So much for due diligence …

It was in November, 2015 the Bega Valley Shire Council (BVSC) announced the sale by public tender of two parcels of council owned land in Main Street, Merimbula, including the site of the old Library & Squash Courts. Council released a comprehensive Information Memorandum in support of the tender process.

Around six months later on May 18th, 2016, BVSC resolved to execute an Option Deed in favour of Romfam Investments Pty Ltd (Romfam), granting Romfam an exclusive 12 month option, so as to allow Romfam to undertake necessary due diligence prior to purchasing the sites.

The Bega Valley Shire Residents & Ratepayers Association (BVSRRA) recognises council’s apparent support of development at any cost. It therefore understands council’s willingness to enter into arrangements with developers to accommodate their needs & encourage investment in support of this approach, allegedly to the benefit of residents & ratepayers.

It is with that in mind that the BVSRRA noted council’s decision to give Romfam an exclusive 12 month option to purchase the land, notwithstanding the stipulation contained in its Information Memorandum that “council is looking for a purchaser who is able to meet a stipulated development timeframe resulting in an ongoing legacy of employment creation that benefits Merimbula’s future” & that a key tender evaluation criteria was “a demonstrated ability/capacity to activate development immediately”, & notwithstanding the BVSRRA’s belief that if the necessary due diligence was undertaken by a competent party, then it should not take more than three months to complete.

Nevertheless, as previously observed, council clearly believes that it is important it does everything within its power to accommodate commercial developers as part of its strategy to serve & protect the best interests of residents & ratepayers.

And so it was that the Option Deed was subsequently executed with an expiry date of June 30th, 2017 & with no penalty to Romfam attached should it determine not to proceed with the purchase.

This is where things get interesting.

On April 21st, 2017, an email was sent to a council planning official formally requesting a six month extension to the Option Deed.

What is unusual about this request is that it also confirmed that Romfam was committed to purchasing the sites but wanted the extension so that it could “move towards obtaining the DA”.

So, now we have a potential purchaser of the sites, having been granted a 12 month exclusive option so it could complete its due diligence & having completed that due diligence, asking for an extension of its option so it can prepare its DA, with absolutely no obligation for it to proceed with the purchase & with absolutely no financial consideration being offered to residents/ratepayers should it decide not to proceed.

The BVSRRA thought that this request was unreasonable & suggested that if council was of a mind to grant the extension, then it should pursue a financial arrangement whereby the financial interests of residents & ratepayers were afforded some protection in return, should Romfam ultimately determine not to proceed with the purchase. Such an arrangement would also compensate residents & ratepayers for the costs of the exercise, should it not proceed.

Needless to say, when council met to consider the Romfam request on May 17th, the matter was hastily moved into ‘secret session’.

The BVSRRA notes that the matter has returned to the agenda for council’s ordinary meeting to be held next Wednesday, August 16th, & that council has already agreed to an extension of the option by a further seven & a half months.

While the BVSRRA is disgusted by council’s decision to grant an unconditional extension to the option period, ensuring that all of the risks attached to the issue rest on the shoulders of residents & ratepayers, it is not surprised given council’s clear determination to do everything in its power to accommodate commercial developers.

Given its enthusiasm for rent-seeking proposals from commercial developers, the BVSRRA cannot help but wonder if council might wind-up agreeing to ‘gift’ the Main Street land to Romfam or even pay for the development itself in order to ensure that it proceeds.

To add insult to injury, residents & ratepayers might wonder where the benefit of all this is to them when council has agreed to a sale price for the lots of $1.3M, which is 35% below their value a decade ago & notwithstanding that current property values in Merimbula have never been higher.  

The BVSRRA makes no secret of the fact that it has opposed the sale of the land from the outset, given that it was originally purchased to provide for future community facilities; that the proposed development will not result in the best use of the land & will have a material negative impact on the viability of other parts of the commercial centre - all because council does not have the vision or will to develop a proper integrated plan or strategy for Merimbula that would prevent that from happening. 

The BVSRRA believes that this is one of the worst commercial decisions taken by council.

Fraser Buchanan, BVSRRA