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AGENDA

Special Meeting

Tuesday, 22 May 2018

commencing at 9.00am

Council Chambers, 9 Pelican Street, Tewantin

Committee: Crs Tony Wellington (Chair), Frank Wilkie, Jess Glasgow, Ingrid Jackson, Joe Jurisevic, Frank Pardon and Brian Stockwell

“Noosa Shire – different by nature”

SPECIAL MEETING AGENDA 22 MAY 2018

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TABLE OF CONTENTS ITEM PAGE

ATTENDANCE & APOLOGIES -

REPORTS 3

1 PEREGIAN BEACH DIGITAL HUB – BUILDING TENANCY AND TENDER 1718T127 3

MEETING CLOSURE -

SPECIAL MEETING REPORT 22 MAY 2018

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REPORTS

1 PEREGIAN BEACH DIGITAL HUB – BUILDING TENANCY AND TENDER 1718T127

Author Manager Economic Development, Anthony Dow

Environment and Sustainable Development Department

Index ECM/ Subject/ Economic Development Attachments 1. Crowe Horwath Probity Letter

2. Tender Assessment Detailed Information Sheet – Confidential (This attachment is CONFIDENTIAL in accordance with Section 275 (1) of the Local Government Regulation 2012, which permits the meeting to be closed to the public for business relating to the following: (e) contracts proposed to be made by it (h) other business for which a public discussion would be likely to prejudice the interests of the local government or someone else, or enable a person to gain a financial advantage

EXECUTIVE SUMMARY

In December 2017, the Peregian Beach Digital Hub (Digital Hub) Establishment Phase Implementation Plan was adopted by Council.

In early March 2018, Council approved a revised tenancy process for the Digital Hub and Chris Boden joined Noosa Council as Digital Hub Director. Chris is now managing the implementation plan, based at the Digital Hub.

Following the report outlining the tender process presented to Council in March, a tender for private office tenancies and a registration of interest for co-workers was completed. In aggregate, the responses validate the market need for a technology-focused Digital Hub. The targeted marketing campaign successfully attracted interest from 58 technology businesses and entrepreneurs (5 via tender and 53 via registration of interest) employing around 50 people, with forecasted growth to 75 jobs within a 12-18 month period. Based on the response, the tenancy mix is expected to comprise private office tenancies for one ‘Established’ and three ‘Emerging’ technology enterprises on the upper floor and approximately twenty co-work memberships for individual entrepreneurs on the ground floor. Factoring this proposed tenancy mix into the Hub’s financial projections indicates that the net position forecast for the 2018/19 year is anticipated to be within the range outlined in the December 2017 Council report (refer to Finance Section). The loss of prospective tenants to other hubs through the tender process and the rental rates proposed in the responses are indicative of a highly competitive environment where a small number of promising technology companies are in demand both for their tenancy and job creation potential. The key risk for this project is losing the qualified respondents due to delays or alternative location competitive offers. The recommendation to award this tender and delegate final lease negotiations on terms and rental offer will assist in mitigating this risk.


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RECOMMENDATION

That Council note the report by the Economic Development Manager to the Special Council Meeting dated 22 May 2018 and:

A. Award the Tender Number 1718T127 for the tenancy of the Digital Hub to the following tenderers and delegate authority to the CEO to finalise lease negotiations with each:

1. Atmail Pty Ltd;

2. Alkira Software Pty Ltd;

3. Commtract Communication Services Pty Ltd;

4. PB Research and Development Pty Ltd;

B. Agree to proceed to an Invitation to Quote for Property Management Services via Council’s Vendor Panel Marketplace; and

C. Approve the Co-working tenancy process and tenancy mix as noted in this Report.

REPORT

1. Background

The Digital Hub offers a significant opportunity for Council to strengthen and diversify its economy as articulated in the Local Economic Plan and Corporate Plan. In mid-December 2017, the Implementation Plan for the Establishment phase of the Peregian Beach Digital Hub was presented to Council with the following recommendations:

Engage a resource to facilitate the implementation plan;

Undertake an EOI process for tenancy of the Hub;

Present a revised financial model and the intended tenancy mix following the EOI process.

In early March, Council approved a revised tenancy process for the Digital Hub and Chris Boden joined Noosa Council as Digital Hub Director and is now managing the implementation plan, based at the Hub.

A public tender was released on 22 March 2018 for technology enterprises to apply for office tenancies at the Hub. This was accompanied by a registration of interest process for technology co-workers.

2. Tender Overview

To tenant the Hub’s private office spaces, a robust tender process was designed. Crowe Horwath were appointed as Probity Advisors and a copy of the post-engagement letter is provided at Attachment 1.

A website for promoting the Hub was created at peregianhub.com.au, along with comprehensive multimedia content detailing the Hub facility and service proposition. In addition, the tender was advertised in the Noosa News on Friday 23 March 2018 and Sunshine Coast Daily on Saturday 24 March 2018.

The tender website was promoted through a range of online, social media and print channels, which primarily targeted local and regional technology businesses with secondary promotion in the major metros.

That promotion resulted in over 50,000 video views and 850 visits to the website to view the tenancy information, with 60 companies registering for the tender. Industry briefings were then held in late March with 14 attendees. This level of engagement has contributed to raising the profile of Noosa and its digital economy.

http://peregianhub.com.au/


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Ultimately, the tender process solicited five tender applications: One Established enterprise (Atmail) and four Emerging enterprises (Alkira, Commtract, PB Research & Development and GrowOnline).

Tenderer Business Name Description (200 word pitch extracted from Tender document)

Atmail We’ve help solve email hosting headaches for telecommunications and hosting service providers across every continent, thanks to our ability to provide trusted and customised solutions, either hosted on our cloud or by providing software to power the provider’s cloud platforms. Today, we power over 40 million mailboxes worldwide and offer global support coverage with the help of our team members in Australia, the United States, India and Europe. If you’re looking for a trusted email hosting partner, so you can get back to core business, we can help.

Alkira Akira Software is a business changing the lives of blind people with a novel intelligent, talking web browser. The Alkira solution solves a significant problem where blind and low vision people (BVI) cannot access web portals delivering life-essential services. Large local councils, corporate entities and advocacy groups are the first target customers. In the next iteration the software will, using AI and machine learning will allow the addition of voice services to navigation and transact with websites without requiring website changes. It can be used with Google home, Amazon Alexa or Apple Siri. The tool will allow millions of small & medium enterprises utilise the new medium without the additional infrastructure cost.

Commtract Commtract is Australia’s first marketplace and support network for communications professionals. Our mission is to connect organisations from large corporations to local councils, with the world’s best communications talent. We help our clients by allowing them to access flexible, high quality professionals to quickly meet their communications needs. We help our consultants by finding them exciting work opportunities and simplifying the business of consulting. Commtract is owned and operated by former communications professionals. We understand the industry and the issues.

PB Research & Development (Trading as PiggyBank)

Our product, heypiggybank.com, is a consumer savings product for people to invest and own cryptocurrencies. With the intention for users to subscribe to a monthly plan (e.g $30) to buy & transfer cryptocurrencies to their PiggyBank. And when the time comes, users can “break their PiggyBank” to withdraw funds to a nominated bank-account. The product is targeted towards the “average Joe” who would like to own crypto-currencies, however due to the technical and security barriers, hesitates to make the leap. PiggyBank makes it easy for consumers to own and hold crypto’s with a few clicks - Made for mobile, a simple on-boarding process, and designed with security in mind.

GrowOnline GrowOnline provide a complete, end-to-end, integrated, inbound digital marketing solution for small businesses at low cost.

3. Tender Assessment

Four of the five applications successfully met the tender criteria that assessed the applicants’ financial capacity, business and individual talent, technology fit and cultural fit. One applicant, GrowOnline, has withdrawn from the tender process and are in discussions with Council regarding co-work options at the Hub.

Due to the commercial in confidence nature of the tender submissions, and the fact that commercial negotiations over lease terms and rental payments has yet to be finalised, a confidential tender assessment information document is provided at Attachment 2.

Based on the preferred floorspace configuration detailed in the tender responses, and subject to awarding of tender, the successful tender submitters could all be accommodated in the upper floor area with minimal space available for additional private office tenants when factoring-in forecasted head-count growth.


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Any future tenants would be sourced via a commercial real estate partner as part of their obligations under a property management service agreement. That partner will source potential tenants on an as-needs basis and assess them based on the criteria from the tender. Refer section 6 of this report for further detail on this process.

4. Co-working Tenancy Process

In parallel with the tender for private office spaces, a co-work registration of interest process was conducted to assess the market appetite for individuals wanting to work in a shared environment at the Hub.

Thus far, 53 applications have been received for co-work. An initial assessment suggests that around half of those would fit Councils preferred criteria:

Entrepreneur working in technology;

Building a tech business, looking to grow and planning to hire locally;

Currently working from home or similar environment (i.e. not from a local co-working space);

Benefit from entrepreneurial support.

The full application process for co-work membership is underway offering an initial 6 month membership for technology entrepreneurs at a cost of $450 per month. This rate is comparable to local co-work offers. The Digital Hub Director will apply the preferred criteria outlined above to finalise selection of co-work tenants. Current demand suggests that, subject to fitout completion, 20 co-workers will be in place by 31 July 2018.

5. Recommended Tenancy Mix

We are optimising the tenancy mix for digital jobs growth and ratepayer return. Based on the market learnings from the response thus far, the mix is likely to have a larger proportion of tenants in the co-work category than first projected. This reflects the maturity of the local digital sector and the potential to graduate Technology Co-workers to leased office space locally. As a result, the following tenancy mix is recommended:

Upper Floor – 5 private office spaces, accommodating approximately 30-40 jobs

Ground Floor – 20 co-work desk rentals plus co-work, common spaces for specific program

delivery.

6. Property Management Services

The Property Branch will undertake an ‘Invitation to Quote’ for property management services via Council’s Vendor Panel Marketplace that includes:

managing leases;

collection of rentals, outgoings & arrears;

management of external services & utilities;

securing tenants & re-tenanting for vacant office space .

Previous Council Consideration

Council Workshops:

12 May 2017

26 October 2017

17 November 2017

7 December 2017

Council Briefing:

11 May 2018


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Meetings:

Ordinary Meeting, 21 September 2017, Item 7, Page 18

That Council note the report by the Economic Development Manager to the General Committee Meeting dated 18 September 2017 regarding tender 1617T130 for the provision of Management Services – Peregian Beach Digital Hub and:

A. Notify tender submitters that a decision on tender 1617T130 is on hold while Noosa Council further considers the business case of the Peregian Digital Hub project; and

B. Request the CEO to arrange for advice to be provided to Council on strategies to meet Council’s broad intentions for the Peregian Digital Hub.

Special Meeting, 13 October 2017, Item 2, Page 3

That Council note the report by the Director Community Services to the Special Council meeting dated 13 October, 2017 and;

A. Not award tender 1617T130 in accordance with Section 228 (8) of the Local Government Regulation 2012 and Conditions of Tender clause 14.1; and

B. Request the Chief Executive Officer to inform all tenderers of Council’s decision.

Ordinary Meeting, 21 December 2017, Item 6, Page 12

That Council note the report by the Economic Development Manager to the General Committee Meeting dated 18 December 2017 and;

A. Adopt the Peregian Beach Digital Hub Establishment Phase Implementation Plan – December 2017 provided at Attachment 1;

B. Approve the engagement of a project resource to facilitate the implementation plan;

C. Approve the undertaking of an Expression of Interest process for tenancy of the Digital Hub;

D. Note that, following the EOI process, a further report will be provided to Council, presenting a revised financial model and the intended tenancy mix.

Special Meeting, 1 March 2018, Section 2 - Item 1, Page 2

That Council note the report by the Economic Development Manager to the Special Council Meeting dated 1 March 2018 and;

A. Approve the Digital Hub tenancy process and associated assessment criteria and weightings as detailed in the report with the following addition to the Tender Assessment Criteria in all categories under “Alignment with the vision”:

The second sentence is to read:

“Evidence of intended contribution to building the Digital Hub community including demonstrated contribution based on past and present actions”; and

B. Agree to proceed to the public tenancy process for tenancy of the Peregian Beach Digital Hub.

Finance

The table below summarises the five-year financial forecast for the Hub as outlined in the December 2017 report.


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Overall, while the factors outlined below will drive a shift in the revenue and tenancy mix, it is not anticipated to impact total annual revenue for the Hub during the 2018/19 year

An evaluation of the proposed tenancy mix compared to the December 2017 forecast reveals the following changes in assumptions underlying the Hub’s operating revenues:

Total permanent lease space is anticipated to be lower under the proposed tenancy mix compared to the December 2017 forecast.

However, the December 2017 forecast assumed a low occupancy rate for permanent rental in the first year (50%). The timing of lease negotiations and proposed annual lease terms means that the let space will actually be occupied for the entire financial year.

Demand for co-work space is higher than anticipated compared to the December 2017 forecast.

The permanent lease rate charge per square metre under the proposed tenancy mix will be lower than the December 2017 forecast. While the fee for co-work space is anticipated to be higher than the December 2017 forecast.

In respect of cost estimates, the following is noted:

A Digital Hub Director has been employed to manage the facility. Provision of funding for

salaries and wages had been allowed for under the December 2017 forecast. Once the

Certified Agreement is finalised, the financial projections will be updated to reflect 2018/19

budget forecasts for salaries and wages.

All other operating and maintenance cost forecasts remain aligned to previous forecasts.

The fitout requirements for the facility were presented to Capital Works Executive on 24 April

2018, where funding for some immediate work for fitout scope and design of $60k was

endorsed.

Once the tenancy mix has been adopted, the second stage of the fitout can be undertaken

to accommodate all permanent lease and co-work space needs. Further funding

requirements for the second stage to complete the fitout will be also addressed through the

Capital Works Executive for inclusion in the budget.

Budget Implications

2017/18 Budget

Nil.

2018/19 Budget

The final mix of permanent lease tenancy and co-work revenues will inform 2018/19 budget for adoption in June 2018.

7. Risks and Mitigations

Risk Mitigation

Loss of potential tenants through delays Expedite the awarding of the tender to the four qualifying respondents and proceed to lease negotiations.

Unable to reach agreement on lease terms Ensure all options have been exhausted.

Compliance with LGA Regulations for fair market price

Valuation and market research report indicates a highly competitive marketplace for the attraction of commercial tenants

Unoccupied Building due to delay in reaching agreement with prospective tenants

Responsive Council with robust parameters that supports fair and commercially viable decision for all parties. Delegated CEO authority


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Risk Mitigation

Unoccupied Building due to delay in completing fitout

Expedite initial fitout for co-work space and finalise all fitout matters as part of lease negotiations

Not being able to apply an entrepreneurial, agile approach to achieve KPIs due to constraints and regulatory requirements of local government.

Governance framework that enables agility, flexibility & entrepreneurialism

Consultation

External Consultation - Community & Stakeholder

Crowe Horwath - Appointed as probity advisors Herron Todd White Commercial - Market Rental Research Report Internal Consultation

The operational project team meets weekly and consists of representatives from economic development, property, finance and procurement.

Departments/Sections Consulted:

x Chief Executive Officer x Community Services x Corporate Services

Executive Officer Community Development Financial Services Executive Support Community Facilities ICT Libraries & Galleries Procurement & Fleet Local Laws Property Waste & Environmental Health Revenue Services

x Executive Services x Environment & Sustainable Development x Infrastructure Services

Community Engagement Building & Plumbing Services Asset Management Customer Service Development Assessment Buildings and Facilities Governance Economic Development Civil Operations People and Culture Environmental Services Disaster Management Strategic Land Use Planning Infrastructure Planning,

Design and Delivery


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Attachment 1


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CONFIDENTIAL – ATTACHMENT 2


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