A team of east end business people has submitted a proposal to redevelop Newcastle ocean baths which highlights the commercial challenges of overhauling the heritage site on a "short" 21-year lease.
The separate owners of hospitality businesses Scotties, The Falcon and The Kiosk at Newcastle beach have lodged a bold plan to redevelop the baths pavilion after City of Newcastle called for expressions of interest in the project in November.
Their proposal adheres to the intent of the council EOI document by including a restaurant, function centre, gym and cafe or kiosk in a "Beach, Body and Baths Club" inside a new two-storey building behind the pavilion's heritage-listed facade.
The cost of their plan, estimated at $10 million to $12 million, would be subsidised by installing $4-an-hour council parking meters along Shortland Esplanade from Newcastle beach to Nobbys, a zone which falls outside the lease area.
The proponents would also sell shares in the development to the Newcastle public and make money from 60 parking spaces in the baths car park, which is included in the lease area.
One of the business people behind the proposal, prominent Newcastle solicitor Rob Faraday-Bensley, admitted the funding model was "outside the box" but said the project was constrained by its 21-year lease, which is the maximum allowed under the relevant legislation.
We're not desperate to do it. Our approach was that, if it was going to happen, we wanted to do it in a way that was appropriate and sympathetic and that all the community benefited from.
Business people told the Newcastle Herald in November that the project was unlikely to be viable unless developers were allowed to pay only peppercorn rent then own the building after 21 years.
Mr Faraday-Bensley's plan offers two financial models, one in which the developers receive the parking-meter revenue from Shortland Esplanade and fund the development and the other in which the council receives the parking revenue but makes a "significant capital contribution" to redeveloping the pavilion.
Under both models, the lease would oblige the council to buy back the new building "for a price equal to the original development build cost" if the proponents did not have their lease renewed for another 21 years.
Even if the developers had the lease renewed, the council would be obliged to buy back the building at the end of the second lease period.
Mr Faraday-Bensley, a high-profile figure in Newcastle cricket and rugby circles and a member of East End Board Riders Club, was a legal advisor to the Merewether Surf House Unit Trust but said that project did not have the "inhibiting factor" of a 21-year lease.
"That's a challenge for the council because it's such a great site it really deserves to be done properly if it's going to be done," he said.
"I don't think they're going to be able to do it in a pure private-enterprise way without thinking outside the square. How do you do this in a way that stacks up economically?"
Mr Faraday-Bensley said other challenges included negative community sentiment about redeveloping the area, retaining the existing facade, exposure to the elements and the "remote nature" of the site.
Converting free parking beside the beach into paid parking would raise eyebrows, but "ultimately it's about saying, well, somehow this has to be funded, and how do you do it?"
"We're not desperate to do it. Our approach was that, if it was going to happen, we wanted to do it in a way that was appropriate and sympathetic and that all the community benefited from," he said. "Also, we're understanding of the predicament council have."
Mr Faraday-Bensley runs The Kiosk with wife Sigrid and friends Daniel Mason and Luke Marshall. The other business people behind the proposal are Scotties' mother-and-son owners, Jenny Roberts and Jack Magin, and The Falcon's Mike Galvin and Brendhan Bennison.
Their proposal says the public capital raising would allow residents to take an ownership interest in the company leasing the baths pavilion. Those who owned shares would start to see a return on their investment after several years.
"Obviously there's financial benefit in it for us, because we're the ones coming out with the concept and putting the time and energy into it," Mr Faraday-Bensley said.
The Newcastle Herald understands the proposal has received a cool response in the council.
The council's unheralded announcement of the EOI phase, accompanied by an architect's concept design which later drew criticism from lord mayor Nuatali Nelmes, prompted a public backlash.
Opponents have gathered 11,600 signatures on an online petition calling on the council to cancel the EOI process, which included the Merewether ocean baths pavilion, and consult the community.
The council says on its website that an EOI process is the "best way to explore" funding options for the ageing baths pavilions, which require "significant works" to bring them up to modern standards.
Cr Nelmes said in November that a commercial partnership "could allow us to significantly enhance and manage these precious facilities in a financially responsible way".
The redevelopments must retain the Newcastle facade and include new public change rooms, disabled access, car parking, new seating, shading and community facilities at both sites.
The council says it will form a panel to review the EOI submissions and decide whether to proceed to tender.
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