Letter to Fremantle councillors

Dear Councillors,

One of the major problems spoken about at last Tuesdays Special Council meeting related to the duplicitous nature of the public information FMPL distributed prior to the awarding of the head lease. A market newsletter and email clearly suggested “the conditions” (eg low cost environment, 5 + 5 tenure) under which stallholders were asked to support FMPL. (Fremantle Markets Pty Ltd)

The FMPL presentation to council (contained within the March 2008 Special Council minutes) also reflects these commitments.

Once the head lease was signed all this went out the window. This is at the core of stallholder’s anger. Many now feel they were tricked into supporting FMPL. Knowing what they know now, stallholders would not have supported them.

Other councillor’s may also have rejected their business plan. We tried to alert our members but the major division inside the markets at the time and the continual deriding of the Association made our job difficult. Even with these restraints, the Dowson initiated Catalyse survey never revealed overwhelming FMPL support and most of the issues raised therein by stallholders remain today.

FMPL connived to withhold information such as the size of their rent hikes, the extent of their food redevelopment and the downsizing of businesses to accommodate this. Worst than this they purposely promoted a public perception which did not accurately reflect their intentions. Surely this makes a mockery of council’s public submission process and treats the councillor’s with contempt.

It is implausible that the Murdoch brothers, both qualified accountants, negotiating the business plan and lease for a major public asset for the next 18 years would not have known the extent of the rental increases they intended to pass on. A projected cash flow would have been integral to their planning.

Not all of us were gullible however they did enough, with the considerable help of the mayor, to win the lease.

http://sonyagreen.blogspot.com/

john and jamie murdoch - cameleons?

Fremantle Special Council Meeting Tuesday 31st March 2008

The Stallholders Association thanks the Council for calling this Special Meeting and those councilors who have seen fit to listen to the stallholders and to recognize the markets future is at a crossroads.

As the Secretary of the Stallholders Association, I speak with a lot of stallholder’s and I can tell you tonight that the questions they want answers to are:
“Why is this happening”
“Will my business be viable”.
“What about the future?”

Fremantle Markets is an unquestionable success. It is an elusive mix and as stallholders we are proud of the markets and the community that has grown around it. Its vibrant, unique and irreplaceable.
That’s why we are here tonight and why we are willing to keep coming back…we are determined not to lose what we have helped create.

We are in touch with our customers, hear their comments and intimately know the market environment. The markets are not just “a thing”.. it has a life and that life is the stallholders …..without us it’s an empty building.

We are bewildered by the current mess we find ourselves in.

One question the Council has to ask itself is how has it been allowed to degenerate into this when the Working Group was established to prevent it?

The agenda items are just some of the issues, but, more importantly for the City and councilors to consider are the reasons behind the downward spiral in confidence and morale at the Markets.

At the centre of this are unsustainable rent increases but equally important is the dictatorial style of management. These boys are chameleons, what the council sees is not what we see.

In last years Council survey, 58% of stallholders were happy to enter into a 5 year agreement with management. That’s not overwhelming support within itself but if you conducted that survey today the results would be dramatically lower.

Jamie claims publicly that, “over half have happily accepted these increases”.
But what he doesn’t say is …this group is predominantly casual stalls….who have to be happy!

The rent increases need to be fair and equitable for everyone.
How can it be when you assessed market rent at $550,000, that’s an annual increase of $400 a stall ….. then permanent stalls are slugged an extra $4000,…….. a 1000% hike….. And I’m being very conservative!

That makes our rents right up at the top of the highest market rents in the country. These are rents comparable to major shopping centres. …….THIS IS A MARKET, NOT THE GALLERIA.


As retailers we understand markup and if in the long term, it’s excessive, your customers will desert you because they know, they have been ripped off.
And that’s how the stallholders feel… “RIPPED OFF”.

The Murdoch’s claim that rents have been too cheap… it’s not justification, it’s an excuse as are the wild claims in their marketing plan that stallholders turnover on average half a million dollars a year. Who dreams up these figures?

We are already seeing more empty casual stalls, and permanents, who have been hit with their increases, are starting to feel the reality of falling returns.
Trying to lift your prices to cover these rent hikes is simply not on with the current economic woes,

Two stallholders have just walked away; others sold out of long term businesses for little money. It’s scant return for years of dedication.

Stallholders don’t want to leave… they love the markets but now find themselves re-assessing their future and looking elsewhere for alternative premises. These have been sound successful enterprises just unable or unwilling to pay crippling rents. We can’t afford to lose good people.

For FMPL it’s not just about replacing good long term operators, but keeping them. These people are not just entries in an accounting ledger.

We acknowledge we have to move forward with the times, and new initiatives need to be undertaken, however we do not want Fremantle Markets, a premier market in Australia to fall into the trap of so many others that end up homogonous and boring because interesting and innovative operators are driven out through high rents…..

The Stallholder’s Association recommendation to rectify this is to reintroduce stallholder rents indexed to Council increases. The historic evidence is, this system works successfully. I know management are publicly critical of subsidized rents, however, the Murdoch family have been happy to re-enter a number of long term leases as beneficiaries of it over the past 30 years.

The Council, local businesses and broader community have also profited from the success it brings.

Unfortunately the other issue I raised in relation to the dictatorial management style will not be that easily addressed.

The Stallholders Association, who represent the majority of stallholder’s, urge councilors to vote in favour of the agenda items.


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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.