Vos Yard and Waterspace Development Single Stage Business Case
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Vos Yard and Waterspace Development Single Stage Business Case Prepared by: Shona McMahon Prepared for: Waterfront Auckland Board Date: 16 April 2013 Version: 4.0 Status: Final Single Stage Business Case Document Control Document Information Position Document ID Vos Yard Development and Waterspace Document Owner Richard Aitken Issue Date 16 April 2013 Last Saved Date 16 April 2013 File Name U:\CCO\Projects\ Document History Version Issue Date Changes 1.0 4/4/2013 GM Property & Assets first review – Options, WP goals, messaging 1.0 5/4/2013 Peter Walker (PVCT) & GM Property & Assets – General review 2.0 10/4/2013 Peter Walker (PVCT) and GM Property & Assets review notes amended 3.0 11/4/2013 PVCT Business Plan and funding plan incorporated 4.0 16/4/2013 General review and refinement and focus on BCR Document Review Role Name Review Status GM Property & Assets Richard Aitken Reviewed v1.0, v3.0 Chair Percy Vos Charitable Peter Walker Reviewed v1.0, v2.0 Trust Project Director Daniel Khong Reviewed v3.0 GM Corporate Services Carl Gosbee Reviewed v3.0 Chief Executive John Dalzell Reviewed v3.0 Document Sign-off Role Name Sign-off Date GM Property & Assets Richard Aitken 16/4/2013 Chief Executive John Dalzell 16/4/2013 Single Stage Business Case | 2 Contents 1. Executive Summary 4 2. Introduction 7 3. Summary of Recommended Option 10 4. The Strategic Case – Making the Case for Investment 15 5. The Economic Case – Determining Best Value for Money 21 6. Commercial Case – Preparing for the Potential Deal 26 7. Financial Case – Affordability and Funding Requirements 30 8. Management Case – Planning for Successful Delivery 34 9. Recommendations 38 Attachments 1. Draft Concept Design (FearonHay March 2013) 2. Construction estimate (Ebert Construction, 2012) 3. Percy Vos Charitbale Trust Pyramid of Funding and Capital funding plan 4. Project programme (MPM Projects) 5. Waterfront Auckland Board resolution minutes, August 2011 6. Built Heritage Acquisition Fund proposal criteria 7. Subdivision map, Hamer St, Wynyard Quarter 8. Investment Logic Map (ILM) 9. Percy Vos Charitable Trust Business Plan (Management and Maintenance) 10. Cost Benefit Analysis 11. Demand Assessment 12. Commercial Case components Single Stage Business Case | 3 1. Executive Summary Introduction 1. This business case is for the conservation and development of the Vos site and waterspace (Lot 3, Hamer Street, Wynyard Quarter) into a broad-based heritage and maritime themed experience for the public, visitors and the boating community. The main focus of the development will be conservation of the last wooden boatbuilding shed in New Zealand. This historic site (land and waterspace) will be converted into a Marine Heritage Centre to engage a diverse range of users in the heritage and commercial activity of a living and working harbour edge. The development will continue the legacy and art and craft of wooden boatbuilding, established by Percy Vos. 2. The dominant benefit of the proposal is the heritage conservation of the Vos boatbuilding shed, the last wooden boatbuilding shed in New Zealand. A BCR has been calculated at 1.8:1.5 (refer Attachment 10) showing a positive result. It is estimated that the BCR could be higher given there a number of smaller benefits identified that were not monetised. This is a positive outcome for a public project that conserves a building of heritage nature. The cost is the NPV of the foregone commercial market income to Waterfront Auckland, to 2042. Note that the BCR is yet to be professionally peer reviewed by SGS Economics and Planning. 3. The Options analysis for the Vos site was performed in the July 2011 Vos and Brijs Development Study (refer Introduction, Section 2). The recommended Option A was confirmed and agreed by the Waterfront Board to retain the heritage part of the Sanford site (“the optimum character solution”) and allow future redevelopment of the remaining site and waterspace. The subdivision of the Sanford site has now been completed (March 2013) to allow for the conservation and development of the heritage component to proceed i.e.: Vos Yard and waterspace development. Refer Attachment 7 for subdivision plan. 4. The Development Study also recommended the establishment of a Trust comprised of interested groups that could see the Vos Yard developed as a Marine Heritage Centre. The Percy Vos Charitable Trust (PCVT) was formally established in November 2011 and gained charitable status 19 March 2013. 5. Waterfront Auckland will Project Manage this Council funded project, working in partnership with the PVCT who will build, manage and maintain the new facility. As custodians of the new Vos facility, PVCT will manage the building against a Business Plan (refer Attachment 9) and Conservation Plan. The fallback position will be Waterfront Auckland as managers and owners of Vos Yard should the PVCT fail as custodians. 6. The recommended lease and funding structure to enable the development is outlined in Section 3. Waterfront Auckland remains landowner, ground leasing the Vos site to the Built Heritage Acquisition Fund (BHAF) of Council at $0. BHAF sub-lease the site to the PVCT (as owners of the improvements) funding the PVCT led development at a cost of $4.7m. BHAF will require PVCT to buy back and own the asset in ~ 4 - 5 years (terms to be agreed). PVCT will take full development, management and operational responsibility of the new Marine Heritage Centre (refer Attachment 9). 7. To facilitate progress Waterfront Auckland must apply to Council to change the designation of the Vos site from a Commercial to Public property asset (receiving $0 income with no 8% ROI required). 8. Remaining actions required following relevant approvals are for the development of the Vos Yard and waterspace to progress via the proposed partnership with the PVCT and the proposed funding and leasehold arrangement (refer Section 3, Figure 3). PVCTs funding sources and approach are summarised in Attachment 3. The main commitment for capital funding will be sourced from a fixed number of High Net Worth individuals who will provide ~ $3m over three years. Single Stage Business Case | 4 9. LTP budget (FY 2013) for the Sanford subdivision is $1m. This budget allows completion of Waterfront Auckland’s Annual Business Plan 2012 / 13 initiative Stage 1: Subdivision and new lease with Sanfords. This proposal progresses Stage 2: “Finalise agreement to facilitate the development of a Marine Heritage Centre.” 10. Changing designation of the Vos site to Public presents potential lost revenue for the 1,115m2 land space and 2,043m2 waterspace of $130k pa + future rent reviews and escalations. Total rental income foregone to Waterfront Auckland to 2042 is $5.3m; opportunity cost NPV of ($1.58m) (8.25% discount rate 2015 – 2042). 11. Subject to Waterfront Auckland, BHAF and Council approvals, the project is estimated to take 18 months to complete with completion programmed for January 2015. Strategic Case 12. The 2012 Waterfront Plan specifically refers to the Vos & Brijs Heritage Slipway as a key initiative in the Wynyard Quarter. The Waterfront Plan also refers to the project as “preservation of the historic boatyard and slipway as part of a broader redevelopment project.” This proposal is also indicated in the Waterfront Plan as a project to support the marine and fishing industries. The projects and actions to support the marine and 13. Waterfront Auckland’s Statement of Intent (SoI) to 2015 includes the Vos Yard and waterspace development Stage 1 as a “Confirmed Strategic Project / Public Project” with Capex budget (public) LTP 2012 – 2022 $1m. As outlined in the Introduction, this proposal is in Waterfront Auckland’s current Annual Business Plan 2012 / 13 as an “Agreed project.” 14. This proposal is significantly aligned with Waterfront Plan objectives of “Public Waterfront,” “Smart Working Waterfront,” “Blue Green waterfront,” and “Liveable Waterfront.” This is in particular with regard to the Culture and Heritage aspects of a Public Waterfront and providing a place for authentic and gritty waterfront activities. 15. The key project outcome is preserving the maritime heritage of the Vos Yard site which directly contributes to the Auckland Plan’s Strategic Direction 4: “Protect and Conserve Auckland’s Historic Heritage for the benefit and enjoyment of present and future generations.” 16. A facilitated Investment Logic Mapping (ILM) workshop for the Vos Yard Development and waterspace was held on 21 March 2013. The investment benefits delivered by this project are: Conservation of Vos Yard; a well utilised public facility with debt repaid, creation of a public destination with regular visitation and Vos Yard becoming an exemplar heritage organization. 17. One risk has been assessed as inherently “High” in the proposal: Consenting risk from a public safety aspect due to proximity of the Bulk Liquids operations (lease expiry / exit ~ 2022). However, given the mitigation strategies in place and normal business processes will apply, it is anticipated that this will not cause significant project disruption. Economic Case 18. This proposal is predicated on the Vos & Brijs Development Study, July 2011, Option A as agreed by the Waterfront Auckland Board (refer Attachment 5). Option A separates the heritage component of the Sanford site. The subdivision has now been complete utilising LTP budget of $1m. 19. A high level Cost Benefit Analysis (CBA) was appraised (refer Attachment 9) based on the SGS Economics and Planning (Melbourne) framework. The BCR is 1.8:1.5 and does not monetise a number of smaller benefits that the new Marine Heritage Centre will afford. While this is a positive BCR for a public project, the overarching benefit also remains; that the last wooden boatbuilding shed in New Zealand is conserved. 20. The opportunity cost (used in the BCR) to Waterfront Auckland is the foregone commercial market rental achievable for the Vos site (land and waterspace) which could otherwise be achieved; $5.3m to 2042; NPV cost of ($1.58m).