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Ipswich Central Redevelopment Committee — 2020-08-20
1. Contract Variation - CBD Retail Refurbishment Works
Doc ID No: A6404917
ITEM: 1
SUBJECT: Contract Variation - CBD Retail Refurbishment Works
AUTHOR: Project Manager
DATE: 30 July 2020
Executive Summary
This is a report concerning a proposed variation to existing Contract 13254 with J. Hutchinson Pty. Ltd. for the provision of retail development works associated with the retail component of the Nicholas Street - Ipswich Central project (the Retail Project).
Recommendation/s
That under s257(1) of the Local Government Act 2009 Council delegate the power to the Chief Executive Officer (“CEO”) to be authorised to negotiate and administer and finalise a contract variation of $33,614,627 for retail development works (“Works”) with J. Hutchinson Pty. Ltd for the Design and Construct Contract for Ipswich Central Civic Project, Contract No. 13254 and to do any other acts necessary to implement Council’s decision. The delegation of power and authorisation for the CEO to administer the contract variation is conditional upon, the execution and finalisation of the agreement for lease with the redevelopment’s key anchor tenant.
RELATED PARTIES
Hutchinson Builders
Ranbury Management Group
Advance Ipswich Theme
Strengthening our local economy and building prosperity
Purpose of Report/Background
The Retail Project (and associated retail redevelopment works) is part of a broader program of works to revitalise the Ipswich CBD precinct. The largest part being the Civic Project (including the library, civic space and Administration Building) which is well advanced. A competitive tender process was undertaken which resulted in the engagement of J. Hutchinson Pty. Ltd. (trading as Hutchinson Builders) in August 2019 as the Design and Construct (D&C) contractor for the Civic Project.
During commercial negotiations prior to award of the Civic Project contract, clauses were included in the Contract that would enable the Retail Project to be added to the scope of the Civic Project via a contract variation if the Principal (Council) requested it. The Retail Project is approximately 25% of the value of the Civic Project. During negotiations, fixed rates for profit and overheads were pre-agreed and included in the D&C Contract pursuant to review by the Council’s quantity surveyor, Rider Levitt Bucknall (RLB). The relevant Retail Project terms were drafted by Council’s lawyers Clayton Utz and included in the D&C Contract.
On 10 December 2019, Council endorsed the Economic Development Committee’s recommendation (refer Attachment 1) to adopt the Tender Consideration Plan (TCP) (refer Attachment 2) for the procurement of the Retail Project construction work to be awarded as a variation to the existing Civic Project D&C contract. The purpose of adopting the TCP was to approve the procurement process to award a variation to the existing D&C contract. The driver for this paper and its recommendation is the awarding of the Retail Project variation to the contractor delivering the existing D&C contract now that variation’s quantum has been confirmed.
Stage 2 of the two stage D&C procurement methodology adopted by Council in this TCP proposed that should Council accept the lump sum price and construction program presented, then Hutchison Builders will be issued with a variation to their existing Civic Project contract and commence D&C delivery of the related construction works.
The table below details the genesis of the value of the proposed Retail Project variation. The value of the original December 2019 proposal has been reduced by three smaller, approved contract variations totalling $2,278,642. Each of these variations was approved by the Superintendent and Council’s General Manager Coordination and Performance and the Chief Executive Officer as their value was under respective procurement delegation limits.
Description
Value
Original Retail Project Variation Proposal (Dec 2019)
+ $35,893,269
Variation 1 - Retail Design Development Phase (Jan-Apr 2020)
- $443,300
Variation 2 - Design Development Disbursements (Jan-Apr 2020) (Hydraulic Investigations)
- $17,160
Variation 3 - Eats Awning and Adjacent Streetscape Works (July 2020)
- $1,818,182
Revised Retail Project Variation (August 2020)
+ $33,614,627
The original proposed variation cost ($35.893M) for the Retail Project was reviewed by RLB in December 2019 (refer Confidential Attachment 4). Hutchinson Builders’ price submission was found to be below RLB’s cost plan (expected market price). The proposal includes the provision of ‘open book’ pricing of subcontract work with approximately 75% of the Retail Project work’s value being delivered by subcontractors through a competitive tender process of which Council will have full visibility. The remaining 25% relates to construction management costs at a relatively low margin and overhead arrangements compared to conventional industry benchmarks.
On 30 June 2020, Council endorsed the Ipswich Central Redevelopment Committee’s recommendation to adopt the Ipswich Central Redevelopment Retail and Commercial Property Strategy as adopted by the Interim Administrator at Council’s Ordinary Meeting of 28 October 2019. The adopted three stage development strategy recommended:
· Stage 1 (Venue and Eats) - progression dependent on the securing of key tenants such as a cinema offering.
· Stage 2 (Metro B) - completion date to coincide with Council’s occupation of the new Administration Building (again dependent of securing of key tenants).
· Stage 3 (Metro A) - not recommended to proceed, future option once other assets developed and have been proven to be commercially successes.
The scope of work currently proposed under the Retail Project variation includes internal demolition and landlord works (Stages 1 and 2 only) to the following Council owned or leased assets:
· Eats (Food and Beverage)
· Venue (Entertainment)
· Metro B (Food and Beverage)
· Metro A (facade only with an add-alternate price for demolition)
· Audio Visual projection onto retail facades
Given the Retail and Commercial Property Strategy’s implementation is dependent on the securing of tenants such as a cinema operator, in anticipation of an imminent binding agreement with the key anchor tenant, it is recommended that Council support a contract variation for retail development works to the D&C contract with J. Hutchinson Pty. Ltd. subject to the execution of an agreement for lease with the redevelopment’s key anchor tenant. This will allow Council to respond quickly to progress the Retail Project once the tenant is secured.
An executed agreement for lease (also referred to as an AFL) is a document that binds the parties to enter into a Lease agreement. An agreement for lease is utilised where some details of the lease are yet to be finalised, for example the commencement date for the lease which can be subject to other project deliverables. Target dates are captured in the AFL, then once finalised the lease is updated and executed.
Legal/Policy Basis
This report and its recommendations are consistent with the following legislative provisions:
Local Government Act 2009
Local Government Regulation 2012
RISK MANAGEMENT IMPLICATIONS
The existing Contract for the Civic Project has been extensively reviewed by Council and external legal resources and includes clauses that enable the option for incorporating the work of the Retail Project via a variation to the Civic Project contract.
The TCP identified the impacts on the Retail Project’s risk profile of proceeding with the work as a variation to the existing Ipswich Central Civic Project contract, including:
· Reduced interface risk associated with multiple contractors since one contractor will be responsible for coordination of construction works across the CBD precinct;
· Reduced risk profile due to the elimination of interface risk between different contractors and the responsibility for coordination of works by a single contractor;
· Single point of accountability remains with a Tier 1 contractor for any disruptions to the rail corrido
Mentions: Nicholas Street · Ipswich
2. Ipswich Central Executive Report No 18 to 3 August 2020
Doc ID No: A6390870
ITEM: 2
SUBJECT: Ipswich Central Executive Report No 18 to 3 August 2020
AUTHOR: Project Manager
DATE: 29 July 2020
Executive Summary
This is a report concerning the July 2020 update on the Ipswich Central Program of Works.
Recommendation/s
That the Ipswich Central Executive Report No 18 to 3 August 2020 be received and the contents noted.
RELATED PARTIES
Program Management Partner, Ranbury Management Group – for the Ipswich CBD Transformation Project.
Advance Ipswich Theme
Strengthening our local economy and building prosperity
Purpose of Report/Background
This reports details the progress of the redevelopment works for the Ipswich Central precinct. Under the Hutchinson Builders’ contract, the work program currently has five separable portions which include the administration building, the library, the civic space, car park upgrade and works to the existing lift in the EATS building.
The ‘topping out’ ceremony celebrating completion of the concrete structure of Council’s new Administration Building occurred on Friday, 31 July 2020. From an external perspective, the building has taken on a new look in the last month with most of the protective screens now removed and a growing number of façade panels installed. Internal fit-out works such an internal wall framing are now underway. It is currently anticipated that the building could be available for occupancy by Council staff as early as July 2021, however this date will become clearer as works continue.
Works on the library will achieve Practical Completion on 6 August 2020. Practical Completion means that all works under the contract are completed. As a result, after that date the library will be ready for the installation of furniture, fixtures, equipment and IT.
The Civic Space will largely be completed by mid-August 2020 with the exception of an exclusion zone on the eastern side of the space which is to allow for the safe installation of the facade and other works on the western side of the Administration Building. Trees and other vegetation will be completed in this area on the completion of these works.
Practical Completion for the car park’s refurbishment will also be achieved on 6 August 2020 noting that the following approved variations are yet to be completed:
· installation of parking infrastructure such as a new boom gate on B1; and
· the replacement of two large air extraction fans.
Replacement of lighting on B3 to B6 of the car park was outside of the scope of the Hutchinson Builders contract scope. With the painting works now completed on these four levels, a review of the performance of the current lighting is being undertaken to identify any improvement opportunities.
Design works are underway on streetscape improvements adjacent to the EATS building as well as the EATS facade. The related construction works are anticipated to commence in mid-August 2020 and be completed by late November 2020. As a result, there will be improved pedestrian outcomes between Nicholas Street and the library and civic space when they open.
It is now likely that the contract for the Commonwealth Hotel’s reconstruction will be executed by mid-August 2020 and associated works completed in January 2021.
Legal/Policy Basis
This report and its recommendations are consistent with the following legislative provisions:
Local Government Act 2009
Local Government Regulation 2012
RISK MANAGEMENT IMPLICATIONS
As previously reported, Hutchinson Builders have continued their construction activities largely unabated through the Covid-19 restriction period. The delivery timeline for the retail redevelopment remains dependent on the lease execution by a key anchor tenant. As a result of delays to the retail refurbishment commencing, associated works would not be completed until early July 2021 (excludes a tenant fit-out period of up to three months) if Hutchinson Builders were to commence in late August 2020.
Financial/RESOURCE IMPLICATIONS
The current budget for the CBD’s redevelopment (including the retail project but excluding associated incentives) is $239.1M. At the time of writing, final project expenditure is forecast to meet project budget.
COMMUNITY and OTHER CONSULTATION
No consultation was undertaken in the preparation of this report.
Conclusion
Overall the work program remains on budget and on time. Commencement of the retail redevelopment is dependent on attainment of an executed lease with a key tenant.
Attachments and Confidential Background Papers
1.
Executive Report to 3 August 2020 ⇩
Greg Thomas
Project Manager
I concur with the recommendations contained in this report.
Sean Madigan
General Manager - Coordination and Performance
“Together, we proudly enhance the quality of life for our community”
Ipswich Central Redevelopment Committee
Meeting Agenda
20 August
2020
Item 2 / Attachment 1.
Ipswich Central Redevelopment Committee
Meeting Agenda
20 August
2020
Mentions: Nicholas Street · Ipswich
3. Retail Sub-Project Steering Committee - July 2020
Doc ID No: A6391747
ITEM: 3
SUBJECT: Retail Sub-Project Steering Committee - July 2020
AUTHOR: Project Manager
DATE: 30 July 2020
Executive Summary
This is a report concerning the formation of the Retail Sub-project Steering Committee and the status of the leasing program for the retail component of the Ipswich Central redevelopment.
Recommendation/s
That the report be received and the contents noted.
RELATED PARTIES
Ranbury Property Services Pty Ltd
Councillor Fechner may have a potential conflict of interest in relation to this matter.
Councillor Madsen may have a potential conflict of interest in relation to this matter.
Advance Ipswich Theme
Strengthening our local economy and building prosperity
Purpose of Report/Background
At its 28 July 2020 meeting, Council adopted a recommendation to establish the Retail Sub-project Steering Committee (RSPSC) to support the recently established Ipswich Central Redevelopment Committee (ICRC) in delivering the CBD project. The RSPSC will report monthly to the ICRC on the strategic direction for the planning, development, delivery and operations of the precinct’s retail and commercial assets as well as the status of the retail and commercial leasing agenda.
On 3 August 2020, the RSPSC held its inaugural meeting which was chaired by James Hepburn, refer draft minutes (Attachment 1). The meeting discussed a broad range of issues with a focus on retail leasing, the proposed contract variation to allow retail refurbishment works to commence and precinct management. Updates were also provided on key procurement activities associated with the precinct’s future management and operation including operation of the civic space car park, precinct valuation services, precinct management services (centre/asset management) and the engagement of a leasing agent associated with the precinct’s commercial office space. The ICRC Chair, Councillor Marnie Doyle, will attend future meetings of the RSPSC on an ongoing basis.
As at 31 July 2020, eight non-legally binding Heads of Agreement’s (HOA) with interested parties have been endorsed. These eight HOAs combined equate to 18.6% of the total retail tenancies but more importantly 36.7% of the precinct’s GLA (approximately 32% of the targeted gross rent). Whilst no further HOA’s have been endorsed over the past month, discussions with the key anchor tenant for the cinema regarding lease documentation have continued to progress well. Representatives from both parties have met on several occasions to resolve outstanding matters. Every effort is being made to expedite this process and it is anticipated that the lease documentation will be finalised and executed in the coming weeks. The execution of this lease is critical as it exists as the trigger for contract variation to deliver the retail refurbishment works. The ongoing impacts of COVID-19 on the retail redevelopment and its leasing remain unclear however as previously reported, the eight prospective tenants with HOA’s have indicated their willingness to proceed.
The ICRC meeting of 21 July 2020 requested that a report be provided to the committee’s Chairperson on the status of the leasing negotiations. In response, preparations are underway of financial presentations to two councillor workshops, the first being on the costs to complete the project and the second on the leasing and ongoing operational costs.
On 30 July 2020, the half-yearly report on the progress of the redevelopment and its impacts on the Ipswich economy was sent to the Minister for Local Government, Racing and Multicultural Affairs.
Formalising the Leasing Process
The finalisation of the leasing process for major tenants can often be a protracted process, especially when compared to smaller specialty tenancies. Typically, a tenant will sign a non-binding HOA (also known as a Letter of Intent or Letter of Offer) that allows the lessor and lessee to commence the process to enter into a formal agreement. Once the HOA is received by Council for consideration of the commercial terms, it is in turn forwarded to an independent retail specialist engaged by Council to confirm that the commercial parameters of the deal are consistent with the current market.
Following endorsement by Council, a suite of documentation will then be prepared and issued to the tenant. For tenancies subject to the Retail Shop Leases Act 1994 (RSLA), a Lease Disclosure Statement (LDS) is required to be issued at least seven days prior to signing a lease. An LDS details the major commercial terms of the lease. The RSLA applies to tenancies under 1,000m² which are undertaking a retail business located in a retail shopping centre of 5 or more stores. In the case of the Nicholas Street precinct each asset (e.g. Metro B) is treated as an individual centre. A number of benefits exist for tenancies under the RSLA:
· The landlord has restrictions on what outgoings can be passed on to the tenant, in particular land tax amongst others;
· There are restrictions on rent review mechanisms; and
· Tenants may be entitled to early determination of current market rent if they have an option to renew or extend the lease.
Within development projects, it is usual for the lease to form part of a formal Agreement for Lease (AFL). In the case of the CBD redevelopment, an AFL is required because at the time of agreeing to a deal, the retail refurbishment works are yet to be constructed and a formal document describing the lessor and lessee’s scope of work is required. This can at times be quite a detailed and complicated process, especially for major tenancies and tenancies such as restaurants that require an extensive list of services (electricity, hydraulics, mechanical etc.). For leasing within an existing centre, AFL’s are not a requirement. As a result once the retail refurbishment works have been completed, there will no longer be a requirement for an interim AFL, rather the process will be to move from the HOA directly to a lease.
Legal/Policy Basis
This report and its recommendations are consistent with the following legislative provisions:
Local Government Act 2009
Local Government Regulation 2012
RISK MANAGEMENT IMPLICATIONS
The retail leasing program continues to face a number of significant risks including but not limited to COVID-19 impacts, the pace of the retail market rebound and the attractiveness of the offer from the lessor (council). At an individual tenancy level, it is important that negotiations on HOAs and their subsequent conversion into legally binding AFL’s/leases are concluded as soon as possible.
The governance framework established through the ICRC and the RSPSC (with an independent Chairperson) will act as an effective control measure for the management of the financial and reputational risks to Council associated with the Ipswich Central redevelopment.
Resourcing continues to be an ongoing management challenge, as evidenced by the following two examples:
· No existing internal precinct/asset management capability to transition the precinct operationally post construction including in disciplines such as tenancy design and precinct management, operation and activation; and
· Evolving legal resourcing requirements to progress an expanding number of leasing deals in the short to medium term (from lease development to execution through to lease management and administration through site works and fit-out).
Financial/RESOURCE IMPLICATIONS
The proposed workshops will provide Councillors with deeper understandings on the current and future financial and resourcing implications of the project/precinct.
The retail precinct’s short-term commercial success is largely dependent on identifying, attracting and securing a commercially viable tenancy mix. Medium to long-term commercial success relies on a comprehensive activation and management strategy to support occupiers and repeatedly draw consumers back to a revitalised CBD.
COMMUNITY and OTHER CONSULTATION
The contents of this report did not requ
Mentions: Nicholas Street · Ipswich
4. Ipswich Central Redevelopment - Heritage
Doc ID No: A6407691
ITEM: 4
SUBJECT: Ipswich Central Redevelopment - Heritage
AUTHOR: Principal Officer (Urban Design and Heritage Conservation)
DATE: 6 August 2020
Executive Summary
This is an information only report in relation to the conservation of historic buildings and the interpretation of the precinct’s history in the Ipswich Central Redevelopment.
Recommendation
That the report be received and the contents noted.
RELATED PARTIES
There were no conflicts of interest.
Advance Ipswich Theme
Strengthening our local economy and building prosperity
Purpose of Report/Background
The purpose of this report is to inform the Committee on the measures taken to conserve the historic buildings and to interpret the history of the CBD in the Ipswich Central Redevelopment.
Historic Core
The historic core of the Ipswich CBD, bounded by Brisbane, Ellenborough, East and Bremer Streets was substantially demolished for redevelopment in the mid-1980s. The 1875 railway station in the former Union Street had been demolished earlier. The western section of Brisbane Street, Top of Town, was not redeveloped and has remained substantially intact.
Council Heritage Assets
The Ipswich Central Redevelopment area includes a small number of heritage buildings including the Commonwealth Hotel owned by the Ipswich City Council. The exterior of the Commonwealth Hotel is being conserved/reconstructed after substantial structural damage. Council also is in possession of 6 panels of cast balustrade and 6 cast iron stanchions from the Nicholas Street rail bridge.
Façade Improvement Program
This program will assist owners to make some minor improvements, however it is unlikely to result in substantial conservation works being undertaken. This program provides the opportunity for building owners to initiate contact with Council’s Heritage Program.
Historical Rail Interpretation
Rail infrastructure was an important element in the city centre prior to the 1980s - station, station master’s house, turntable, signal cabin, bridge, goods yard and sheds. This is no longer the case. In order to interpret the significance of rail to the city centre it is proposed to install a piece of the iconic cast iron balustrade and cast iron stanchion from the Nicholas Street rail bridge, the design is being finalised. The installation will include steel silhouettes of two fashionable women recreating a 1940s photograph taken at the same location. (Attached). The installation will also include historical information regarding the historical presence of rail in the city centre. The remaining cast iron items are to be securely stored for future appropriate use in the precinct.
Legal/Policy Basis
Not Applicable
RISK MANAGEMENT IMPLICATIONS
As this report is for information only there is no risk .
Financial/RESOURCE IMPLICATIONS
The projects referred to in this report are currently funded in Council programs.
COMMUNITY and OTHER CONSULTATION
No formal community consultation has been undertaken in relation to projects referred to in this report. However, the Commonwealth Hotel project and the Façade Improvement Program have received favourable press coverage.
Conclusion
The Ipswich Central Redevelopment will include works interpreting the cultural significance of the city centre. Future opportunities for historical interpretation of the ‘lost’ city centre will be explored as the redevelopment progresses
Attachments and Confidential Background Papers
1.
Doris Timperley in Nicolas St 1930s with Bessie Biggam ⇩
2.
Heritage Art for Precinct ⇩
Daniel Keenan
Principal Officer (Urban Design and Heritage Conservation)
I concur with the recommendations contained in this report.
Peter Tabulo
General Manager (Planning and Regulatory Services)
“Together, we proudly enhance the quality of life for our community”
Ipswich Central Redevelopment Committee
Meeting Agenda
20 August
2020
Item 4 / Attachment 1.
Ipswich Central Redevelopment Committee
Meeting Agenda
20 August
2020
Item 4 / Attachment 2.
Mentions: Brisbane Street · Nicholas Street · Nicolas Street · Union Street · Ipswich
Source: Ipswich City Council meeting agenda (CC BY 4.0).