PORT RENT REVIEW TO BE DETERMINED INDEPENDENTLY, CLAIMS THE PORT OF MELBOURNE
Thursday, April 16, 2015
Port rent review to be determined independently, claims the Port of Melbourne There has been a great deal written on the DP World rent matter, and PoMC has written an open letter to put its case.
The Port of Melbourne Corporation (PoMC) welcomes this opportunity to clarify some of the key issues and outline the process for the benefit of industry bodies and stakeholders who may have been led to believe that a conclusion has already been finalised.
The matter involves a rent review provision that can occur every two years under DP World's lease. Over the twenty years' duration of the lease at the Port of Melbourne's West Swanson Dock, this market rent review process has occurred multiple times as set out in the lease.
Similar periodic rent review provisions exist in numerous other tenant leases at the port. These rent review provisions are common in industrial property leases, including those at other ports. In that respect, it is routine and the rent review would have been undertaken irrespective of any plans by the Victorian Government to seek a lease for the Port of Melbourne.
Independent valuer
In terms of the process, it is important to note that this rent review will be determined by the independent expert valuer process as set out in the terms of the lease. This process comes into effect when the rent adjustment between landlord (PoMC) and tenant (in this case, DP World) is not agreed.
Furthermore, this process does not allow for PoMC to unilaterally decide what the quantum of any rent adjustment should be. PoMC can't and won't dictate a final rent review outcome. This is an important point that some stakeholder commentary has overlooked or was unaware of – but we have sought to emphasise this in our correspondence to all stakeholders who have approached us directly on the matter.
PoMC has now formally requested the President of the Australian Property Institute to appoint an independent valuer to exercise the lease provisions.
Market value
While PoMC believes the final rent review outcome is best left to the independent umpire, it is entirely reasonable for PoMC to administer the terms of the lease and seek market value rent based on expert consideration.
For the first time in twenty years, as a result of the open competitive tender process for the third container terminal at Webb Dock East, we have new information on the rental value of a container stevedoring operation in Melbourne.
The significant redevelopment of the Webb Dock precinct, which gave rise to VICT as the successful bidder to operate the container terminal, clearly demonstrated the market appetite for stevedoring operations at the Port of Melbourne.
As a result, we believe this market information is relevant and applicable to this rent review process.
While the rent review remains a commercial matter between PoMC and DP World under the terms of the lease, PoMC is aware of industry interest in the outcome and we will continue with the process to bring the determination to a conclusion.
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