The private consortium that won the bid to revitalise Sydney’s Darling Harbour last year has just received government approval for its plans to build three new venues and infrastructure developments for the harbour, and will begin construction on them in early 2014, according to a joint statement.
The public-private partnership (PPP) project is estimated to take about A$1 billion (€679 million; $894 million) of capital from the private sector, and is slated for completion in 2016. The development will be on a build-own-operate-maintain-transfer basis, according to Malcolm Macintyre, chief executive of the private consortium and a director at Lend Lease’s infrastructure development arm Capella Capital, with a three-year construction period and a 25-year operating period.
The consortium includes Brisbane-based venue management firm AEG Ogden; Australian developer Lend Lease; Australian investor and developer Capella Capital; Spotless, an international facilities management provider; and HOSTPlus, the national super fund for the hospitality, tourism, recreation and sport industries. Lend Lease will invest 50 percent of the equity, with HOSTPlus providing the remainder. The other members of the consortium will help Lend Lease with development and maintenance, Macintyre told Infrastructure Investor.
The Darling Harbour PPP, which is the first PPP to be awarded in the Australian state of New South Wales for some time, comprises the International Convention Centre (ICC) Sydney, a new convention facility with capacity for over 12,000 delegates; ICC Exhibition, with 40,000 square metres of exhibition space; and a theatre with a capacity of 8,000 seats. The goal of the project is to make Darling Harbour “one of the world’s best areas to live, meet and be entertained”.
“We recently refined some of our designs in response to public consultation as it’s very important we get this project right for Sydney,” Macintyre said in the statement. For example, the firms chose to scale down and break up the size of the buildings so that they wouldn’t be as monolithic, and added features like a large balcony.
The NSW government told Infrastructure Investor that the private sector partners will be given a facility service payment only when the facility is operating to the specified requirements. In addition, revenue and operating profit will all go to the government, with the private consortium being paid a fixed fee and a percentage of the profit.
Macintyre explained that this means the private sector partners do not have to take demand risk. Since Darling Harbour is already a prime location, the private sector is basically redeveloping what has already been fairly successful – and the private sector is indeed incentivised to attract the best events and tenents, because “if we don’t perform to a certain standard, the state can abate the payment,” he explained.
All the PPP’s capital commitments are fully underwritten, with debt being provided by a consortium of domestic and international banks. Infrastructure Investor understands that the deal is being leveraged at a fairly traditional level for an availability-based PPP, which in Australia is typically in excess of 80 percent.
Lend Lease is also completing several other projects nearby Darling Harbour through project development agreements with the NSW government, including a mixed-use facility with a hotel, 1,400 residential apartments, student accommodation, retail, parking and extra community space. Altogether, all projects related to Darling Harbour and the PPP are expected to cost about A$1.5 billion, and will be fully completed by 2019, according to Lend Lease.