People’s Palace needs more People asking Questions

Freo Massive removes Email: People’s Palace or Murdochs’ Money Machine

The last email you received from the Fremantle Society responded to the mayor’s statement that any stallholders aggrieved by the management of the markets should complain to the government. It also raised other issues about efforts to help stallholders.

That email was posted on Freo Massive yesterday, but has been removed.

If you believe that the Fremantle Markets is indeed the “People’s Palace” as the previous email claimed, perhaps you could remind Freo Massive that it is supposed to be more than a cheer squad for the council.

Questions Put to Fremantle Council

Tom Cockle, principal of an investigative accounting firm, has put the following questions to council as he seeks further information in order to help stallholders at the markets. Following these questions is an earlier answer given by council to Mr Cockle’s first questions.

Dear Glen,

Thank you for the below information. In order to complete my understanding of the Fremantle Markets commercial arrangements, I have listed below 21 additional questions. As Levi’s business advisor, I have also cc’d Levi, his lawyer Shanti Rubens and my associate Paul Ford.

Most of my questions concern council’s responsibility for ensuring compliance of the Fremantle Markets Operating Strategy for two reasons:

Firstly, the Operating Strategy document is an “essential provision” of the Lease. In effect, this means any non-compliance of the Operating Strategy could be a significant breach of the Lease.
Secondly, the council, as the landlord of the government owned property, is the only party who is contractually responsible for the oversight of the Operating Strategy and ensuring FMPL complies with the terms of the Lease/Operating Strategy (many of these terms are outlined below in bold italics).

Operating Strategy – Fair Market Rent

Clause 4.6 “Rent charged for a stallholding is to be a fair market rent negotiated between the Market Manager and the stallholder and rent review provisions in licence agreements must be capped so that a stallholder’s rent cannot increase through a rent review by proportionally more than any increase in the Market Manager’s rent under the Lease during the period between the stallholders’ rent review and the stallholders’ previous rent review.”

Can the Fremantle Council please provide a copy of their procedure or guideline document which is used to review and assess FMPL’s compliance to clause 4.6 “Fair Market Rent” of the Operating Strategy?
Can the Fremantle Council please advise how often these Fair Market Rent compliance reviews are scheduled to occur?
Can the Fremantle Council please provide copies of the ‘assessment and results’ documents (including copies of any independent valuations/estimates) for all the Fair Market Rent reviews undertaken since the commencement of the Head Lease in 2008?

Operating Strategy – Object

“To maintain a vibrant and interesting retail market incorporating a diverse range of highly individualised stallholdings with a focus on attracting and retaining stallholders with unique or limited outlet products.”

Can the Fremantle Council please provide a copy of their procedure or guideline document which is used to review and assess FMPL’s compliance to the main Object of the Operating Strategy, in specific regard to the focus on “retaining stallholders with unique or limited outlet products”
Can the Fremantle Council please advise how often the compliance reviews for “retaining stallholders with unique or limited outlet products” are scheduled to occur?
If not contained in the procedure or guideline document, can the Fremantle Council please confirm if the review includes both stall holders that have left of their own accord and also stall holders who have been evicted?
Can the Fremantle Council please provide copies of the assessment and results documents for all the reviews of “retaining stallholders with unique or limited outlet products” undertaken since the commencement of the Head Lease in 2008?

Operating Strategy – Working Group

Clause 1.4 “By 31 December in each year the Working Group will provide a report to the Council of the City on the past year’s operations, plans for the ongoing operation and any proposed amendments to this Strategy and the key performance indicators.”

Can the Fremantle Council please provide copies of the annual Working Group reports since the commencement of the Head Lease in 2008?
Can the Fremantle Council please provide copies of all the Working Group meetings minutes and agenda items since the commencement of the Head Lease in 2008?
Can the Fremantle Council please provide copies of all versions of the Key Performance Indicators since the commencement of the Head Lease in 2008?

Operating Strategy – Fremantle Markets Rent Account

Clause 2.3 “The City will set aside the increase of rent derived from the Premises for the first ten years of the Lease as a minimum to assist in obtaining external funding for implementing the Plan.”

Can the Fremantle Council please confirm the amounts of increased rent set aside for the first 10 years of the lease?
Can the Fremantle Council please advise where these figures can be found in the Council Annual Financial Statements?

Operating Strategy – main document

Can the Fremantle Council please provide all versions of the approved Operating Strategy documents (includes amendments approved in the 27th June 2012 council minutes)?
Many references in various documents (eg minutes, lease etc) have been made to the Fremantle Markets Operating Strategy. However, the lease does refer to a Fremantle Markets Operating Strategy Agreement. If this is in fact a separate document to the Operating Strategy, can the Fremantle Council please provide a copy of this document?

Lease / Operating Strategy – Banning Orders

Can the Fremantle Council please provide a copy of any agreed procedure or guideline document for the banning of members of the public from the Markets?
If there are agreed procedures or guidelines, can the Council confirm if these documents provide guidance over the duration / severity of the bans? (Note: VA has been banned for 5 years).

Strategic and General Services Committee Minutes – 10 March 2010

In reference to the Independent Arbitrator’s review of the two fair market rent valuation reports (one from the stall holders and one from FMPL), can the Fremantle Council please provide a copy of the Independent Arbitrators “shorter” report?

Questions relating to your email below

Can the Fremantle Council please confirm if the $813,000 rent figure for last year related to the year ended 30thJune 2018? Note: the Sunday Times reported $813,651 for the year ended 30th June 2019.
Can the Fremantle Council please advise the total amount of building improvement expenditures spent by FMPL since the commencement of the Head Lease in 2008? Note: the Lease identified capped expenditure limits of $87k roof painting, $65k power transformer, $100k building façade and $50k exhaust fans (if required).
Can the Fremantle Council please confirm if the $900,000 conservation works has been funded by the $400k and $500k loans taken out by the council in 2011/2012?
Can the Fremantle Council please provide a breakdown how the $900,000 conservation funds were allocated across the different areas of the Fremantle Markets building?

I look forward to hearing from you at your earliest convenience.

Kind Regards

Tom

Earlier answer from council:

Thank you for your recent comment on the matter involving Fremantle markets stallholder Levi’s Donuts.

The lease between the City of Fremantle and Fremantle Markets Pty Ltd (FMPL) was signed on 10 March 2008. The lease expires on 31 October 2026.

The lease between the City and FMPL stipulates FMPL will pay the City an annual base rent (paid in monthly instalments) over the term of the lease.

The lease states the base rent will be increased every 18 months during the term of the lease, specifically by…

• CPI plus 1% for the first two rent reviews

• CPI plus 1.5% for the next two rent reviews

• CPI plus 2% for all subsequent reviews

In addition to the base rent, FMPL must also pay an Annual Performance Adjustment when the base rent falls below 26% of its annual gross revenues in the previous year.

Total rent received by the City from FMPL last year was $813,000.

The City of Fremantle included regular rent increases as a condition of the head lease to secure a stable revenue source from one of our most important assets and to protect the financial interests of the City’s ratepayers.

The lease required FMPL to undertake substantial improvements to the building – like improving ventilation and air flow, power supply and façade conservation works – resulting in substantial savings for ratepayers. The lease also requires FMPL to properly maintain the asset, which also delivers considerable savings to ratepayers. Since the commencement of the lease the City has undertaken significant conservation works on the building to the amount of $900,000. These include repairing the façade and street front shops, repairs to the external stone walls and windows, and significant improvements to water capture and drainage to protect the integrity of the walls and footings into the future.

The lease also includes a Fremantle Markets Operating Strategy. This provides guidance on the general operation of the market and does not direct the operation of any single stall. The City does not have any involvement with the initial rents FMPL stallholders agree to when first entering an agreement, except that it should be “fair market rent” – which is determined by two willing parties prepared to enter into an agreement. The lease and operating strategy specify that a stallholder’s rent can’t go up by proportionally more than FMPL’s base rent increase as set out in the lease, rents are to be set at market value and that sub-leases up to five years may be provided. Lease terms and the rents charged are a matter for FMPL and stallholders to negotiate based on current market conditions. The markets currently have near 100 per cent occupancy, which would indicate there is strong demand for stalls.

The below is an excerpt from the operating strategy;

Stall-holdings

4.2 The Markets shall maintain at least 12.5% ratio of stalls as “Casual Stall-holdings”

within the Markets to provide access for day and weekend traders.

4.3 A strategy for identifying and attracting desired stallholdings in accordance with the

object of this operating strategy must be developed by the market manager for

consideration by the Working Group.

4.4 The Market Manager must only let stallholdings under the terms and conditions

provided for in the forms of sub-lease or license agreements for casual and

permanent stallholdings.

4.5 The terms and conditions of sub-leases and license agreements must comply with the

Commercial Tenancy (Retail Shops) Agreements Act 1985 (“the Act”) and include

dispute resolution provisions that refer disputes, subject to section 11(5) of the Act, to

the State Administrative Tribunal for resolution.

4.6 Rent charged for a stallholding is to be a fair market rent negotiated between the

Market Manager and the stallholder and rent review provisions in licence agreements

must be capped so that a stallholder’s rent cannot increase through a rent review by

proportionally more than any increase in the Market Manager’s rent under the Lease

during the period between the stallholders’ rent review and the stallholders’ previous

rent review.

At the time of adopting the lease the general consensus of stallholders was for security of tenure through long term sub-leases. This has been provided for in the head lease with sub-leases up to 5 years. However, not all stallholders wanted long term leases. There is also a need to keep short term options available to allow for new stalls to take up spaces and test their product, and also to allow the markets to remain “fresh” with regular changes in the product mix.

The Fremantle Markets pay the same property rate on the same basis as every other commercial property in central Fremantle. Over the past five years the City of Fremantle’s commercial rate has increased by an average of 1.78 per cent per year.

Like all leases, the tenant is afforded the entitlement to operate under the conditions of its lease without interference. The City believes the rights of appeal and dispute resolution by profession state government sanctioned authorities is better placed to resolve issues between the tenant and individual stallholders.

Kind regards
Glen Dougall
Director City Business

Originally posted by the President 17 June 2019.

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