Stumbling block for Southgate redevelopment plans

By Sean Car

Plans for an $800 million redevelopment of Southgate are under threat of suffering significant setbacks with one of the centre’s tenants defiantly looking to see out its long-term lease agreement.

In May last year, Southgate’s owners ARA Australia lodged a development application with the Minister for Planning Richard Wynne for approval as it seeks to deliver a new 21-storey office tower and more than 10,000 sqm of new retail space across four levels.

While the application is still sitting with the Department of Environment, Land, Water and Planning (DELWP), ARA said last year that the project was aiming to begin in 2021 and end in 2024, generating more than 340 construction jobs.

But last month, the directors of events and hospitality venue Metropolis, which currently enjoys sweeping views of the Yarra and the CBD from its 880 sqm home spanning the entire top floor of the current Southgate Centre, said it wasn’t going anywhere.

According to its directors Georgina Damm and Eddie Muto, Metropolis has a lease agreement in place until “at least 2024”, as well as any extensions afforded to it by disruptions caused by COVID-19.

The business said it signed its seven-year lease with Southgate’s former owners Dexus in late 2017 and while other Southgate tenants have demolition clauses in their contracts, Mr Muto said he “doesn’t do demolition clauses”.

A statement from Metropolis issued in January accused ARA of “jumping the gun” on announcing its redevelopment plans, which it said “must be put on hold for the time being”.

“In articles published on several media outlets, ARA declared that redevelopment could be starting as early as 2021 with the new site to be completed by June 2024. The $800 million project is said to be rebuilding the two-hectare Southgate site,” a statement from Metropolis said.

“However, the articles failed to mention the secured long-term lease agreement between the Southgate Centre and Metropolis Events.”

“This announcement, (not surprisingly), triggered many alarming phone calls from brides-to-be and corporate clients wondering why they had not been notified that Metropolis Events would be closing? When in fact, this couldn’t be further from the truth.”

“Imagine securing the site of your dreams only to read a dream-shattering headline the following day. Talk about fake news!”

The statement said that while the company’s directors were currently considering tenure options within the proposed newly-developed Southgate beyond 2024, it said it would remain in full operation in the meantime.

With Metropolis currently occupying the top of the site that ARA plans to demolish to make way for its new tower and four-storey retail precinct, the news presents a major hurdle for Southgate’s owners.

ARA Australia told Southbank News that it wouldn’t be providing a formal comment in response to issues raised by Metropolis, but is understood to be continuing negotiations with the directors to establish a mutually beneficial outcome.

Currently including the two Herald Weekly Times (HWT) and IBM office towers, a three-level retail and hospitality plaza and a basement carpark, the Singaporean-listed ARA Australia purchased Southgate from Dexus in 2016 and assumed management in 2018.

Speculation regarding its planned redevelopment heightened early last year following concerns raised by a number of its current tenants as to whether their businesses would be incorporated in the new plans, as reported in the March 2020 edition of Southbank News.

ARA’s head of asset management Rohan Neville said last year that it would be accepting expressions of interest from all parties, including its existing tenants, as it sought to create an “all-day lifestyle destination.”

“ARA Australia is committed to maintaining open, two-way communication with all tenants and community stakeholders throughout this process,” he said.

“Our tenants have been aware of the master planning investigations for some time and each tenant has been contacted by an ARA representative via phone to inform them of our intention to lodge the application. Moving forward we’ll be providing regular updates and sharing new information as it becomes available.”

“We are currently exploring a range of options in relation to Southgate’s retail and dining offering, to enhance the overall customer experience for everyone who visits the precinct.”

ARA Australia had sought to take advantage of the state government’s fast-tracking of building permits amid the COVID-19 pandemic last year, but the plans still remain subject to approval.

Metropolis said its directors were also in discussions with other river fronted sites flagged for development in the near future. “This offers Metropolis Events the opportunity to operate its premium event services uninterrupted if the company choses to not stay at Southgate Centre past 2024,” a statement from Metropolis said •