Policy: Council

Policy: Council

COMMERCIAL PROPERTY POLICY

(i)

COMMERCIAL PROPERTY POLICY

Policy Statement Blue Mountains City Council manages dealings with commercial property that it owns, manages or acquires in accordance with all relevant legislative requirements, the Council’s adopted Community Strategic Plan and the framework set out in this Policy. This includes all strategic, investment and corporate property. Commercial property dealings will be conducted efficiently and in a way which:

support the objective of generating income for the Council through property development / investments;

facilitate local business activity, including tourism and centre based renewal, where appropriate;

align to the principles of equity and transparency;

manages property income, in order to sustain capital investment and renewal; and

considers Council’s future objectives within relevant strategic plans. This Policy is supported by a Commercial Property Policy Procedure (the Procedure). The Procedure is a fluid and live operational document that can be adjusted and updated to reflect best practice in the management of property and land. This Policy refers to Commercial Property only; it is not intended to guide Council in the management of its Community Property and Facilities, which will be the subject of a separate Policy.

Strategic Direction The preferred operational strategic direction is to rationalise and divest property interests to benefit the operational and community needs of the municipality. Triggers and methods for assessment of commercial property and community property utilised for a commercial purpose, are provided within this Policy, the Property Investment Panel Terms of Reference, and the Commercial Property Policy Procedure. Overall strategic direction shall be guided by the recommendations of the elected Council body.

(ii)

Policy Ref. No:

This information (number) is from the Pathway Policy Register.

PCT Endorsement Date: 1 June 2018

TRIM Record No:

18/118320 ELT Meeting Date(s): 14 June 2018 27 June 2018

Distribution: Public Public Exhibition Details:

9 July 2018 to 16 August 2018

Status: Adopted Council Meeting Date:

26 June 2018 18 September 2018

Scope: Council staff and users of Council property

Council Minute No: 341

Lifespan: First twelve (12) months, thereafter every four (4) years or in line with Council election(s)

Responsible Directorate/Group:

City & Community Outcomes

Next review:

August 2019 Contact Position:

Manager, Community & Economic Outcomes

Version History

Version Adoption Date Reason for Change

2018 18 September 2018

(Minute no. 341)

Policy updated to reflect submissions, ready for adoption

by Council

2018 26 June 2018 Policy endorsed for Public

exhibition

2018 1 June 2018 Policy Control Team

endorsement

2005 3 December 2002 Revision

2002 3 December 2002 Periodic update

(iv)

Definitions Term Definition

Agreement A negotiated and binding legal arrangement between parties including a lease, licence etc.

Community Land “Community land” means land that is classified as community land under Division 1 of Part 2 of Chapter 6 of the Local Government Act 1993 (NSW)

Community Property Land or building held as a part or whole asset that is utilised for the delivery of services and facilities that benefit the community

Commercial Property Land or building held as a part or whole asset generally utilised for income generating purposes

Trustee In addition to every person appointed or constituted trustee by act of parties, by order or declaration of a court, or by operation of law

Public Authority A public authority constituted by or under an Act, a government department or a statutory body representing the Crown

Occupier Includes a person having the charge, management or control of premises, land or property

Owner In relation to Crown premises, land and property, means the Crown Department, and any other than premises, land and property, other than Crown land

ELT Executive Leadership Team

Investment Property Land or building held as a part or whole asset held to earn rentals or capital appreciated or both

Lease An agreement between Council and another party offering an exclusive use

Licence An agreement between Council and another party offering non-exclusive use

Market Rent Rent based upon valuation advice by a suitably qualified professional or market estimates from real estate agents

Operational Land “Operational land” means land that is classified as operational land under Division 1 of Part 2 of Chapter 6 of the Local Government Act 1993 (NSW)

Property Investment Fund (PIF)

A mechanism to facilitate actions for property held or utilised for a commercial purpose by Council

Property Investment Panel (PIP or the Panel)

An internal panel utilised to assess funding, investment and divestment programs for commercial buildings or community buildings utilised for a commercial purpose

Premises Review Panel (PRP)

An internal panel assesses community organisations and their use of buildings held by Council

Property Dealing Or Property Related Activity

For the purpose of this policy, a property dealing or property related activity refers to any one or more of the following:

Property sales;

Property acquisitions;

Easements and right of way management;

Permanent road closures and sale or leasing

Leases & licencing arrangements in relation to property;

Research and advisory service by or to Council; and

Entrepreneurial or other activities relating to Council’s properties

Proponent A person who puts forward a proposal or proposition to Council

(iv)

in favour of something

Real Property Any land or building owner under the care, control and management of Council that could be leased or licensed to a Tenant under an Agreement

Strategic Property Property required for long term aims and interests and the means of achievement considered in Strategic Plans

Tenant A person or entity that occupies a property under Agreement

LG Act Local Government Act 1993 (NSW)

Procedure Council’s Commercial Property Procedure

Use The primary use of the Property, for example, future development, child care, community use, etc.

(iv)

Key Documents

Blue Mountains City Council, Community Strategic Plan 2035

Blue Mountains City Council, Asset Management Policy

Blue Mountains City Council, Investment Policy

Blue Mountains City Council, Community Buildings Manual

Blue Mountains City Council, Commercial Property Procedure

Blue Mountains City Council, Property Investment Panel – Terms of Reference

Key Legislation

Aboriginal Land Rights Act 1983

Conveyancing Act 1919 (NSW)

Crown Lands Management Act 2016 (NSW)

Independent Commission Against Corruption Act 1988 (NSW)

Land Acquisition (Just Terms Compensation) Act 1991 (NSW)

Local Government (General) Regulation 2005 (NSW)

Local Government Act 1993 (NSW)

Native Title Act 1993

Real Property Act 1900 (NSW)

Residential Tenancies Act 2010 (NSW)

Retail Leases Act 1994 (NSW)

Retail Leases Amendment (Review) Act 2017 (NSW)

Roads Act 1993 (NSW)

Telecommunications Act 1997 (Cth)

Valuation of Land Act 1916 (NSW)

COMMERCIAL PROPERTY POLICY – September 2018 1

Table of Contents DEFINITIONS ......................................................................................................................... 2

1 OVERVIEW ................................................................................................................... 2

2 SCOPE .......................................................................................................................... 2

2.1 Risk & Benefit Analysis ............................................................................................................... 3

3 PROPERTY DECISION-MAKING.................................................................................. 3

3.1 Property Investment Panel .......................................................................................................... 3

Refer to the Procedure for specific direction for property matters and procedures. .......................... 4

3.2 Sales, Disposals & Acquisitions .................................................................................................. 4

3.3 Easements .................................................................................................................................. 4

3.4 Access over Public Parking Areas .............................................................................................. 4

3.5 Permanent Road Closures .......................................................................................................... 5

3.6 Leases and Licences .................................................................................................................. 5

3.7 Building Materials and Products.................................................................................................. 5

3.8 Land ............................................................................................................................................ 6

4 INDIGENOUS PROPERTY CONSIDERATION ............................................................. 6

5 PROBITY ....................................................................................................................... 6

5.1 Maintaining Impartiality ............................................................................................................... 6

5.2 Maintaining Accountability and Transparency ............................................................................ 6

5.3 Managing Conflicts of Interest ..................................................................................................... 6

5.4 Maintaining Confidentiality .......................................................................................................... 7

5.5 Obtaining Value for Money .......................................................................................................... 7

6 THE PROPERTY INVESTMENT FUND ........................................................................ 7

6.1 Retention of Funds ...................................................................................................................... 7

6.2 Performance Benchmarks ........................................................................................................... 8

6.3 Distribution of Asset Funds ......................................................................................................... 8

6.4 Performance Monitoring and Outcomes ..................................................................................... 8

6.5 Entrepreneurial Activities: Development and Investment ........................................................... 8

7 RESPONSIBILITIES .................................................................................................... 10

7.1 Responsibilities in Property ....................................................................................................... 10


1 OVERVIEW

This Policy describes the approach for the sustainable management of commercial property held by Council. Council is required under the Local Government Act to be a good custodian of public infrastructure. Council must therefore effectively, efficiently and transparently manage property assets as a corporate entity whilst balancing the interests of the community to achieve positive community and economic outcomes. Council maintains a property portfolio for the following broad purposes: 1. to achieve returns on investment; 2. to deliver development within the local government area; 3. strategic acquisition; and 4. secure community activation and amenity. The Council seeks to balance its roles, responsibilities and strategic priorities in a sustainable manner. This Policy provides guidance to stakeholders on responsibilities and collaboration required to achieve effective and transparent outcomes. A well-managed property portfolio can be used to benefit a community’s economic, social and environmental wellbeing. The management of the portfolio should therefore be supported by strategic short, medium and long-term targets to maximise the utilisation of these assets.

2 SCOPE

Council is asset manager and owner of a raft of Commercial strategic, investment and managed property. Council generally engages in property matters either by purchase, gift, vesting or default; having a variety of property asset classes. These include:

Commercial property;

Crown land, both vacant and improved;

Easements, right of ways and covenants;

Residential property;

Roads and road reserves;

State government assets and infrastructure;

Tourist Parks; and

Vacant operational land. The abovementioned commercial property is utilised by the local community, small medium and large businesses, inter-regional business and for personal travel, residential, commercial tenants and domestic and international tourists alike. Council has three (3) distinct roles in its property activities: 1. as the developer/owner/service provider, seeking the best possible return for its property;


2. as a statutory authority responsible for the assessment of any Development Application (DA) for the property, but with those DAs generally determined by an independent Local Planning Panel; and

3. as a corporate entity seeking to implement unique and innovative ideas to capture income and value which deliver tangible benefit to the community.

This Policy addresses commercial property and land utilised for a commercial purpose or community property and land, when used for a commercial purpose. Council must exercise particular care to ensure its roles as a developer/owner and as consent authority are kept separate and transparent, having high levels of governance.

2.1 Risk & Benefit Analysis In carrying out property related activities consideration must be given to the risks and benefits associated with this portfolio. Risk and benefit analysis of property dealings, including appropriate market research and sensitivity analysis, shall be conducted in the following circumstances:

prior to engaging in new property dealings;

when there is a change of property status or use;

when there is a change in Council strategic direction which may affect the property;

upon signs of significant property market fluctuation;

as required to maintain a sustainable credit rating for investment purposes; and

at a time and frequency appropriate to the nature of the activity. In managing property, Council’s challenge is to determine the purpose of assets held and the burden of subsidy Council is willing to bear and disperse among stakeholders. Risk and benefit analysis should consider financial viability, together with environmental, social, economic, political, reputational and strategic matters.

3 PROPERTY DECISION-MAKING

3.1 Property Investment Panel A Property Investment Panel (the Panel) shall be formed to support the implementation of this policy; with members to include appropriate stakeholders as guided by the Terms of Reference. The purpose of the Panel is to guide property direction and periodically review the performance of the commercial property portfolio to recommend actions in relation to the management of Council’s commercial property portfolio. Required actions will be reported to either ELT or Council, as appropriate to the identified property action. The Panel will incorporate expertise from the property industry, together with market analysis and be convened to consider matters relating to building advocacy, surplus land, leases and licences on the Commercial portfolio, guiding future directions and planning. The Panel will be governed by the Terms of Reference. The Panel shall convene, as a minimum, annually, or as deemed necessary in liaison with the Manager of Community and Economic Outcomes or as directed by the appropriate chain of command. The Panel shall not unnecessarily interfere with the responsibilities and


delegations of the Property and Facilities Management section, which are essential for daily actions in property matters.

Refer to the Procedure for specific direction for property matters and procedures.

3.2 Sales, Disposals & Acquisitions Council can acquire and dispose of vacant and improved land for the purposes of carrying out its functions under the LG Act. For the purposes of this Policy, this includes the acquisition and disposal of land and property for road widening, road opening, investment, redevelopment, subdivision and resale. Council may acquire or dispose of property or land as guided by the compulsory acquisition process where a matter of strategic importance is identified or it is necessary for the provision of services to the local community. As part of Council’s due diligence when acting in sales, disposals and acquisitions of property, Council shall have regard to sections within this Policy and the Procedure regarding Building Materials and Products which present as hazardous or contaminated. Council will follow the principles of the Land Acquisitions (Just Terms) Compensation Act 1991 (NSW) and apply for Ministerial approval in accordance with section 187(2) of the LG Act, if required. A resolution of Council is required to sell, purchase or otherwise deal with land and other property, in accordance with Section 377(1)(h) of the Local Government Act 1993 (the ‘LG Act’). Reports to Council recommending such decisions must detail the method and circumstances surrounding the proposed divestment or acquisition of the asset which may include sale or purchase of land and property, airspace and subterranean space. Refer to the Procedure for further direction for property matters and procedures.

3.3 Easements Council may grant or relinquish an easement over its land for different purposes, including but not limited to, establishing a right of way, drainage, sewerage, electricity or other utility services. Council will only consider granting an easement over Council land if an easement does not detrimentally affect the use of Council owned land. The proponent is required to fairly and reasonably compensate Council including all fees and charges related to the granting of an easement.

3.4 Access over Public Parking Areas Historical informal arrangements exist with respect to access to private property over Council’s public parking areas; such arrangements will be formalise over time. For any new developments that propose to gain access over Council’s land, a formal agreement must be reached with Council prior to lodgement of the respective development application. Reaching such an agreement is separate to the development application process and does not presume the development application outcome.


3.5 Permanent Road Closures As the Roads Authority, Council may be approached by a land owner/s, or may identify through a development application, an opportunity for closure of a public road or a portion of a public road. On a case by case basis, Council may decide to sell, lease or licence the land as determined by ELT or a Council resolution.

3.6 Leases and Licences As a property owner it is, from time to time, necessary for Council to enter into various types of commercial agreements for a range of uses, including: residential; commercial, retail, special uses, telecommunication towers, recreational & sporting facilities, road closures, golf courses and bowling clubs etc. Dealings relating to leases and licences may require the engagement of an external managing agent who will be subject to a performance review program including site inspections by Council staff of all relevant properties. In managing leases and licences, the Retail Leases Act will prevail to guide Council in determining the purpose of the agreement, the industry standard of income and anticipated return on investment. In assessing return on investment Council is required to assess the burden of subsidy Council is willing to bear and disperse among stakeholders. Commercial agreements which incorporate a community element e.g. Katoomba Civic Centre are to be reviewed every four (4) years to ensure the building utilised is delivering a sustainable, efficient and effective service to the community as a whole as required under the LG Act.

3.7 Building Materials and Products Certain events relating to property may trigger the need to obtain a hazardous materials report. These include:

Repairs; maintenance refurbishment;

Proposal for development;

Proposals of lease or licence of a property; and/or

Proposals to acquire or dispose of property. Subject to the property matter, reference shall be had to relevant databases or registers including the Contaminated Land Database, the Asbestos Register and, eventually, the Hazardous Materials Register, or equivalent, to ensure appropriate and adequate investigations occur prior to proceeding with the property matter. Subject to the situation, the burden of cost shall be borne by Council, the proponent or be shared between the parties. A bond shall be payable to Council for parties proposing to utilise Council land or buildings, and shall be set according to the risk associated with the proposed use. This bond is over and above a rental bond. A hazardous materials report shall be obtained from an appropriately qualified independent consultant if it is known or suspected that a property may have been operated or used in a manner that involved hazardous materials, or where there is knowledge or suspicion that the building materials in use may be hazardous. This shall also apply if Council has no historical knowledge in relation to the property.


Any recommendation for a destructive investigation and/or a detailed sample analysis will be referred to the Property and Facilities Management for approval. A remediation action plan and/or a management action may be required to remove and/or manage the hazardous materials identified on site, shall be referred to Facilities and Asset Management in the first instance, ELT and Council as required.

3.8 Land Council currently manages leases and licences on Crown Land. Council generally requires permission from the Crown, either implied or direct, to utilise land for specific purpose. With respect to Crown land, Council may be required to bear certain costs, but is not expected to benefit from any capital growth or rental growth. This should be taken into account in the assessment of Council’s property portfolio value. Refer to the Crown Land Management Act 2016 for additional information and guidance. Council shall maintain buildings and infrastructure situated on Crown land or land of other Government Bodies to a standard the Panel considers fit for use and occupation. Land can be requested to return to the Crown, see the Crown Land Management Act 2016.

4 INDIGENOUS PROPERTY CONSIDERATION

Council may consider the Aboriginal Advisory Council’s “Pathways” Strategic Plan, the Blue Mountains Community Strategic Plan, other documents such as the Gundungurra Indigenous Land Use Agreement and Strategic Plan, other Co-management Agreements to which Council is a party, when considering commercial property matters.

5 PROBITY

Council seeks to conduct all dealings in property with integrity and transparency. The assessment of proposals or propositions shall be in line with this Policy and other relevant Council policy. The following principles aim to assure all parties are aware of the integrity of the decision making process.

5.1 Maintaining Impartiality Fair and impartial treatment will feature as part of the property process, whether this is on a case by case basis or as a portfolio. Should the delegated officer(s) be unable to resolve the property matter, the matter can be referred to the Panel on an ad-hoc basis for review and recommendation.

5.2 Maintaining Accountability and Transparency The demonstration of accountability and transparency in all property dealings and matters shall occur via mechanisms available to Council including feedback, consultation, and documentation. This process shall be prepared to be open to the process of scrutiny, debate, and possible criticism.

5.3 Managing Conflicts of Interest Appropriately skilled and trained internal and external expert consultants or professional(s) shall conform to Council’s current measures to identify, manage and monitor conflict of


interest as per the Code of Conduct. Should conflict of interest be significant to the property matter, the matter can be referred to the Panel on an ad-hoc basis for review and recommendation on a case by case basis.

5.4 Maintaining Confidentiality Having regard to the varying nature of details and information pertaining to property matters, the integrity of the process shall be assured by the management and maintaining of confidentiality on a case by case basis. Information shall be made available as delegated and responsible officers deem appropriate to ensure sensitive information remains confidential or available to specific stakeholders only.

5.5 Obtaining Value for Money Obtaining value for money is fundamental to return income to Council for the delivery of operational maintenance, capital works and repairs, or other projects. Council requires stakeholder confidence that proponents will be assessed on merit, and that innovative ideas and processes can be implemented in a timely manner utilising resources available.

6 THE PROPERTY INVESTMENT FUND

The Property Investment Fund (PIF) is established to provide a sustainable reinvestment mechanism in support of the following triggers: effective management, maintenance, development and growth of Council’s commercial property portfolio. In establishing future directions the Council shall refer to the Panel on a timely basis or as triggered by property actions. Council is directed by the LG Act to deal with property in a corporate capacity. Council has established a Property Investment Fund (PIF) to effectively manage property. To ensure the PIF remains financially sustainable all income received from property related activities i.e. lease, licence, or disposal, will be directed into the PIF. This shall be achieved by implementing asset management plans, replacing aging assets with new assets and preserving the value of assets for the future.

To ensure that the PIF is financially sustainable, the following conditions are established:

6.1 Retention of Funds The PIF shall retain sufficient fund levels to maintain a stable level of interest to support prioritised asset works and ongoing capital investment in commercial property. Income producing assets shall be utilised as an internal loan source for the acquisition or improvement of property. All borrowed funds shall return interest to the PIF. The return on investment generated from the PIF shall be reinvested and the balance must be used, as determined by recommendations from the Panel, and approved by ELT or Council for building and facility projects and/or capital works programs.

Interest generated from the PIF shall facilitate asset works on property as recommended by the Panel and approved by ELT or Council, as required.

Exceptions to the abovementioned include Council Resolutions or Due Diligence requests triggered by a business case, made in direct relation to commercial property as a whole or a


part, held for investment purposes. Should the use be undefined i.e. a community use in a commercial building, this matter shall be presented to the Panel and the Panel will be instructed to make a recommendation.

6.2 Performance Benchmarks Performance Benchmarks shall be utilised to analyse current and future assets and their suitability for Council’s strategic objectives. Refer to the Procedure for more information.

6.3 Distribution of Asset Funds The distribution of asset funds shall ensure sales from roads and surplus open space is:

in accordance with Section 32(5) of the LG Act, ‘the net proceeds of sale by a council of any land dedicated in accordance with a condition imposed under section 94 of the Environmental Planning and Assessment Act 1979 must be dealt with under that section as if those net proceeds were a monetary contribution paid instead of the dedication’;

as directed by the Roads Act 1993 money received by a council from the proceeds of sale of the land is not to be used by the council except for acquiring land for public roads or for carrying out road work on public roads; or

to fund projects not permitted to be funded by Section 94 Contributions.

6.4 Performance Monitoring and Outcomes Council shall monitor and report the performance and outcomes of the PIF to the Council on a biannual basis. This system will:

accurately record property and investment transactions;

accurately record income and outgoings from the PIF;

accurately record the funds dedicated to capital works and cyclic maintenance programs; and

generate quarterly reporting of PIF transactions for internal purposes.

Council’s property investment decisions made by Property Services, the Panel, ELT and/or the Council, shall consider:

returns (profit or social purpose) on funds employed;

risks (by a full risk/benefit analysis) associated with the proposal;

locality of the development/investment;

current market trends and conditions;

market demand for and supply of the property in question;

security of income;

on-going costs relating to the life cycle of the asset;

measured community expectations; and

appropriateness of the use of the public asset.

6.5 Entrepreneurial Activities: Development and Investment Entrepreneurial activities are those relating to the use and development of Council’s properties such as subdivision proposals, development proposals, sales, purchase, entrepreneurial activities associated with Council land, joint venture developments and proposed change of land use or land classification. The following principles are essential to guide Council’s approach to entrepreneurial property activities:


A range of investments in accordance with LG Act;

Council’s property portfolio shall achieve an annual income comparable with market evidence or equal to or greater than the current 10 year bond rate;

Council’s property development/investment shall achieve a profit and risk factor comparable with the ‘performance benchmarks’ as stated in the Procedure;

The Investment Policy principle of diversification shall be observed, in terms of property types and/or locations;

Annual review of “market trends" in hand with internal analysis shall assist Council to recognise and act upon investment opportunities as they arise;

Council is a conservative investor and will engage in investment activities in accordance with its adopted Investment Policy, balancing Council’s property-related objectives;

Council shall seek best industry practice in its’ activities in property;

Council shall implement strategies which minimise costs and maximise returns, to deliver commercial and community benefits.

Council is required to disclose the costs related to acquisitions, and present a strategy or plan with opportunity costs to identify how Council shall fund fees, charges and costs associated with the acquisition of land or property.


7 RESPONSIBILITIES

The City & Community Outcomes Directorate, more specifically the Community & Economic Outcomes Branch, is responsible for the ongoing implementation and review of Council’s Commercial Property Policy, Commercial Property Policy Procedure and the Property Investment Panel Terms of Reference.

7.1 Responsibilities in Property

DIRECTORATE RESPONSIBILITY ROLE

City Presentation

Assets are maintained to the required operational standard, works undertaken and the physical completion of actions related to property maintenance, repair

and capital works on a case by case basis.

Manager City Presentation

Community and Community Outcomes

Asset management plans, condition reports, capital works.

Building and Asset Officer or equivalent


Direct tasks to ensure outcomes or recommendations are met.

Director, C&CO


Manage tasks to ensure outcomes or recommendations are met.

Manager, C&CO


Complete or delegate tasks as required. Property Officer


Complete or delegate tasks as required. Property Projects

Officer


Assist in financial delivery of outcomes or recommendations.

Building Assets Project Officer

Community and Economic Outcomes

Asset facilitation and management. Co-ordinator Built

Asset Management

Infrastructure and Major Projects

Facilitate projects and guide projects as required.

Program Leader Major Projects

Integrated Planning and Finance

Budgets align to facilitate works required and reduces backlog of outstanding

building works.

Manager – Strategic Finance

Integrated Planning and Finance

Financial information is available on a quarterly basis to the Panel or C&CO.

Manager – Strategic Finance