This is the second article to discuss costs matters relating to the decision to build a new council complex in Gordon Street, Coffs Harbour.
At a recent Council meeting it was revealed the cost for the new complex in Gordon St had ‘blown out’. Not one sod has been turned as yet. It appears the second guess means an additional $40 M has to be found. Several options were supplied to explain how the blow-out will be funded.
The first article in this series of four tried to explain the source of the extra $40 million. On the surface $20.5M is to come from the sale of Rigby House. For the uninitiated this may well seem plausible but is it?
Several factors need to be considered.
Rigby House is on the fringe of the Central Business District (CBD). Council has advanced a theory the move to Gordon Street would revitalise the CBD. So it begs the question of why, when Rigby House is further removed from the CBD than the proposed site, it will attract buyer interest. Would the buyer consider passing traffic to be an issue?
Surely it is not to become an industrial site. So what special factor will be used to promote the site?
This remote location is not a prime site. Market prices would normally give an indication of the expected selling price. But recent sales in the vicinity of $20M in the immediate area are hard to find unless the Gowings Hotel site is in the mix. It seems unlikely the “Gowings” consortium of owners would wish to acquire this site for a further shopping complex or a hotel/ motel site. Market forces suggest it would not be viable considering the recent sale of the Pacific Bay complex. So the question to answer is how Council determined the asking price. Or is it a pure guess?
The figure quoted at the Council meeting failed to make clear whether it is the gross price or the net price. Unanswered is the matter of the cost of the current refurbishment. Has this been taken into account? Or are the current costs reflected under on-going repairs? In many instances real estate agents advise against major renovations preferring to leave it up to the new owner. But since Council is making the repairs does it imply they have a buyer in mind and the repairs will suit the buyer? It is hard to believe a buyer is waiting in the wings. Such a potential buyer would almost certainly need to be a government agency or an educational facility. And as such this is hard to accept. Not so long ago the Catholic Club block was sold off but there was no indication of buyers waiting in line to develop a shopping complex or an educational facility. No rumours circulated of any government agency looking to move here. So is this a “pie in the sky” wish?
But it does raise another issue; namely dead money. This is a complex issue and will be covered in the next paper.
This is another interesting topic. Will the purchasor expect to have vacant possession or will a lease back arrangement be on the cards? This is where the policy of being open and transparent should come to the fore. Either way it leads to multiple dead money situations.
Either way = DEAD MONEY!
In the third paper the discussion is on choices and dead money.
Cob is a former forensic auditor for State and federal Government entities.