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Property standoff: No end in sight to Woden’s zombie apocalypse

By Ian Bushnell - 18 August 2017 10
Building

Seven and a half years and still standing: the abandoned Alexander building in Woden.

It looks like a set from World War Z. The only thing missing are the zombies, but they probably come out at night.

For seven and a half years now the Alexander and Albemarle offices in Woden have stood vacant, the site fenced off but subject to the ravages of time, vandals, and graffiti. They are pock marked with barely a window left unsmashed.

It is a towering edifice of urban decay literally only a stone’s throw from gleaming new offices and community facilities such as the ageing but busy library.

Obvious shelter for the homeless and a haven for criminal or other dubious activity, the site is so forbidding that even the police are loathed to enter and will only go in during a life-threatening situation.

But don’t expect Woden’s zombie apocalypse to be coming down and redeveloped anytime soon.

The owners, Doma Group, say the ACT’s taxes and charges regime makes the more than 1ha site financially unviable to demolish and redevelop.

It’s a case of we told you so to the Government. “Industry some years ago warned the Government that the proposed change from the change of use charge to the lease variation charge would have a detrimental effect on older building stock in the city and the town centres, rendering larger old building both physically and financially redundant,” Doma’s General Manager Development, Gavin Edgar, said.

He said the Government was encouraging development by adjusting the Territory Plan, but the key planning lever it controlled was the cost of development and that was in the hands of Treasury.

“The change to the system to the Lease Variation Charge (LVC) effectively doubles the tax on the development and renders it not feasible,” Mr Edgar said.

On top of this Icon Water announced it would charge an additional amount for any redevelopment to pay them to service the land.

“Logic would say that this should be discounted from the LVC payable, but the Territory has not acknowledged and instead maintains the fiction that the Icon charges are independent of development taxes and charges that it levies,” he said.
“More recently, the Territory unexpectedly announced even higher charges for redevelopment.”

Mr Edgar said a transitional period was introduced but the exemption only applied to properties purchased between 1 July 2016 and 30 June 2017, ”making it even less likely for older buildings to be redeveloped”.

The Government, however, is not budging, with a spokesman saying the ACT Government has no plans to change its position on the lease variation charge.

The spokesman said the site was on a privately leased site and the Government was committed to the revitalisation of the Town Centre through the revised Woden Town Centre Master Plan and public infrastructure in the area.

“The ACT Government will continue discussions about redevelopment opportunities with the Doma Group and other building owners in the Town Centre to realise the vision for a renewed and vibrant town centre,” the spokesperson said.

However, Mr Edgar said Woden would probably have to wait for light rail before the Government’s economic attention turned there.

“The focus of the Government has been on Government-owned greenfield and infill sites. Neither the new City Renewal Agency nor the Suburban Land Agency have any focus on the non-Civic town centres. Proper economic attention will likely be focused on Woden only once the light rail extension makes its way south of the lake,” he said.

building

Doma’s preference is for an office building but it is looking at other options including mixed-use, high-rise residential, although Mr Edgar says that may not be the moneyspinner it sounds with so much land being rezoned for high-density housing in the area, resulting in a potential oversupply of apartments.

“The charges and costs to bring an existing building back to a vacant site have not dropped to reflect these new challenges and in fact have increased, resulting in most of Canberra’s office vacancy sitting in the worst grade buildings,” he said.

“Financiers will often be the final arbiters in these decisions and if the costs, including the Government taxes, charges and levies, are not offset enough by the revenues, the development simply cannot proceed.”

The flight of both Federal and ACT Government workers from Woden in recent years has not helped although this may be turning around with the injection of 1100 ACT public servants back into the Town Centre.

But according to Doma, any project remains in the hands of the ACT Treasury and the market.

“The development of the site could easily be accelerated should there be a requirement for a new pre-committed office requirement. Otherwise the project timing is very much a factor of market influences,” Mr Edgar said.

Woden Valley Community Council president Fiona Carrick said the site was a symbol of the neglect the area had suffered in recent years and was deterring investment in the Town Centre.

“How do we induce demand when we have that in our midst,” she said.

Ms Carrick said the Government should take responsibility and find a solution to the problem and negotiate with Doma on the lease variation charge.

“The Government and Doma should show some respect for the Woden community and demolish the buildings,” she said.

“Life is not always about commercial matters, there are social issues in a community to be considered also. Even a developer has a social responsibility to the community.”

Ms Carrick said children were entering the site and putting themselves in danger.

fenced off building

Mr Edgar said the site had been made as safe as possible with weekly fence inspections, removal of all loose items and furniture from the buildings and boarding and bricking up of openings. “There are security patrols with dogs and infrared cameras, and the police have dealt with many trespassers,” he said.

Access Canberra said it had received two concerns about the buildings this year – one on fencing and the other on the aesthetics of the site. “From a safety perspective, site security and fencing for these buildings is considered adequate at this time,” the spokesperson said.

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10 Responses to
Property standoff: No end in sight to Woden’s zombie apocalypse
tim_c 4:32 pm 31 Aug 17

chewy14 said :

The simple fact is they’re holding it because they believe they will make more money out of it by doing so.

Developers will always claim something isn’t “viable” to develop when they want the government to give them something or change planning rules to allow them to do whatever they want. In reality, rather than making a loss, this mostly means they simply won’t make the profit margins they want to.

If they were truly bleeding excessive amounts of money, they would sell.

Who to? Who’s going to buy a run-down property that no one will rent, that is unviable to redevelop?

chewy14 11:39 am 31 Aug 17

tim_c said :

chewy14 said :

Economic reality makes you think that.

If the holding costs were so significant, they would either be developing the sites or trying to sell.

The only reason to hold onto them is that they believe they’ll make more money in the long term by doing so.

Economic reality says that if you’ve got a site that’s not viable to redevelop, you’re not going to spend a hundred million dollars or so when the returns will be less than the outlays.

You could try to sell it off to cut your losses, but I can’t really imagine a lot of developers lining up to buy a property that’s not viable to redevelop.

A possible reason they could be just holding onto it because they believe they’ll lose less money than if they try to redevelop it or give it away. So I guess you’re right in one way – if you reduce your losses, in accounting terms you’re making more money that way.

The simple fact is they’re holding it because they believe they will make more money out of it by doing so.

Developers will always claim something isn’t “viable” to develop when they want the government to give them something or change planning rules to allow them to do whatever they want. In reality, rather than making a loss, this mostly means they simply won’t make the profit margins they want to.

If they were truly bleeding excessive amounts of money, they would sell.

tim_c 1:23 pm 30 Aug 17

chewy14 said :

Economic reality makes you think that.

If the holding costs were so significant, they would either be developing the sites or trying to sell.

The only reason to hold onto them is that they believe they’ll make more money in the long term by doing so.

Economic reality says that if you’ve got a site that’s not viable to redevelop, you’re not going to spend a hundred million dollars or so when the returns will be less than the outlays.

You could try to sell it off to cut your losses, but I can’t really imagine a lot of developers lining up to buy a property that’s not viable to redevelop.

A possible reason they could be just holding onto it because they believe they’ll lose less money than if they try to redevelop it or give it away. So I guess you’re right in one way – if you reduce your losses, in accounting terms you’re making more money that way.

chewy14 1:31 pm 25 Aug 17

tim_c said :

watto23 said :

I suspect its not costing Doma group any money right now and they are using it as a political stick, because they don’t like the rules. Property developers don’t live on thin margins so most of their complaining is just trying to maximise their own profits. So they may not consider it top priority now and will use public complaints and the eyesore to try and get their way. The government could just introduce a tax for derelict buildings and convince them to redevelop 🙂

What makes you think that?!? It’s costing them money to sit on those buildings: paying rates and land tax, hiring construction fences and security patrols, and far more significantly: the capital cost of the ownership of the buildings – try paying a commercial interest rate of at least 7% p.a. on a few tens of millions of dollars and then come back and say “It’s not costing them any money right now” – even if they haven’t borrowed money to purchase the buildings, it still represents funds that they can’t use for another project.

Perhaps if we had some laws against vandalism, graffiti and trespassing then we’d probably hardly even notice the buildings were even abandoned!

Economic reality makes you think that.

If the holding costs were so significant, they would either be developing the sites or trying to sell.

The only reason to hold onto them is that they believe they’ll make more money in the long term by doing so.

tim_c 10:30 am 25 Aug 17

watto23 said :

I suspect its not costing Doma group any money right now and they are using it as a political stick, because they don’t like the rules. Property developers don’t live on thin margins so most of their complaining is just trying to maximise their own profits. So they may not consider it top priority now and will use public complaints and the eyesore to try and get their way. The government could just introduce a tax for derelict buildings and convince them to redevelop 🙂

What makes you think that?!? It’s costing them money to sit on those buildings: paying rates and land tax, hiring construction fences and security patrols, and far more significantly: the capital cost of the ownership of the buildings – try paying a commercial interest rate of at least 7% p.a. on a few tens of millions of dollars and then come back and say “It’s not costing them any money right now” – even if they haven’t borrowed money to purchase the buildings, it still represents funds that they can’t use for another project.

Perhaps if we had some laws against vandalism, graffiti and trespassing then we’d probably hardly even notice the buildings were even abandoned!

Woden Valley Communi 12:59 am 22 Aug 17

HiddenDragon said – ‘A location like this – “mere footsteps (in real estate parlance) from shops and restaurants – could lend itself to something distinctly better and become the sort of place that people would actually enjoy living in, and would pay for accordingly’.

Wouldn’t it be terrific if the ACT Government could plan Woden to have some basic community facilities (CIT, community/arts centre, sports hall etc..) and ‘nice’ places that people want to be. Then there might be demand for offices and apartments and Doma Group could develop their derelict buildings.

HiddenDragon 5:16 pm 21 Aug 17

“Doma’s preference is for an office building but it is looking at other options including mixed-use, high-rise residential, although Mr Edgar says that may not be the moneyspinner it sounds with so much land being rezoned for high-density housing in the area, resulting in a potential oversupply of apartments.”

There’s probably already an oversupply of sorts in that area, particularly when it comes to what are essentially standardised apartments aimed at investors and people who basically just want somewhere to sleep and to have a few meals when they’re not working or doing more interesting things elsewhere. A location like this – “mere footsteps (in real estate parlance) from shops and restaurants – could lend itself to something distinctly better and become the sort of place that people would actually enjoy living in, and would pay for accordingly.

chewy14 2:29 pm 21 Aug 17

Woden Valley Community Council said :

There has to be a solution to the derelict Alexander and Albemarle buildings in Woden.

If Doma considers the ACT Government’s taxes and charges (the Lease Variation Charge – LVC) make the site financially unviable to demolish and redevelop, then why not stage the project.

Stage 1 – demolish the buildings. If Doma Group does not have the cash flow then the ACT Government could loan them the required funds, which could be paid back when the land is developed.

Stage 2 – development to be undertaken in the future when financially viable. At this point the loan could be returned and the LVC determined and paid.

Why should the ACT government be picking development winners and losers?

It looks like the owners are just whinging that they can’t make enough money at the moment and using it as leverage to pressure the ACT government, all the while knowing that the land value is increasing, apartments are oversupplied at the moment and the light rail coming to Woden will boost their profits significantly.

watto23 7:58 pm 19 Aug 17

I suspect its not costing Doma group any money right now and they are using it as a political stick, because they don’t like the rules. Property developers don’t live on thin margins so most of their complaining is just trying to maximise their own profits. So they may not consider it top priority now and will use public complaints and the eyesore to try and get their way. The government could just introduce a tax for derelict buildings and convince them to redevelop 🙂

Woden Valley Communi 12:08 am 19 Aug 17

There has to be a solution to the derelict Alexander and Albemarle buildings in Woden.

If Doma considers the ACT Government’s taxes and charges (the Lease Variation Charge – LVC) make the site financially unviable to demolish and redevelop, then why not stage the project.

Stage 1 – demolish the buildings. If Doma Group does not have the cash flow then the ACT Government could loan them the required funds, which could be paid back when the land is developed.

Stage 2 – development to be undertaken in the future when financially viable. At this point the loan could be returned and the LVC determined and paid.

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