council resolves how this item is to be classified).

A further written report will be considered by Members at the Meeting after the following recommendation is carried.

OFFICER’S RECOMMENDATION

Item 15.2 – Town of Gawler Administration Centre Formal Lease Offer – Ground Floor (CC15/1121)

That: 1. Pursuant to Sections 90(2) and 90(3)(b) of the Local Government Act 1999 (the

Act), the Council orders that the public be excluded from attendance at that part ofthis meeting relating to Item 15.2, excepting the following persons:• Chief Executive Officer• Acting Manager Economic Development, Regulatory Services &

Communications• Manager Infrastructure & Engineering Services• Manager Library & Community Services• Manager Finance & Corporate Services• Minute Taker• Team Leader Property and Procurement

to enable the Council to consider Item 15.2 in confidence on the basis the Council considers it necessary and appropriate to act in a meeting closed to the public (excepting those persons listed above) in order to receive, discuss or consider in confidence the following information or matter relating to Item 15.2:

(b) information the disclosure of which—(i) could reasonably be expected to confer a commercial advantage on a

person with whom the council is conducting, or proposing to conduct,business, or to prejudice the commercial position of the council; and

(ii) would, on balance, be contrary to the public interest;

Item Number 15.2 Title TOWN OF GAWLER ADMINISTRATION CENTRE

FORMAL LEASE OFFER – GROUND FLOOR Date 23 August 2016 Author(s) Rebecca Howard, Team Leader Property and Procurement

Reference CC15/1121; CR16/38963

Previous Reference/ Motion Council Meeting, 24 May 2016 Motion No. 2016:05:217 Special Council, 19/04/2016, Motion No. 2016:04:100-101 Special Council, 03/03/2016, Motion No. 2016:03:63 Special Council, 22/12/2015, Motion No. 2015:12:514

TOWN OF GAWLER CONFIDENTIAL COUNCIL MEETING AGENDA - 23 AUGUST 2016

For Intended Recipients Only

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Specifically, the present matter relates to the formalisation of a lease offer to a State Government Agency for a tenancy within the Town of Gawler Administration Centre.

The disclosure of this information could reasonably be expected to prejudice the commercial position of the Council because Council and the relevant State Government Agency have yet to enter negotiations and disclosure of this information may compromise Councils ability to negotiate a lease on favourable commercial terms.

The Council has considered the public interest in relation to whether to make this order. The prevailing public interest in these circumstances is Council ability to secure the best tenant on favourable commercial terms for occupation of a Council asset. The Council considers that, on balance, disclosure would be contrary to the public interest.

2. Accordingly, on this basis, the principle that meetings of the Council should beconducted in a place open to the public has been outweighed by the need to keepthe information or matter confidential.



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Item Number 15.2 Title TOWN OF GAWLER ADMINISTRATION CENTRE

FORMAL LEASE OFFER- GROUND FLOOR Date 23 August 2016 Author(s) Team Leader, Property and Procurement

Reference CC15/1121; CR16/38963; CR16/41363

Previous Reference/ Motion Council Meeting, 24 May 2016 Motion No. 2016:05:217 Special Council, 19/04/2016, Motion No. 2016:04:100-101 Special Council, 03/03/2016, Motion No. 2016:03:63 Special Council, 22/12/2015, Motion No. 2015:12:514

Attachment/s Under Separate Cover

Attachment 1 – Site Map Attachment 2 – Lease Offer


Item 15.2 – Town of Gawler Administration Centre Formal Lease Offer - Ground Floor (CC15/1121)

That Council: 1. Enters into a lease with the Department for Environment, Water and Natural

Resources (subject to receiving Development Plan Consent for change of land usefrom educational facility to office space) for an initial term of five (5) years with one(1) Right of Renewal for a further five (5) years for a portion (ground floor) of theTown of Gawler Administration Centre, 41-43 High St, Gawler as detailed in thisreport.

2. Authorises the Mayor and Chief Executive Officer to sign and apply the commonseal of the Council to all relevant lease documents.


That: 1. Pursuant to Section 91(7) of the Local Government Act 1999 (the Act), the Council

orders that the following document(s) (or part) shall be kept confidential, beingdocument(s) (or part) relating to a matter dealt with by the Council on aconfidential basis under Sections 90(2) and 90(3)(b) of the Act:• The written report item no. 15.2 of 23-08-2016

on the grounds that the document(s) (or part) is:

(b) information the disclosure of which—(i) could reasonably be expected to confer a commercial advantage on a

person with whom the council is conducting, or proposing to conduct,business, or to prejudice the commercial position of the council; and

(ii) would, on balance, be contrary to the public interest;

Specifically, the present matter relates to the formalisation of a lease offer to a State Government Agency for a tenancy within the Town of Gawler Administration Centre.



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The disclosure of this information could reasonably be expected to prejudice the commercial position of the Council because Council and the relevant State Government Agency have yet to enter negotiations and disclosure of this information may compromise Councils ability to negotiate a lease on favourable commercial terms.

The Council has considered the public interest in relation to whether to make this order. The prevailing public interest in these circumstances is Council ability to secure the best tenant on favourable commercial terms for occupation of a Council asset. The Council considers that, on balance, disclosure would be contrary to the public interest.

2. This order shall operate until a Lease Agreement is executed and will be reviewedannually in accordance with the Act.

3. Pursuant to Section 91(9)(c) of the Act, the Council delegates to the ChiefExecutive Officer the power to revoke this order at any time and directs the ChiefExecutive Officer to advise the Council of the revocation of this order as soon aspossible after such revocation has occurred.

BACKGROUND

Council has previously considered the leasing of a portion of the Town of Gawler Administration Centre at its May 2016 Meeting;

Moved by Cr K Fischer Seconded by Cr R Symes Motion No: 2016:05:217

That Council:- 1. Authorise the Mayor and Chief Executive Officer (CEO) to sign and apply the

common seal of Council to all relevant documents, in order to execute thedocuments pertaining to the purchase of the former TAFE site (CT5922/699)located at 41 High St, Gawler 5118.

2. Allocate $2,100,000 for the purchase and fit-out of 41 High St, Gawler(CT5922/699), being $212,000 in 2015/2016 and $1,969,650 in 2016/2017.Acknowledging that the purchase price is subject to agreement between the Townof Gawler and Department of State Development with valuations currentlyproviding prices between $1,506,000 and $1,670,000.

3. Authorise the CEO to negotiate lease agreements for the occupation of 41 HighSt, Gawler by existing tenants (Workskill Australia, ARA Jobs and Department ofCommunities and Social Inclusion – Pinery Fire Recovery Team) and TAFE(Minister for Education) in accordance with the details in this report.

4. Authorise the Mayor and CEO to sign and apply the common seal of Council to allrelevant documents, in order to execute the documents pertaining to lease areaswithin 41 High St Gawler.

5. Extend the existing 23 High St, Gawler (IES building) lease to early December2016 for reasons as detailed in this report, including allocating and additional$30,000 in the 2016/17 budget for the provision of rental payments.

6. Adopt, in principle the concept plans for the fitout of the Town of Gawler BusinessCentre located at 41 High St, Gawler to progress to detailed construction plans fortender.



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7. Authorise the Chief Executive Officer to finalise the final design and specificationsof the Town of Gawler Business Centre (41 High St).

8. Note that a further report detailing the fit-out tender results will be prepared forCouncil consideration before final commitment is made to the correspondingexpenditure.

The May 2016 report to Council outlined that a locally based State Government Agency has registered interest in the leasing a portion of the ground floor of the Town of Gawler Administration Centre. The report detailed as follows:

“Preliminary discussions have been held with State Government regarding the potential utilisation of the building for office accommodation. A State Government agency with an office in Gawler has indicated a strong desire to occupy approximately 450sqm of the ground floor. This State Government Agency currently occupies a site in Gawler South, which is no longer meets their needs. This existing lease expires on 30 June 2017.

The agency is seeking to secure a tenancy within Gawler that provides an easily accessible site, provides suitable office accommodation, equipment and vehicle storage and provides a position that is of higher profile within the town. Discussions to date have indicated a strong preference for co-location with the Council and for the TAFE building in particular.

The agency are also keen to explore innovative sharing and collaboration of spaces including customer service function, display and demonstration areas, energy efficiency, recycling and waste reduction programs that will provide benefits to all building occupiers.

Initial discussions have indicated that rooms 20, 21,22, 23, 24, 25, 29, 30 may provide the ideal footprint within the building. This area has been highlighted as the most viable site for leasing and has therefore been quarantined from occupation by TAFE or Council post June 2017. These rooms will be fully utilised until June 2017.

Discussions will now continue in earnest (subject to Council resolution). The Department of Planning, Transport and Infrastructure Lease Management Team will negotiate a lease on behalf of the State Government Agency. Council will be seeking a market rate for the premises, with a long term lease (potentially 10 years) and the majority of fit out costs the responsibility of the tenant.”

The purpose of this report is to seek Council approval to: • Provide a formal offer of lease to the Department for Environment, Water and

Natural Resources (Gawler Office), through the Department for Planning,Transport and Infrastructure (DPTI) (State Government Lease Managers) for aportion of the ground floor in the Town of Gawler Administration Centre;

• Continue discussions with DEWNR regarding any innovation, collaboration orsharing of spaces to be documented in the lease agreement; and

• Finalise the lease agreement with the Department for Environment, Water andNatural Resources (Gawler Office).



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COMMENTS/DISCUSSION

Following the May Council meeting, Council staff have met with representatives from the Department for Environment, Water and Natural Resources (DEWNR) regarding the potential lease area on the ground floor of the Administration Centre. DEWNR staff and management have expressed a strong desire to secure a portion of the ground floor as the new DEWNR Gawler Office location.

The current DEWNR office is located on the corner of Adelaide Road and Seventh St, Gawler South, in a converted house. DEWNR has largely outgrown this existing site, both within the office area and the car parking arrangements. The existing lease expires on 30 June 2017 with DEWNR seeking to relocate at this time.

There are four (4) existing leases with in the Town of Gawler Administration Centre, being: • TAFE• Workskil Australia• ARA Jobs• Department of Community and Social Inclusion (Pinery Recovery Centre)

At this time, the entire ground floor is occupied by TAFE, Workskil and the Pinery Recovery Centre, however TAFE and the Pinery Recovery Centre will vacate the premises (due to reduced operations) between the period December 2016 to July 2017, resulting in approx. 393 sqm of vacant space by July 2017.

DEWNR and DPTI have inspected the site and indicated that the 393sqm (Attachment 1) would be sufficient space to meet their requirements. An additional 13sqm, currently used as a meeting room by Workskil Australia may also form part of the DEWNR leased area, subject to successful negotiations with Workskil Australia.

In order for DPTI to formally consider the site for DEWNR occupation, a lease offer (Attachment 2), outlining the details of the site, terms and conditions of the lease, including rental and outgoings must be provided to DPTI. This offer forms the basis of the negotiations between the parties.

Legislative Requirements

Council is required under the Local Government Act 1999, Section 202 Alienation of Community Land by Lease or Licence, to undertake public consultation on leases or licences over Community Land. However, where Council is seeking to enter into a lease or licence with the Crown, Instrumentality of the Crown or a Minister, public consultation is not required. The Local Government Act 1999 (General) Regulations state (relevant extract only):

22—Exemption of certain leases or licences over community land from consultation requirements

(1) Pursuant to section 202(3)(b) of the Act, a council is not required to complywith its public consultation policy with respect to a lease or licence overcommunity land if—

(a) the lease or licence is being granted to the Crown, or to a Ministeror other agency or instrumentality of the Crown; and



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In many instances, leases granted over Council land are also subject to the Retail and Commercial Leases Act 1995 (RCLA), however in this instance, the RCLA will not apply as the Lessee is a State Government Agency. The RCLA states:

4—Application of Act (1) This Act applies to a retail shop lease if the premises to which the leaseapplies consist of a retail shop or a retail shop together with an adjacentdwelling.(2) However, this Act does not apply to a retail shop lease if—

(c) the lessee is—(iv) the Crown or an agency or instrumentality of theCrown in right of the State, another State or Territory, orthe Commonwealth; or(v) a municipal or district council or other authority withpowers and functions of local government.

It should be noted that a Development Application for the change of land use within the building from educational facility to office space has been lodged with the Development Assessment Commission. The Development Assessment Commission has advised that the proposed change of use is considered minor (non-substantial) and will be assessed as a Category one (1) application, therefore not requiring community consultation. The Development Assessment will be assessed under delegation, with a decision expected by the end of August 2016.

Risks and Benefits

The proposed lease provides Council with a number of benefits and very few risks, both operational and leasing risks.

The benefits of entering into a lease with the Crown, and in particular DEWNR, include; • security of tenure and rental payments;• dedicated lease management through DPTI;• provision of office fit-outs to Government Office Accommodation Committee (GOAC)

standards;• a community focussed organisation (Natural Resource Centre);• environmentally sustainable practices for management of waste, recycling etc.; and• share a number of common goals with Council.

Entering in to a long term lease arrangement provides only one potential risk, being the Council’s ability to use the leased area for other purposes within the lease term. It is considered that this risk is insignificant given the available space and expansion opportunities on the first floor of the Administration Centre building, and the expiry of the Workskil Australia lease in 2020 (116sqm), which if required can be used to accommodate any additional Council requirements.



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Lease Terms and Conditions

In March 2016 the Council undertook an independent valuation of the Town of Gawler Administration Centre for the purpose of determining the market value and potential rental value of the building. The report produced by McGees Property provided that the expected ground floor rental on a per square metre basis is $320 per square metre. This is a gross rental, being inclusive of all outgoings including utilities, cleaning, waste and fees/taxes.

It is proposed that Council seek to achieve the $320 per square metre rate from DEWNR, as per the McGees property valuation report.

DEWNR have indicated that they are seeking a five (5) year term, with one right of renewal of five (5) years. With a potential lease commencement date of 1 July 2017, lease expiry would be 30 June 2028. It is proposed that a 10 year lease is sufficient.

Other relevant terms and conditions are outlined in the lease offer (Attachment 2), and will be subject to negotiation, although it is expected that Council will only have responsibility for the following elements under any potential lease agreement:

• Structural building repairs (external walls, roof and floors). Internal walls, fittings,glass and floor coverings will be the responsibility of the tenant

• Building services (fire systems, air-conditioning, water, electricity, lift, security)• Waste/recycling removal, building cleaning and grounds maintenance

Leasing the majority of the ground floor to a like-minded State Government Agency, that works closely with the Council, and are keen to explore innovate sharing and collaboration of spaces, including displays, energy efficiency, recycling and waste reduction will provide a significant benefit to the Council and the Gawler Community. The ability to secure a tenant of this calibre is extremely fortuitous and will provide the best use of, and the best financial return for the space within the building.

Council staff will continue to work with DEWNR and DPTI representatives regarding any potential collaboration or contribution that aims to increase the environmental outcomes of the building and surrounds.

COMMUNICATION (INTERNAL TO COUNCIL)

Chief Executive Officer Manager, Infrastructure and Engineering Services

CONSULTATION (EXTERNAL TO COUNCIL)

DEWNR DPTI McGees Property

POLICY IMPLICATIONS

Nil

STATUTORY REQUIREMENTS

Local Government Act 1999 Retail and Commercial Leases Act 1995



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FINANCIAL/BUDGET IMPLICATIONS

Rent

The McGees Property Valuation provided a rental value of $320 per square metre inclusive of outgoings (exclusive of GST). Based on an anticipated lease area of 406 sqm, the annual rental for the first year of occupation will be $129,920 (GST exclusive).

Estimated outgoings for the building are $52 per square metre, which calculates to $75 per square metre of lettable area. Should these estimated outgoing be accurate, the revenue received from the lease (taking into consideration outgoings) will be approximately $99,470 (GST Exclusive) in the first year. Rent will be subject to CPI and an independent market review at renewal.

Costs

It is expected that costs incurred in drafting and documenting the lease agreement will be minimal, and will be shared by the parties.

Fit out costs will be borne by the Lessee, however Council may be required to contribute to any upgrades required in common areas of the building. It is unlikely that Council will need to contribute to any building works, however if any significant costs are to be incurred, approval will be sought through a future Council report.

COMMUNITY PLAN

Objective 5.2: Be recognised as a ‘best practice’ Local Government organisation Objective 5.3: Deliver ongoing effective and efficient services, including support for regional

collaboration Objective 5.4: Create and support community partnerships that contribute to the

implementation of this Plan



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ATTACHMENT 1



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TOWN OF GAWLER

Lease Summary Information

1. TENANT

1.1 Name

Minister for Environment (Department of Environment, Water and Natural Resources)

1.2 ACN/ABN (if applicable)

36 702 093 234

1.3 Address

Po Box 1047 Adelaide SA 5001

2. LEASE OR LICENCE

2.1 Is a lease or licence required (eg is the tenant being granted exclusive possession, or will they have the use of the premises at certain times and upon certain days)?

Lease – Exclusive Use for the purpose Office Accommodation 24 hours a day, 7 days per week..

2.2 Is it intended that the premises will be used by/licensed to anyone else? If so, who?

The intended premises (403sqm of the ground floor 41-43 High St Gawler) is not used or accessed by any other group. The Tenant will have shared access to and use of the common areas of the building, including atrium, toilet facilities and car park.

3. PREMISES

3.1 Is the land Council owned or under the Council’s care control andmanagement?

Owned by Council

3.2 Is the land community land?

Yes

ATTACHMENT 2



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3.3 Is the proposed use authorised in the Council’s community land management plan? If not (or if the term is more than five years), has the Council complied with the steps set out in its public consultation policy?

Yes

3.4 Are there any trusts or dedications over the land that restrict how it must be used?

No

3.5 What is the street address of the premises (if applicable)?

41-43 High St Gawler

3.6 What is the Real Property Act description of premises?

Certificate of Title Volume: 5922 Folio: 699

3.7 Do the premises comprise the whole or portion of the land in the CT?

Part

3.8 If portion, are the premises described in a plan? How are the premises described?

Refer attached plan

3.9 Do the premises (or part of it) comprise a building?

Yes

3.10 Are there common areas that the tenant will be entitled to use in common with other tenants of the land (eg driveway, toilets etc)? If so, describe, along with any provisions that apply to the common areas.

Yes, atrium, central hallway, toilet facilities, outdoor seating area, car park. Tenants will be required to maintain the common areas in a tidy condition.

3.11 Does the tenant have any additional rights (eg parking, use of an adjoining oval etc)? If so, describe, along with any provisions that relate to these additional rights.

Yes

Potential access to secure car parking, and on-site secure bike storage.

Access to the building communication/server room (access to be accompanied access only).

4. PERMITTED USE

4.1 What is the tenant permitted to use the premises for?

Office accommodation, customer service desk and related service deliveries (ie, workshops, sale or donations of items/information).



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4.2 Will the tenant be required to obtain development approval for such a use?

No – currently being sought by Town of Gawler

5. RETAIL AND COMMERCIAL LEASES ACT

5.1 Does the Retail and Commercial Leases Act apply to the lease/licence?

No - Crown

6. TERM

6.1 What is the initial term and when does it commence?

Five (5) year Term – commencing on approx. 1 July 2017

6.2 Are there any rights of renewal?

1 right of renewal of five (5) years

7. MAINTENANCE

7.1 Is the tenant responsible to generally maintain and repair the premises, including any improvements (eg buildings, equipment)?

No

7.2 Is there anything the tenant is not responsible to maintain or repair? If so, what?

Tenant is responsible for wilfully caused damages to the Leased Area

7.3 Is the Council responsible for any maintenance? If so, what?

Yes – All building maintenance and repair

7.4 Is the tenant required to paint the premises before the lease/licence ends or at any other time (eg every five years)?

Yes,

7.5 Is the tenant responsible to clean the premises themselves or will the Council clean the premises and pass this cost on to the tenant?

No. Council responsible for cleaning.

8. ASSIGNMENT

8.1 Is the tenant allowed to sublease/sublicence the premises? If so, is this to aparticular group or person?

No

8.2 Is the tenant allowed to hire the premises out on a casual basis (eg for functions)? If so, is this to a particular group or person?



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Yes – to be approved by Council on an as needed basis.

9. INSURANCE

9.1 Is the tenant required to have public liability insurance? If so, what is theamount of cover required

Yes – $20 million

9.2 Is the tenant required to insure their contents?

Yes.

9.3 Will the Council insure the building? If so, will the cost of this be passed on to the tenant?

Yes. Insurance is included in the calculated outgoings.

10. COSTS

Is the tenant responsible for all or a portion of the Council’s costs of lease/licencenegotiation and preparation?

Yes – costs shared between the parties.

11. SPECIAL CONDITIONS

Are there any other special conditions that relate to the tenant, premises orarrangement that need to be recorded?

No.



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