BIA declares NSW Maritime commercial marina rents unsustainable

by BIA NSW - Logbook on 22 Dec 2009 Since the release of the NSW Maritime Commercial Lease Policy in 2008, the BIA has been has been working hard to negotiate with Maritime a manageable Commercial Marina Rents Procedure (CMRP). The Industry-preferred methodology based on 'percentage of turnover' results in a consistent, transparent and sustainable rent determination procedure that responds to actual market conditions.

Despite the concerted efforts of the MANSW committee & BIA staff, the CMRP released by Maritime in August 2009 fails to deliver a sustainable outcome.

Having put forward, in numerous meetings & correspondence, arguments based on the independent findings of Pitcher Partners (set out in their report 'Sustainable Rent for Marina Concession Holders'–September 2008), the BIA’s representations seem to have fallen on deaf ears.

NSW Maritime, the monopoly landlord on Sydney Harbour, has not formally challenged the findings of the Pitcher Partners Report, which found that sustainable rents are between 6% and 8% of turnover, nor have Maritime provided data or analysis that supports the sustainability of the current CMRP.

In fact, NSW Maritime has provided no information supporting the CMRP from any external, independent, or accredited source. Three critical flaws in the CMRP are:

• The 'double dip' on commercial swing moorings, where both a license fee and a percentage of revenue generated from the mooring is payable to NSW Maritime under the lease agreement.

• The uncapped and unsustainable percentages applied to berthing revenues for the purpose of determining rent

• The unsustainable percentages applied to sub-tenancy rental revenue and directly-supplied marine services, for the purpose of determining rent
On 26th October 2009, the BIA convened a meeting of representatives from thirty-six (36) marinas on Sydney Harbour, and based on that meeting and other sustainability information referenced, the BIA proposed the following amendments to the current CMRP:.

1. Commercial Swing Moorings: Remove license fees for commercial swing moorings, and cap the percentage applied to berthing revenues for the purpose of determining rent, at 7% (irrespective of the proportion of total vessel storage revenues derived from commercial swing moorings).

2. Berths: Apply the following percentages to berthing revenue for the purpose of determining rent:
2.1. 6% for Marinas 1 – 50 berths
2.2. 7% for Marinas 51 – 100 berths
2.3. 8% for Marinas > 100 berths

3. Sub-tenancies: Adjust the percentage applied to sub-tenancy rental revenue for the purpose of determining rent, to 8%.

4. Directly-supplied Marine Services: Adjust the percentage applied to revenue generated by the marina operator (as opposed to a contractors or tenant) in the provision of marine industrial services, to 2%

These recommendations were unanimous supported by the 36 Sydney Harbour marinas represented at the 26th October meeting, and are consistent with both the Pitcher Partners Report, and the recent market rent determination conducted by Colliers for D’Albora Marinas at Rushcutters Bay and The Spit.

The BIA does not endorse the current NSW Maritime Commercial Marina Rent Procedure, and advises members to take all reasonable action to resist application of the procedure to marina rental negotiations.