Costs skyrocket to almost $50m
IPSWICH City Council’s bid to become a player in the retail market has backfired badly, inflicting a massive financial loss on the city.
The ever-expanding bill surrounding council’s rebuild of the Venue and Cinema building in the CBD is now so high it would take 68 years to pay it off based on the retail lease revenue they hoped to make.
When elected in 2019 the council took on the CBD redevelopment project and instead of just deciding to overview the building of the new council chambers and two libraries, they decided they would attempt to lure retailers into the then dilapidated central business hub.
The initial strategy was supported by former Ipswich administrator Greg Chemello and when the newly elected councillors took up their seats, they meandered down the same path.
Despite warnings to stay in the council lane from experienced retailer investors such as billionaire Bob Ell, the owner of Riverlink and three other profitable shopping centres, they dived head long into trying to get businesses to sign leases spending millions redeveloping the Nicholas Street precinct and Tulmur Place.
Their biggest venture was to agree to a highly incentivised lease agreement with Hoyts Cinema which is believed to have involved a free multi-million dollar fit out of the old cinema building.
That agreement has now turned pear-shape with costs of the building revamp blowing out from a $15m budget to almost $50m dollars.
With legally binding contracts in place with Hoyts and Hutchinson Builders council was left with no choice but to keep stumbling along and approved millions in extra funding at a special meeting last week. The massive blow-out has been caused by a number of factors including the discovery of major black mould issues in the ceilings, air ducts, walls and roof of the building.
The issues are so big a bio-security team will need to spend weeks decontaminating the building to clean and remove mould riddled materials.
The work can be likened to a major asbestos clean-up.
The renovation of the Venue building was supposed to be just that, but according to council officers it is now more of a demolition project.
But mould isn’t the only problem the builders discovered during their first few months of work late last year.
They also found that the main underground sewer lines had collapsed. The agreed fit-out for Hoyts is also causing headaches and adding costs.
Council has just been hit with a cost of upwards of $750,000 for new modern theatre seats, with hundreds of old theatre seats from the previous Birch, Carroll and Coyle cinema useless.
In the special council meeting last week Cr Nicole Jonic expressed concerns surrounding the building report given to council in November last year revealing the serious mould issue as it was first reported by an expert to council in May, some five months earlier.
Council had that initial mould report in its hands before it signed off on the multi-million dollar contract with Hoyts in August.
Riverlink’s Limelight Theatre owner, Ross Entwistle, said he’d been saying for years that there was never a viable business case for more cinemas in the CBD, yet Council ploughed ahead, committing $50m to redevelop the Venue Building and to secure Hoyts.
“Now they flag a cost blow out of at least another $20m, seriously, council’s pursuit of this folly, and the colossal waste of money that is guaranteed to follow, should be cause for great concern to Ipswich ratepayers,” he said.
Work on the site is presently suspended until specialist teams clean the building thoroughly.
It will mean the opening date for the proposed new cinema will potentially go back until after the March 2024 elections.
NOTE: You can read the Council’s press release spin on this issue on the website tomorrow morning with the latest issue of Local Ipswich News.