leasing guide 2015/16 - property nsw...leasing guide 2015/16 (as at 23/6/16) 53 retail leasing...

leasing guide 2015/16a step-by-step guide for

prospective retail tenants seeking a lease in the rocks precinct

contents

1 Custodianship 2

About The Rocks

2 An enviable visitor profile 4

3 The Rocks Leasing Plan 5

Retail Leasing Direction

4 Preferred retail mix 6

5 Strategic directions 7

6 Snapshot of the lease process 9

7 Step by-step guide 10

Identifying the right property

Applying for a lease

Negotiating the lease

Planning the fitout

Executing the lease

The handover

8 Tenant checklist 14

9 Renewing and existing lease 15

10 Glossary 16

11 Key contacts 18

Leasing Guide 2015/16 (As at 23/6/16) 1

about the rocks The Rocks is an iconic location, situated between the two most recognisable symbols of Australia: Sydney Harbour Bridge and Sydney Opera House.

The Rocks precinct:

• is 26 hectares of premium real estate

• has prime access to the CBD and all modes of transport

• adjoins Sydney Harbour

• is home to much loved cultural institutions.

More than 14 million people visit The Rocks each year and the precinct contributes $400 million per year to the NSW visitor economy.

As well as being Australia’s most significant historic precinct, The Rocks is a vibrant and contemporary space, well placed for future growth.

As a NSW Government agency, Property NSW works through SHFA to ensure the activation and profitability of The Rocks for the mutual benefit of tenants, visitors and the taxpayers of NSW.

2 Leasing Guide 2015/16 (As at 23/6/16)

1

As a Government agency, Property NSW works to ensure the activation and profitability of The Rocks for the mutual benefit of tenants, visitors and the taxpayers of NSW.

custodianshipProperty NSW manages the assets of Sydney Harbour Foreshore Authority (SHFA), which was established under the Sydney Harbour Foreshore Authority Act 1998. SHFA is the landowner of The Rocks, working as part of Property NSW, in the role the custodian of the precinct.

Its main roles are:• place management

• heritage conservation

• urban renewal

• custodianship of NSW’s most state significant harbour foreshore areas.

SHFA through Property NSW, manages commercial and retail leases, and provides security, cleaning, building maintenance and other asset management services. It manages and curates two key heritage and cultural precincts – The Rocks/Circular Quay and Darling Harbour – which together attract over 41 million visitors annually.

SHFA through PNSW contributes $1.2 billion gross value added to the NSW visitor economy. Its corporate vision is to create extraordinary places in Sydney that the world talks about.

2an enviable visitor profile

LeiSuRe SuiTS

• Affluent white collar workers

• Aged 25–55

• Based in the city

• Casual dining after work bars

Drive demand

CuRiouSLy CReATive

• Affluent white collar workers

• Aged 18-34

• Based in the city

• Culturally aware

• Creative authentic

Create atmosphere

SoPhiSTiCATeD TouRiST

• Loves to discover heritage

• Seeks genuine experiences

• Likes to explore

• Visits galleries

• Fine dining

Drive visitor economy

For The Rocks to achieve its vision, it must appeal to its target audience:

1. Leisure Suits

2. Sophisticated Tourist

3. Curiously Creative

It is also essential to stay abreast of growing audiences such as:

1. Families from Sydney and around Australia

2. Cruise ship passengers



3retail leasing directionSHFA’s vision is to make The Rocks one of the most envied heritage destinations in the world – an alluring precinct and a leader in retail experience internationally.

To achieve this The Rocks welcomes businesses:

• with passion and style, who understand the market, care for the environment and look to the future

• who embrace the best of Australian retail innovation

• who offer excellent personalised customer service

• who deliver truly amazing retail experiences

• who educate, entertain and enrich the retail experience

• with a unique product that captures the consumer’s imagination

• that add to the overall success of The Rocks

• that are vibrant and fit with the preferred retail mix for The Rocks.

the rocks leasing planThe Rocks Leasing Plan consists of a series of policies and procedures that guide and inform SHFA’s leasing and property management decisions.

The key documents can be found on SHFA’s website and consist of:

• Strategic Directions 2015/16

• Retail Leasing Direction 2015/16

• Leasing Guide 2015/16

• Information Guide 2015/16

The type and combination of retail tenants has a profound impact on the character of The Rocks and, in turn, on visitation and spend. In assessing a prospective tenant’s application to lease a property, SHFA looks for:

• a vibrant business that fits the preferred retail mix

• a distinctve product, not replicated elsewhere in the precinct

• a business that adds to the overall success of The Rocks.

Joe Bananas.A uniquely Australian product.

The Rocks Brewing Company. A boutique beer range designed around the rich stories of The Rocks.

preferred retail MixFor The Rocks to achieve its vision it must appeal to its target audiences and three retail categories have been identified as the pillars of demand for these groups.

1. Food Experience

2. Fashion, Arts and Creativity

3. Health, Beauty and Wellbeing

FooD exPeRieNCe

• After work dining and drinks – from casual to fine dining

• Dining experiences that are about more than just the food

• Produce and product from premium suppliers

• Quality produce, carefully selected and beautifully presented

• Guest chefs, cooking lessons, the ability to recreate

• Uniquely Australian

FAShioN, ARTS AND CReATiviTy

• The best craftsmanship, design and experiences on offer

• Show the masters at work and the stories behind their craft; a spectacle and theatre in the making, immersing the customer in the experience

• Bring the bespoke, the one-off and the unique to life

• Gifts expressing The Rocks’ heritage

• Locally designed and made artefacts

• Contemporary fashion for all ages

heALTh, BeAuTy AND WeLLBeiNG

• Health and beauty, body balance, wellness, self- pampering, natural products, day spa beauty treatments

• Boutique but with a reputation built in other locations

• Eco-friendly household goods, homewares and domestic products

6 LLeasing Guide 2015/16 (As at 23/6/16)

4

strategic directions SHFA has developed five key plans to guide it as custodian of The Rocks for current and future generations:

1. Retail Leasing Plan

2. Living Heritage Plan

3. Public Domain Design Plan

4. Place Activation Plan

5. Brand Implementation Plan

Strategic Directions ShFA’s Commitment Tenant’s obligation

Retail Leasing Plan To deliver a leasing direction that positions The Rocks as an alluring world-class retail destination for Sydneysiders, domestic travellers and overseas visitors alike.

To deliver on the leasing proposal submitted when applying for a lease in The Rocks.

Living heritage Plan Protect the heritage buildings in The Rocks while finding new ways to keep them relevant, through new uses and new lives.

To help protect the heritage of The Rocks by:

• complying with guidelines in Conservation Management Plans for heritage buildings

• working cooperatively with specialist SHFA staff on authorised works.

Public Domain Design Plan

To implement a public domain transformation program in The Rocks, including the following priorities:

• connecting The Rocks to Circular Quay

• better connecting Argyle and George Streets with areas outside the precinct and laneways inside the precinct

• unlocking the hidden networks of laneways

• enlivening The Rocks with enhanced public destinations

• improving the experience for pedestrians

• creating a memorable nighttime experience

• enhancing arrival points at The Rocks

• connecting with Dawes Point.

To support public domain design excellence by complying with precinct guidelines on:

• signage

• outdoor seating.

Place Activation Plan To drive visitation and visitor spend through a suite of events and activities presented throughout the year, supported by comprehensive marketing and advertising campaigns.

To work cooperatively with SHFA when appropriate on joint marketing initiatives.

Brand implementation Plan

To position The Rocks as an alluring, world-class destination for Sydneysiders, domestic travellers and overseas visitors alike.

To implement several brand campaigns each year to ensure that awareness of The Rocks remains high.

To embrace The Rocks brand and integrate it where possible into business operations.


5Each of these strategic plans entails a commitment from both SHFA and tenants in The Rocks, as illustrated in the table below.

leasing a propertyThis section provides a step-by-step guide for prospective retail tenants seeking to

take out a new lease in The Rocks.

identifying the right propertySHFA’s leasing service provider (leasing agent) manages advertising and first contact with prospective tenants.

Identifying the right property

applying for a leaseThe prospective tenant puts forward a leasing proposal to the leasing agent.

Applying for a lease

negotiating the leaseThe new lease is drafted and the parties agree on the terms.

Negotiating the lease

executing the leaseInsurances and bank guarantee are submitted and the lease is executed.

Executing the lease

the handoverThe new tenant takes possession of the property and meets with SHFA’s property management service provider. The handover

planning the fitoutThe tenant meets with SHFA’s in-house fitout coordinator to discuss fitout plans for the property and any development or heritage requirements, including statutory approvals.

Planning the fitout

snapshot of the lease process The snapshot below sets out the key stages in taking out a lease in The Rocks.


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Leasing Guide 2015 - The Rocks Precinct

07

step-by-step guide

The following diagrams show the key steps for each stage of the leasing process and include links to relevant documents. A tenant checklist, to help keep the process moving as efficiently as possible, and a glossary are located at the end of the section.

Tenant checklist

Glossary

identifying the right property

The leasing agent is the first point of contact for prospective tenants. This is a two-way process: the leasing agent is actively scouting the market for the preferred retail mix, and prospective tenants are encouraged to initiate contact with the leasing agent.

SHFA’s leasing agent lists the vacant property on the Real Commercial website www.realcommercial.com.au and SHFA’s website www.shfa.nsw.gov.au. SHFA engages an independent valuer to assess the approximate market value.

1

step

2

step

3

step If the business fits the prefered retail mix for The Rocks, the leasing agent scopes the prospective tenant’s needs (e.g. price, space, whether outdoor seating is required) to determine whether the available property is suitable.

Where there is a match, the leasing agent sends indicative Terms and Conditions to the prospective tenant. Once the tenant returns a signed acceptance of these terms, the leasing service provider prepares a leasing proposal recommendation for SHFA. The tenant provides the following documentation to support the recommendation:

• certified balance sheet for the last three years

• certified profit and loss statement for the last three years

• certified cash flow statement for the last three years (if a Pty Ltd entity).

4

step

indicative timeframe: two to six weeks (with timely provision by tenant of required documents)


7

6

step

step

5

step

4

step

applying for a lease

The ELC determines whether SHFA supports the prospective tenant’s application.

The leasing agent submits the leasing proposal recommendation to SHFA’s Executive Leasing Committee (ELC).

1

step

2

step

3

step Where the proposal is supported, the leasing agent issues the prospective tenant with SHFA’s signed invitation to make an offer (Letter of Offer), which includes:

• rent and terms of the lease

• leasing memoranda

• disclosure statement by SHFA of any works likely to occur in the vicinity.

If acceptable, the prospective tenant signs the Letter of Offer and returns it to the leasing agent within 14 days.

The leasing agent requests a financial check on the prospective tenant from mercantile agent Dun & Bradstreet, which is a factor in determining the level of bank guarantee required for the lease.

SHFA Board endorsement and Ministerial approval are required where the proposed lease is for a period greater than five years.

indicative timeframe (Steps 1-5): 21 days

identifying the right property

negotiating the lease

The tenant’s solicitor reviews the lease.

This step occurs concurrently with discussions between the tenant and SHFA’s fitout coordinator.

SHFA’s solicitor prepares the lease for the property. This is based on a standard lease memorandum, amended for any special conditions. 1

step

2

step

3

step The parties negotiate and agree on the terms of the lease.

indicative timeframe: 28 days


executing the lease

SHFA’s solicitor checks the tenant’s documents and, if in order, sends them to SHFA with a letter confirming they meet the instructions of the leasing agent.

The tenant provides SHFA’s solicitors with the signed lease, bank guarantee and certificate of currency of insurances. In the case of a retail lease for a period of less than five years, the tenant also provides a valid Section 16 (3) certificate as required under the Retail Leases Act.

1

step

2

step

3

step SHFA executes the lease and sends it to the tenant’s solicitor for registration with Land and Property Information.

indicative timeframe: 7-14 days

the handover

The tenant meets SHFA’s property management services provider (property manager), who takes over as the primary contact for matters related to SHFA and the lease.

The tenant meets the leasing agent at the property to receive the keys and sign the key issue record, generally within seven days of executing the lease.1

step

2

step

3

step The tenant receives a SHFA Information Guide, including information on how SHFA supports businesses in The Rocks precinct, and has an introductory meeting with SHFA’s CEO.

Note: Tenants should ensure that all utilities in the premises are transferred to their name.

planning the fitout

The fitout coordinator advises the tenant on the approvals needed for the fitout. In most cases a Development Approval (DA) from the City of Sydney (CoS) will be required.

i. If the premises are not heritage listed, the fitout will proceed by way of DA from CoS only (which requires Landowner’s Consent (LC) from SHFA).

Note: To expedite the process, tenants are advised to seek LC from SHFA for heritage approval and a DA at the same time.

ii. If the premises are heritage listed, the fitout will require both a DA from the CoS and heritage approval from SHFA. Tenants must first seek LC from SHFA to make both these applications.

For more information see the Fitout Guide for Commercial and Retail Premises in The Rocks.

Initial discussions between the prospective tenant and SHFA’s fitout coordinator begin once the tenant receives SHFA’s Letter of Offer. 1

step

2

step

3

step The tenant seeks the relevant approvals from SHFA and CoS.

Note: Tenants are encouraged to finalise their fitout plans as early as possible, as securing the DA can take several months.


executing the lease

the handover


13 The Rocks Leasing Guide 2015 (As at 6/5/2015) The Rocks Leasing Guide (As at 20/4/2015) 13

tenant checklist

Research the market

To help assess whether your business is the right fit for The Rocks precinct, check the following documents:

• Strategic Directions 2015/16

• Retail Leasing Direction 2015/16

Prepare documents to support

lease application

Prospective tenants should provide the following documents to SHFA’s leasing agent:

• overview demonstrating the fit between SHFA’s preferred retail mix and the tenant’s business Strategic Directions 2015/16 and Retail Leasing Direction 2015/16

• certified balance sheet for the last three years

• certified profit and loss statement for the last three years.

• certified cash flow statement for the last three years (if a Pty Ltd entity).

Get legal assistance

Once you receive a Letter of Offer from SHFA, you need legal assistance to complete the leasing process.

Plan your fitout

The sooner you consolidate your fitout plans, the sooner you can apply for the approvals you need. See the following documents for more information:

• Fitout Guide for Commercial and Retail Premises in The Rocks

• The Rocks Heritage Policy

• Green Building User Guide

Apply for required fitout approvals

Discussions with SHFA’s leasing agent and fitout coordinator will indicate which of the following approvals you need to secure:

• heritage approval (SHFA)

• landowner’s consent (SHFA)

• Development Application (City of Sydney) Remember to start your DA as soon as possible, as it can take several months to complete.

Prepare documents to support lease execution

When you present the signed lease to SHFA’s leasing agent, you also need to provide the following documents for lease execution:

• bank guarantee

• certificate for currency of insurances

• in the case of a retail lease for a period of less than five years, a valid Section 16 (3) certificate under the Retail Leases Act.

SHFA is committed to minimising the time it takes to negotiate each step in taking out a new lease in The Rocks precinct. The checklist below is designed to help you plan ahead and gather the information and documents needed to keep the leasing process moving as efficiently as possible.

8


The Rocks Leasing Guide (As at 20/4/2015) 15

renewing an existing leaseSHFA manages lease renewals in The Rocks precinct to ensure the NSW Government is getting the best possible return from public assets. As per usual business practice, there is no automatic right to renewal of a lease.

SHFA is required under the Retail Leases Act to notify a retail tenant of its intention regarding lease renewal no less than six months, and no more than 12 months, prior to the end of the lease term.

At the end of the lease term ShFA may:

• renew the lease to the existing tenant

• withdraw the property from the leasing market, or

• put the property to market, in which case the existing tenant may make an offer.

If the property has not been on the leasing market for a significant period of time (e.g. 10-15 years), SHFA will generally:

• put the property to market to test it for value for money

• undertake building works to restore the property and meet the requirements of modern occupiers. (Where the existing tenant is renewing the lease,

SHFA will undertake these works with minimum possible disruption to the tenant’s business).

Tenants renewing an existing lease with SHFA proceed through the same steps as those taking out a new lease (see page 9).

The Rocks Leasing Guide (As at 20/4/2015) 13

9


Bank Guarantee An undertaking by a bank to pay on demand any monies pursuant to a lease.

Building Area (Gross) The total enclosed and unenclosed area of a building, at all floor levels, measured between the normal outside face of any enclosing walls, balustrades and supports. The unit of measurement for building areas is the square metre. (Note: for measurement of floor space for leasing purposes, refer to Method of Measurement, published by the Property Council of Australia.)

Conservation Management Plan (CMP)

A plan providing guidelines for the conservation, re-use, interpretation and management of heritage items to ensure that heritage values are maintained and, where appropriate, enhanced.

Demised Premises The area held under the terms of a lease.

Development Approval (DA)

DA approval from the relevant planning authority to construct, add, amend or change the structure of a property. Any application requires SHFA’s approval in order to be lodged.

Disclosure Statement A schedule of information, as required under retail lease legislation, which must be provided by a lessor prior to the new lessee’s lease.

executive Leasing Committee

SHFA’s Executive Leasing Committee (ELC) is chaired by the CEO and includes executives from Place Management, Place Renewal, Place Services and Strategic Engagment and Visitor Experience. The function of the ELC is to assess leasing proposal recommendations in accordance with SHFA’s strategic direction and obligations. The ELC is convened fortnightly.

Fitout The installation of fixtures and fittings to the leased premises to enable a business to be conducted.

Fitout Coordinator A representative of the lessor who is involved in all aspects of a tenant’s fitout, from concept through approvals, occupation and handover inspections. The fitout coordinator ensures the tenant receives and understands the relevant lessor documentation pertaining to the fitout works (e.g. guide, architectural drawing).

Gross Lease One in which all operating costs on the property are included in the rental charged rather than charged as a separate amount. The landlord generally pays taxes and operating expenses incurred through ownership. It is the opposite of a net lease in which these costs are borne by the lessee.

Gross Lettable Area Retail (GLAR)

Used for calculating retail tenancy areas in shopping centres, commercial buildings, strip shops, free-standing shops, and semi-detached or terrace type shops in suburban streets. (Note: refer to Method of Measurement, published by the Property Council of Australia. In some states or territories, lease legislation might contain provisions that override the Property Council approach.)

Gross Sales The sum total in dollars for all sales that the retailer makes during a specific period, usually a financial year. Normally used for the purpose of percentage rent calculations.

heritage and Design team

The team reviews tenants’ proposals against the relevant plans and policies, and provides advice as to the appropriate heritage approvals where required. It has delegated authority to determine minor applications under the NSW Heritage Act 1977. This team includes archaeologists, architects, heritage specialists, landscape architects and urban designers.

hold over Where a lease term expires and the lessee remains in occupation (usually on a month-to-month basis) on the terms and conditions of the original lease.

Landowner’s Consent (LC)

The submission by the tenant of all required documentation on tenant works for the landowner’s review, comment and, as a final step, written approval.

Lease A legal agreement between a landlord and tenant for the use of premises. A retail lease cannot override the requirements of the Retail Leases Act 1994.

Letter of offer A signed invitation from SHFA to a prospective tenant to make an offer to lease a property.


10glossary

Lessee Tenant of the premises.

Lessee’s improvements or Tenant’s improvements

Fixed improvements or additions to land or buildings, installed by and paid for by the tenant to meet the tenant’s needs; typically removable by the tenant upon expiration of the lease; removal causes no material damage to the real estate.

Lessor Landowner / landlord / owner of the premises.

Make Good The obligation of a lessee at the end of their occupation, to ensure that premises are returned to the same condition as at the commencement of the lease (e.g. painting and restoring partitions).

Net Lettable Area (NLA)

Used to calculate tenancy areas for office tenants. (Note: refer to Method of Measurement, published by the Property Council of Australia.)

Notice of Lessor’s intentions

Under the Retail Leases Act 1994, the lessor must notify the lessee not less than six months and not more than 12 months before the expiry of a lease of either an offer of a renewal/extension of the lease, or that the lessor does not propose to offer a renewal/extension.

Notice of Termination The notice given by either the landlord or tenant that they want to end the rental agreement and vacate the property in compliance with the terms and conditions of the lease.

option An option in a lease refers to a further term of tenancy.

Permitted use The allowable use within the premises specified in the lease contract.

Public Liability insurance

Catch-all insurance against a person’s liabilities in tort, arising out of such causes as the person’s activities or occupation, ownership or use of premises. Such insurance does not cover areas of liability usually covered by other insurance (e.g. worker’s compensation, professional indemnity, motor vehicle insurance).

Rent A payment made periodically by a lessee to a lessor for the use of premises. The term ‘rent’ is often associated with a variety of other terms outlined below:

Base Rent: The minimum acceptable rental provided in a lease. The base rent in retail leases generally refers to the commencing rent, which is supplemented with a ‘percentage rent’ based on the tenant’s turnover.

Face Rent: The rent shown on a lease document, which may or may not include incentives and may or may not include outgoings.

Market Rent: The estimated amount that a property (or space within a property) should lease on the date of valuation, between a willing lessor and lessee on appropriate terms in an arm’s-length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Whenever market rent is provided, the appropriate lease terms that it reflects should also be stated.

Turnover / Percentage / Participation Rent

Any form of lease rental arrangement in which the lessor receives a form of rental that is based upon the sales of the lessee. Percentage rent is an example of a turnover rent.

Rent-Free Period A period of occupancy where no rent is demanded, normally used as an incentive to a new tenant at the commencement of a lease, and varied according to market conditions.

Rent Review A periodic review of rental under a lease using a predetermined method; for example, increase in line with Consumer Price Index (CPI), a fixed percentage increase, or increase in accordance with a market valuation.

Rental Determination A valuation report by an independent valuer, fixing a rent in circumstances where a lessor and lessee have been unable to negotiate an agreement.

Retail Leases Act 1994 (Retail Leases Act)

NSW legislation setting out legal arrangements between landlords and tenants for shops selling and supplying goods and services, where the shop is less than 1,000 square metres and is used for a retail business.

Section 16 Certificate (s16)

Where a lease (including options) is for less than a five-year term, a certificate under Section 16 of the Retail Leases Act is signed by the lessee’s lawyer or licensed conveyancer.

Works Any physical activity authorised to be carried out involving the construction, alteration, extension, restoration, repair, demolition or dismantling of buildings or structures that form part of land, whether or not works are permanent, and including the installation of any fittings forming part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems.


key contacts Leasing Agent

The leasing agent is the first point of contact for prospective tenants. SHFA has appointed the following agent to deliver its leasing services in The Rocks:

Tim Andrews Independent Leasing

Contact: Tim Andrews

Mobile: 0408 616 708

Email: [email protected]

Property Manager

The property manager arranges maintenance as required, ensures compliance with lease terms and conditions, and manages lease renewals for existing tenants. SHFA has appointed the following agent to deliver its property management services in The Rocks:

Cushman & Wakefield

Contact: Cosmas Raco, Director, Operations Property and Asset Management

Level 6, 56 Pitt Street | Sydney NSW 2000 | Australia

Direct: 02 8243 9913

Mobile: 0408 112 241

Contact: Alicia Kerti, Director, Property Manager - Operations Property and Asset Management

Level 6, 56 Pitt Street | Sydney NSW 2000 | Australia

Direct: 02 9224 8063

Mobile: 0451 371 449

Fitout Coordinator

SHFA’s in-house fitout coordinator ensures the tenant receives and understands relevant SHFA documentation and site information (e.g. fitout guide, architectural drawings) and assists the tenant through the fitout process, including liaison with other SHFA staff as required.

Contact: Fitout Coordinator

Level 6, 66 Harrington Street, The Rocks

Direct: 02 9240 8500

head office

Level 6, 66 Harrington Street, The Rocks

PO Box N408, Grosvenor Place NSW 1220

Telephone: 02 9240 8500

www.property.nsw.gov.au


11

Disclaimer: This document may be subject to change without notice.

June 2016

head officeLevel 6, 66 Harrington Street, The RocksPO Box N408, Grosvenor Place NSW 1220 Email: [email protected]: 02 9240 8500www.shfa.nsw.gov.au

every building in The Rocks has its own story. Property NSW is preserving the stories of the past and inviting new generations to create their own stories in this unique place.

leasing guide 2015/16 - property nsw...leasing guide 2015/16 (as at 23/6/16) 53 retail leasing...

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