Attent: peter tagliaferri, john and jamie murdoch

FREMANTLE MARKETS
STALLHOLDERS ASSOCIATION (Inc)

Fremantle City Council
5th February 2009

General Situation

Fremantle Markets (FMPL) have been given an 18 year lease at an increased head lease cost of $400 per stall or $60,000 pa.

FMPL based on rental increases to date are increasing rents to as high or over $7000 per stall or up to 20 times the increase in head rentals per stall. Increases as high as 80%. Plus on top of this there have been increases in marketing levies etc. If stallholders could afford these increases (using an average of $4000) FMPL could realize increased rentals of over $600,000 per annum or nearly 10 times or 1000% above the head lease rent
The rental increases will make most stallholders businesses either uneconomic to continue or only marginally profitable and hardly worth operating.

Stallholders businesses are virtually un-saleable given the rental and additional costs associated with operating and stallholders face significant capital losses associated with acquisition cost.

FMPL are acting in a totally authoritarian and confrontational manner with no concern for stallholders or the future of the markets. They are also acting in contravention of assurances given to stallholders by Fremantle Council.

1991 Rules and Regulations remain in dispute and Senior Counsel advice will determine how we proceed in relation to Rules 26 and 28.

FMPL Justification of Rental increases:

There has been and can be no justification for FMPL increasing rents by as much as 2000% above the increase in head lease increases.

The rental increases are totally out of line with forecast problems in the retail trade, closures of stores by Harvey Norman and other groups.

The figures for traffic flows and average expenditure by visitors to the markets provided by FMPL that result in average annual income to 150 stallholders currently being some $550,000 per stall are ludicrous. To forecast average turnovers of $936,000 would make all stallholders millionaires and make Fremantle Markets the most desirable retail space in Australia. Also to suggest that at the macro level Fremantle Market currently experiences turnover of $83,000,000 rising to $140,000,000 is incredible.

Were the above figures anywhere close to reality stallholders, assuming only 30% gross profit (based on FMPL average turnover figures) using a discounted present value (NPV) of gross profits over a three year period discounted at a cost of capital of 10% would give a CURRENT AVERAGE value of stalls in Fremantle Markets of $410,000 plus stock and fittings at valuation. or $698,000 plus stock and fittings at valuation with the FMPL forecast figures. Even if working on a net profit of only 20% based on FMPL figures the average NPV or estimated sale value of the stall would currently be $273,000 and on forecast $466,000 respectively plus stock and fittings at valuation. This again is clearly ludicrous and can be checked against recent sales transfer figures for stalls that would be held by FMPL.

Whatever figures FMPL have provided to Fremantle Council they can have no basis in fact or reality as indicated above and are completely misleading.

Comparative evaluations of rental per square metre per 10,000 traffic flow in other markets show that Fremantle is currently the most expensive market by a factor as high as 400%. The comparison is based on Fremantle Markets having a traffic flow of 40,000 and this may be questionable.

The Future

With FMPL’s approach to management we have seen morale at Fremantle Markets at an all time low.

The probability of many or most stallholders being unable to trade profitably under the new rental regime is very high. Many will have no choice but to close shop and walk away facing tens of thousand of dollars in capital losses. This will destroy the markets.
The probability of new businesses being able to trade profitably is low. If new businesses are being encouraged to seek stalls based on the traffic and turnover figures supplied by FMPL

a) They would be basing their decisions on information that can not be substantiated
b) FMPL could be open to legal action by new businesses if the information was deemed misleading or deceptive
c) Lease contracts could be voidable.
The mood of stallholders is such that suggestions for action include consideration of all of the following:

A collective or class legal action.
A petition to Parliament
Representations to both government and opposition and provision of all relevant documentation to them and to the media.
A walk out of stallholders inviting the media to attend
Collectively funded advertisements in the media raising public awareness.

Apparently some media people in press, radio and TV have indicated this could be an excellent David & Goliath story especially in the current global crisis climate and an example of profiteering and bully tactics against stallholders trying to just make a living in very difficult circumstances.

Obviously we would prefer that the above actions are not taken as even though the issue would get great publicity it could be really bad for the markets and no doubt for the Council but for stallholders who otherwise could lose their businesses it will not matter.