City of Karratha signals intent to purchase Quarter hotel site
The City of Karratha’s councillors have agreed to notify the public of an intention to enter into a major land transaction to purchase land for the proposed Quarter Hotel.
Landcorp offered Pacifica Developments and the City of Karratha a six-month exclusive working period on April 27 to finalise an agreement to build a 100-room, four star hotel.
Councillors voted unanimously to present the business plan to the public, undertake a period of community consultation and receive submissions on the proposal.
If the hotel goes ahead, the City would invest up to $10 million towards the $19.7 million project for fit out, to be recovered through lease payments. It is anticipated Marriott International would operate the hotel.
The City would not incur operational costs, and would gain ownership of the hotel if the developer defaulted on its obligations. The hotel would pay about $8.8 million in rates over the lease term.
Documents in tonight’s agenda suggest the hotel would help attract major events to the Red Earth Arts Precinct, create about 50 construction and 50 operational jobs, and provide quality short stay accommodation “not currently available” in Karratha.
The move comes after February’s Langoulant Report criticised Landcorp for not updating a business case developed in 2011 for the Quarter precinct.
In his findings, special inquirer John Langoulant said initial project planning lacked rigour and risk assessment, and failed to include long-term project risks.
“Except in relation to building two, LandCorp did not review its business case in light of deteriorating market conditions, the announcement of the Hilton hotel being constructed at a different site and the change of its role from the project manager to the developer,” he said.
“This is particularly significant given that financial analysis in the 2011 business case did not incorporate assessment of the expected future cash flows or net present values.”
The draft business plan laid out by the City tonight suggests the hotel would make about $2.76m profit after five years.
It found most risks associated with the project to be low to moderate.
Former proponent Murujuga Aboriginal Corporation dumped its interest in an old proposal in 2016, describing investing in the project as “ridiculous” and a risk of running up “enormous debt”.
Ngarluma Aboriginal Corporation and Gumala Investments have both declined advances from the City and Pacifica to invest in the hotel.
The City purchased the commercial building at the Quarter precinct in 2017 to reduce reliance on rates for income.
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