Samurai Resort – Update, More Naked Truths

Samurai Sign1Samurai Resort – Update 04 August 2014

There have been some stories in the paper and a couple of developments recently. Hopefully we are now at crunch time on this issue. Follow the blue links to get the full story……

 

 

 

Article in Examiner Feb 25 2014: Councillor Hits Wall On Samurai sale.

  • Cost $170 K since closure April 2013 (10 months).
  • $289 K outstanding loan payment.
  • Final loan payment June
  • Annual Lease fee $106 K
  • Ongoing Maintenance, insurance and security costs.
  • Unrealistic Sale price of  3 M
  • Council declined comment, tender process still under way

Article in Examiner 16 July 2014: Samurai Sale Fails To Gain Traction

  • Continues to drain ratepayer funds after another failed sales attempt
  • On sale from last August JRP (Joint Request For Proposal)
  • Lease now gazetted General Purposes, instead of Tourist resort
  • Agreement to extend Lease beyond 2029 offered
  • Council statement: Proposals all ‘Non Conforming’
  • Now discussing other options with Councillors and Crown
  • Resort has been dormant since April 2013 (14 Months)
  • 2nd time on market in 4 years, last failed sale in 2010

Macka2Article in Newcastle Herald 17 July 2014: Samurai Sale Plan Beached. 

  • Sustained losses of $11 M since purchase in 2001
  • Operating costs $4 K per week until closure
  • Statement from Council that 4 bids were ‘Non Conforming’
  • no one offered the $3 M
  • Not proceeding, looking at other options with Councillors and Crown
  • Ultra Low Cost Camping Spot Option under Consideration.
  • Bruce Mackenzie supports:
  • ‘‘At the moment there isn’t a place in Port Stephens for families without a lot of coin to go and sleep out in their tents,’’
  • ‘‘If we can break even and keep the site to provide an amenity we don’t currently have on the Tomaree Peninsula then I am all for that.’’ 
  • Proposal Goes to Council 12 August
  • Looking like a sore on the council’s otherwise healthy economic outlook.
  • Still Paying Lease, Insurance Maintenance and security costs

PS Council Statement received 15 July:

“Council will not be proceeding with any external proposals at this time as those received during the request for proposal process were non-complying. We are now discussing other options with Councillors and Crown Lands.”

TRRA inc. has noted the recent Newspaper articles above, the statement issued by Council and the statements attributed to the Mayor. We have been contacted in the last week by two parties interested in the fate of the Samurai Tourist Resort, reacting to our coverage on this site of this issue HERE and our extended article Samurai Beach Resort – The Naked Truth

Couran Cove Island Resort

Couran Cove Island Resort

1.The Developer (This post has been edited at the request of Mr. Dowling 01 April 2014.)

The first was a property developer from South Stradbroke Island Queensland, he called me after reading “The Naked Truth’ article. He asked me if I knew if the lease was still on the market.  He said that he was in the market for distressed assets and was interested in Samurai because he could see some potential in it for re-opening it.

Craig Dowling

Craig Dowling

He identified himself as a cash buyer, and if his enquiries produced anything he said he would fly down and make them an offer immediately. He gave me his phone number and the details of the Resorts he already owns (Pictures above) and I told him to call me and we would have a cup of coffee if he came down here. I referred him to the PSC Property Services Manager, Carmel Foster. I rang his number later to find out how he had fared and got a voice message identifying himself, but he is yet to reply.

Imagine my surprise when I Googled his resort (http://www.courancove.com.au/) and found that he was a former stakeholder in Buildev Pty. Ltd. and had sold his interest to Nathan Tinkler in 2009. Story Courier Mail 14 February: HERE.  I think this was a genuine enquiry about a distressed asset and an offer from an entrepreneur like Mr. Dowling should be seriously considered by Council as a solution to the situation that they have found themselves in.

AERIAL_72. The Tenderer

The second contact on this matter was an email that TRRA Inc. received from a ‘Concerned Ratepayer’   HERE.  We have tried to contact this person to find out more about this proposal without success so far.The drawings look interesting and we hear that a substantial cash offer accompanied the tender, although it was less than the $3 M. We are wondering why Council would let this guy out of their sight. (Pictures left include Aerial, Schematic, a proposed Boardwalk)

NEW_WORK_copy2TRRA Inc. Conclusions

It looks like PS Council is trying to kick this tin down the road again, as they have done since it became obvious that the venture would fail back in about 2006.  No one really wants to actually sell it, because that will crystallise the massive $17 M loss (so far) and whoever bites that bullet will have to wear the opprobrium that comes with it.

It seems now that Carmel Foster has come up with some harebrained scheme similar to the low cost, ‘first BOARDWALK_2time camping’ option being implemented over at Soldiers Point Caravan Park, so as she can be seen to be at least doing something, and divert attention away from the abject failure of her Council Property Services Department to manage both of the sales attempts so far that have cost about $15 K each in marketing expenses.

 

Soldiers Point Camping: 1. Pictures – 2. Detail – 3 TRRA Inc. Submission

Mackenzie is doing what all the other Mayors have done in the past; his statement about ‘breaking even’ says it all. If they can retain this lease and keep some glimmer of hope alive that they will break even, they won’t have to admit failure and wear the consequences. When is this pathetic charade going to end? Councillor Dingle has been calling for decisive action on this for years but nothing ever happens.

TRRA Inc. has been contacted by people that are aware of some of the proposals that were put to Council and declared ‘non-conforming.’ We have discovered that the Tender Documents did not really ‘go to the market’ as stated by Council in the past, we think that this clause was the reason why the tenders were ‘non-conforming’.

From Tender the Docs: Commercial Offer

The Proponent must make a commercial offer to Port Stephens Council to purchase the existing infrastructure and chattels on the site. This offer is required to be in excess of Three Million Dollars ($3,000,000). Offers below this figure may not be considered. 

We are talking about a distressed asset here that at one stage recently was losing about $750 K per year, now dormant and rapidly deteriorating on a Crown lease. Putting a fixed figure like that on the existing infrastructure and chattels may have been brave in the first marketing exercise when the business was still operating, but was either foolish, or set up to fail in the second one. This is not the sale of an operating entity, it is a failed business now closed down, therefore it is just a fire sale of the furniture.  That is the consequence of the previous decision to close it in April 2013. There is no ‘Business’ now to sell. There will be no recovery of what has been lost, this will just be about not losing any more.

Samurai Signs 780 x 423One of the proposals we have been made aware of seemed to tick all the Council boxes except the $3M one. However it did still contain a substantial cash offer.  We have been told it was an attractive, viable proposal that would have provided Council with some cash up front, and extracted it from its obligations to continue with the Crown lease (currently $106 K per annum, indexed). We estimate that cost to be a further $2.04 M for the lease alone until expiry in 2029.  This proponent wished to take up the offer in the documentation to negotiate the extension and terms of the lease with the Crown, but this never happened because the proposal was declared ‘Non Conforming’ and no reason was given why.  TRRA would like to know that reason and why the Council seems to want to dig an even bigger hole for itself by knocking back the reasonable solution offered. They must have some expectation of negotiating a reduction in the lease with the Crown in their discussions, the current arrangement is untenable. Why was this proponent not given that opportunity too?

We will be very interested in Council explaining how they are going to generate the return required to cover the overheads of operating this site by going down market into a ‘Ultra low cost camping venture’ when it was losing an average $400 K per annum in its previous incarnation as a ‘Resort.’

TRRA Inc. believes that this venture has consumed an enormous amount of our LGA resources over the last 14 years. We notice that the glowing financial picture painted in the four pages of wrap around feature enclosing last week’s Examiner, by the Mayor, the General Manager and the Financial Services Section Manager, did not mention this $17 M money sucking millstone around the neck of the ratepayers. The backlog of infrastructure and maintenance in Port Stephens is still very long indeed.  We would be the last ones to rain on their parade, but somebody needs to grasp this nettle and rip it out by the roots.  The last thing we need now is another failed foray into some crazy scheme involving tents.  Leave the tents to the real circus please!

Council should re-examine the only viable tender received and work with this guy to give him a go at running the venture.  He has put his money where his mouth is, and has obviously developed a business plan that he thinks will work.  Maybe he can succeed where Council has failed because of its on-costs and structure. Council needs to welcome this entrepreneur with both arms, assist him as much as possible to negotiate a deal with the Crown and divest itself of this disastrous asset for everyone’s sake.  Enough is enough!

** PS: I know you were all waiting for this, where is the ‘XXX Naked Truth’  in this story?  OK HERE it is, but only click if you can’t help yourself!

***NB*** Read Comments Below!

This entry was posted in 2014, Council Decisions, Council Financial, Council Meetings, Council Responses, Council Submissions, PORT STEPHENS COUNCIL, What The Papers Said! and tagged , , , , , . Bookmark the permalink.

3 Responses to Samurai Resort – Update, More Naked Truths

  1. Incensed Local Businessman says:

    I am incensed with the perceived arrogance of Port Stephens Mayor Bruce MacKenzie, who recently dismissed the Tomaree Residents and Ratepayers Association comments in relation to the failed Samurai Beach Resort. Cr MacKenzie was quoted as saying ‘We run the council, not the TRRA. It is nothing to do with them and they should stay out of it.’

    Au contraire, Bruce: I’d have thought a ratepayers association would have had plenty of right to comment, given the money wasted by council has been provided by the very same ratepayers that association represents.

    Council has already invested more than $10m – some reports say as much as $17m – on the failed Samurai venture. It remains closed, as it has been for more than 12 months, but continues to drain somewhere in the vicinity of $150,000 pa in site lease payments alone – the rate income of maybe 75 homes.

    You have to ask, how is it Councillors assume the right to invest ratepayer dollars in what should be the domain of private enterprise? The value of the site, or its lack of value, has been clearly demonstrated by the disinterested response from the private sector in taking over the Crown Land lease. One would have to assume that that is because the private sector has performed due diligence, and realised it was not likely to be a money-making venture.

    Private enterprise can take risks, using its own funds, if it calculates there is a likelihood of a return on an investment. In this disgraceful venture, Councillors have assumed the right to risk other people’s – ratepayer’s – money.

    Easy. No personal risk for them, and they can always melt back into the community later, regardless of any damage they might leave behind.

    Cr MacKenzie was also quoted as saying ‘If we can break even……then I am all for that’. Terrific. So has the mayor figures to show the income from ‘an ultra-low cost camping spot’ will generate enough to pay for on-site management, tennis court, pool and other grounds maintenance, on an annual basis, and maybe $3000 per week land lease, all from a brief six or eight week window when visitors come to utilise the sites?

    Where does Cr MacKenzie get his numbers? If, indeed, budget camping is so popular, why cut down on the Soldiers Point facility?

    Port Stephens Council is charged with the responsibility of maintaining the local government area in the best interests of those who live here. The massive amounts already wasted on Samurai would have been better deployed on our roads and other infrastructure, areas in which Council ought to have expertise.

    Council should walk away from Samurai. The money lost will never be recovered, but the ongoing losses would be curtailed.

    • Terry Wall says:

      I totally agree with “Incensed Local Businessman”

      It is not the role of Council to select investment opportunities and Samurai is a very good example of why. Cut the losses and concentrate on things for which you have a mandate.

  2. Port Stephens Ratepayer says:

    August 14th 2014 – Copy Of Letter Sent To All PS Councillors

    Dear Members of Port Stephens Council

    As a Port Stephens ratepayer I am struggling more and more to understand how things can go so wrong for such a long time and millions of our (tax payers’) money gets wasted year after year with very few of the Councillors living up to their role and responsibility which is to fight for the interest of the residents and ratepayers of their council.

    The Samurai Beach Resort is a classic example of this. An amazing $17 million of taxpayer’s money already wasted on that project and after reading the newspaper last week it seems that the Mayor does not think that that is enough. His latest plan is to transform it into an ultra low cost camping”; that is just mind blowing ……. WHEN IS THIS GOING TO STOP?

    Dear Members of Port Stephens Council, whatever business plan the mayor and his staff has presented or going to present to you I can assure you even with a major reduction of the Lease fee from Crown Land this plan ca’n and will NEVER fly. Whatever the numbers, in the business plan say, they are far from realistic. If you are even contemplating to support the mayor’s plan, I strongly recommend you, to go and consult some independent and experienced people in this industry for advice before you make your final vote.

    Please don’t forget the main question you have to answer is: is this new “ultra low cost camping plan” in the best interest of the residents and the rate payers of Port Stephens?

    If Port Stephens Council (PSC) goes ahead with this plan PSC is looking at a minimum of another $3.5M to $4M of tax payers’ money to be wasted in the coming 15 years. I do not believe wasting this type of, tax payers, money is in the best interest of the residents and the rate payers of Port Stephens.
    I assume that the new business plan will not recover any of the $17 million already invested prior to 2014 or?

    That would mean PSC has to accept the write off of the $17 million so far invested in the resort. That would already be ONE brave decision, now council needs to make the next brave decision and that is to cut their losses on this resort and secure the sale of the 15 years lease left on this property ASAP (2014) to avoid any more tax payer’s money being wasted on this resort. Finally of course PSC will have to come out in the clear and explain to its ratepayers what went wrong and how PSC will prevent these types of mistakes happening in the future. Most probably this last one is the one the mayor is not prepared to take …..

    AGAIN, don’t forget you as a Councillor have been elected to represent the interest of the residents and the rate payers ….. not that of the mayor and the other people in council who have been in charge of this debacle for many years now and most probably want to ((sweep it under the carpet” ….. .
    In last week newspaper the mayor made the statement ((We run the council, not the Tomaree Residents and Ratepayers Association (TRRA). Sadly enough that is true and it is about time council starts running it in the interest of the residents and the rate payers and not in the interest of themselves.

    Why do you think people organize themselves in groups like the TRRA? Indeed because Council does not live up to their role and responsibilities. Councillor’s are accountable to the community and should be held accountable for their decisions, actions and behaviors and that is what TRRA is trying to do because PSC is not doing it.

    I am sorry to have to say but a lot of people in Port Stephens are getting the impression that some of the members of council are not in there to represent the interests of the residents and ratepayers but they are simply there for the best interest of themselves and/or their mates ….. .

    Any Councillor supporting any further money spent on the development of Samurai Beach Resort by Port Stephens Council does NOT represent the interest of the residents and the rate payers of Port Stephens ….

    This “mate ship” and covering up has got an amazing similarity with what currently is going on in NSW and Newcastle politics. A lot of Port Stephens residents and ratepayers would not mind to see ICAC expand its investigations to PSC. …. Why do you think that is?

    PLEASE Councillors ‘step up to the plate’ and do the right thing and start representing the interest of the people who have voted for you, the residents and the rate payers of Port Stephens.

    Kind Regards
    Port Stephens Rate Payer

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