2011 Expressions of Interest to Lease Process

Overview

Summary of the 2011 Chelsea Cinema Expressions of Interest to Lease Process.

The Chelsea Cinema is a historic cinema located in the City of Burnside. It has a significant role in the social wellbeing of the community.

The City of Burnside implemented a Conservation Management Plan for the Chelsea Cinema in 2009 and adopted the Chelsea Cinema Strategic Plan on 22 March 2011, to guide the development, conservation and ongoing maintenance of the building, based upon an understanding of the history, significance, and physical condition of the building.

Riverline Drive-In (Wallis Cinemas) occupied the Chelsea Cinema from 1971, holding a lease until 2006. While Wallis Cinemas did not exercise all of its rights to renew its lease, it continued to occupy the building under certain 'holding over' provisions of the lease agreement. These lease provisions also permitted Wallis Cinemas and Council to give one month's notice to terminate the tenancy.

The property at 39 May Terrace has been subject to a residential tenancy agreement since 2003, which reverted to a periodic tenancy during 2007.

Chelsea Fashions held a lease over the two shops located within the front section of the Chelsea Cinema. The most recent lessee commenced an agreement with Council in 1991.

Burnside Council was committed to securing a long term lease and guaranteeing that the iconic Chelsea Cinema would continue to be of service to the community.

April 2011

In April 2011, Council took an important step towards the revitalisation of the Chelsea Cinema by endorsing an Expression of Interest process which allowed the Council to approach the market for a long term lessee for the Chelsea Cinema.

After considering the requirements of Council's Section 49 Procurement Policy, Council publicly sought Expressions of Interest from parties seeking:

  • the acquisition of a leasehold interest in the Chelsea Cinema (including shops); or
  • the acquisition of a leasehold interest in the Chelsea Cinema (including shops), and any proposals for the future development and use of the Chelsea Cinema site which included the carpark at 35 May Terrace and/or residence at 39 May Terrace. Both properties are owned by Burnside Council.

The four week Expressions of Interest period commenced on 1 July 2011 and concluded on 29 July 2011.

June 2011

To ensure that the Expressions of Interest process was fair and in accordance with procurement processes, Council engaged external agents to act on Council's behalf. The agents, who were engaged at the 28 June 2011 Council meeting, included legal representation (lease), legal representation (governance), an Expression of Interest assessor and a probity auditor.

At the Council meeting on 28 June 2011, Council also authorised the Chief Executive Officer to send written notice to each of the three lessees within the Chelsea Cinema site (Wallis Cinemas, Chelsea Fashions and the residential tenant), of Council's intention to end their lease on 31 December 2011. The City of Burnside administration met with each tenant personally to inform them of that decision. In addition, the administration met with the tenant of 39 May Terrace on 30 September 2011 and presented the Notice of Termination by Landlord in accordance with the Residential Tenancies Act 1995. The notice provided to the existing tenants either exceeded or met the legal obligations for notices required.

August 2011

On 9 August 2011, Council endorsed the Expressions of Interest Evaluation Plan for the Chelsea Cinema, which was the planning and control document in conducting the Expressions of Interest (applications received in response to the Expressions of Interest). In addition, the Evaluation Plan set out the criteria against which submissions were to be assessed - heritage; economic; community and/or development.

During the four week Expressions of Interest period, applications were received from Republic Theatres, Wallis Cinemas, Maras Group, Australian Work Placement, and Christian Outreach Centre.

These applications were collated and summarised by the Expressions of Interest assessor and documented in the Preliminary Assessment Report.

All five applicants were confirmed for the purpose of the Expression of Interest process and were invited to present their submission to Council at a special meeting of Council which was held on 18 August 2011.

Four of the five applicants accepted the invitation, which also provided the opportunity for Council to request additional information if required.

September 2011

A draft Assessment and Recommendations Report, based on the Preliminary Assessment Report and presentations, was prepared by the Expression of Interest assessor and presented to Council for consideration on 21 September 2011.

Due to the content, the report, minutes, attachments and associated documents relating to this matter will remain confidential for a period of 24 months from 21 September 2011, pursuant to sections 91(7) and (9) of the Local Government Act, 1999.

October 2011

At the 6 October 2011 meeting of Council, Council considered a rescission motion relating to a previous confidential resolution. Due to the content of this motion, this matter will remain confidential for a period of 24 months from 6 October 2011, pursuant to sections 91(7) and (9) of the Local Government Act, 1999.

The draft Assessment and Recommendations Report was endorsed by Council at the 6 October 2011 Council meeting, with Council nominating Republic Theatres and the Maras Group as the preferred confirmed applicants. Council made no decisions with respect to Wallis Cinemas, Australian Work Placement, and Christian Outreach Centre.

After considering the information provided, including submissions, presentations and assessments, Council agreed to enter into further negotiations with Republic Theatres and the Maras Group. As part of the negotiations, and prior to proceeding to any final decision or entering into any binding contracts, the Chief Executive Officer was requested to report to Council on the following matters:

  1. The final form of the development proposal, showing retention of the interior and exterior heritage features of the building, appropriate development of the adjoining property and how this would complement, integrate with and enhance the Chelsea Cinema;
  2. Car parking;
  3. Commercial, including the proposed annual rental payments, financial and legal issues relating to the terms of the lease; and
  4. Such other matters that arise during the course of the negotiations, or otherwise become apparent to the Chief Executive Officer.

November 2011

On 8 November 2011, the Chief Executive Officer provided an update on the process of the negotiations to Council. Two of the three non-preferred applicants were also advised that their Expressions of Interest were unsuccessful, based on their applications not fully meeting Council's requirements. The other remaining applicant was considered to be an option for future negotiations in the event that negotiations with the two preferred confirmed applicants were unsuccessful.

Further to the written notices sent to each of the three lessees within the Chelsea Cinema site (Wallis Cinemas, Chelsea Fashions and the residential tenant) on 30 June 2011, advising of Council's intention to end their lease on 31 December 2011, the City of Burnside administration once again met with each tenant personally to provide a final 30 day notice for vacant tenancy and to discuss any requirements that the tenants may have had in relation to that process.

Council resolved that as part of the Expression of Interest documentation, vacant possession of all sites would be available from 1 January 2012. It was acknowledged that Wallis Cinemas was both an applicant through the Expression of Interest process and an existing tenant of the Cinema building and to achieve vacant possession by 1 January 2012, the process for vacant possession and Expression of Interest had to run concurrently.

December 2011

A special Council meeting was held on 1 December 2011 in which the Expressions of Interest assessor presented details of the ongoing discussions with the two preferred confirmed applicants and both preferred confirmed applicants were invited to make presentations to Council in support of their submissions. At this meeting, one applicant made a presentation to Council, while the other was unable to attend, but did provide a PowerPoint presentation for Council's perusal.

Council was provided with the Chelsea Cinema Confirmed Applicants Summary and copies of the draft lease agreements for consideration and endorsement on 13 December 2011. The summary contained a comparison of the two confirmed applicants' responses to the request for information.

After considering all of the information provided during the Expressions of Interest process, including submissions, presentations and assessments, Council unanimously resolved to offer Republic Theatres Classic a lease over the Chelsea Cinema (including shops) and also a lease over 39 May Terrace. Council did not enter into any lease agreement in respect of the car park at 35 May terrace and this remains a public car park.

Within this resolution, Council also made provision to advise the remaining Applicants that their Expressions of Interest for the lease of the Chelsea Cinema had been unsuccessful.

In accordance with Council's resolution from its 13 December 2011 meeting, the Chief Executive Officer negotiated the final lease arrangement with Republic Theatres Classic, which was signed by all parties on 23 December 2011.

The lease is for an initial term of seven years, commencing 1 January 2012, with several rights of renewal periods, which in total, will bring the term of the agreement to 37 years.

The lease of 39 May Terrace is for seven years and Republic Theatres Classic will be granted a further six periods of rights of renewal, each of five years, provided Council has received an acceptable proposal for the development of the site within the initial term.

Within the lease, a warranty stipulates that Council will continue to maintain and make available to the public, the car park at 35 May Terrace for a period of not less than 37 years.

Under the lease arrangements, the site will remain as an operating cinema in conjunction with ancillary purposes including live entertainment, theatre performances, sale of food and beverages. The lease is subject to market review at the expiration of each term.

Throughout the process Council was mindful of the interest of the community and attended to this process carefully and diligently, ensuring that the outcome achieved was best for both the community and the facility.

During this period there were 17 Council resolutions, 14 of which were considered in confidence. Of the 14 confidential items, 10 were released publicly following the 14 February 2012 Council meeting.

Deliberations concerning this process were held in confidence to guarantee the proper discharge of Council's obligations and to ensure that the process was not compromised by participants obtaining information about the identity or details of offers from other participants. During this time, Council, where possible, informed the community via press releases which were distributed to the media and uploaded to the City of Burnside website.

The City of Burnside is delighted to be partnering with Republic Theatres Classic, which is a well-respected local company that has been in operation for many years.

The shared visions of Republic Theatres Classic and the Burnside Council will ensure the cinema is part of a successful community-based entertainment precinct, while retaining its social and heritage significance.

The company's vision for the 1925 heritage-listed art deco cinema, matched with their determination to provide the community with a wide range of entertainment choices, will place the precinct in a unique position in the market, while meeting the objectives of Council and the community.

Republic Theatres Classic is also dedicated to supporting the artistic endeavours of local community groups and schools by providing a venue for their activities and fundraising.

The City of Burnside has allocated $85,000 within its 2011/12 Annual Business Plan and Budget for conservation restoration to the façade and other areas. Council will work with Republic Theatres Classic to coordinate an appropriate time to undertake the works during 2012.

All information that has been released by Council, as well as recent press releases.