Church abandons 'affordable' tower in Newcastle CBD, sells at profit

Having paid $2.8 million for the block in May 2016 it has just offloaded it to Bloc for $8.3 million.

Bloc declined to comment on its purchase but the church said difficulties in getting the affordable housing part of the project to stack up financially meant the new owners were unlikely to go down that path.

The sale has exposed tensions between the church on one side and Newcastle City Council and the Hunter Development Corporation on the other.

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The church says a lack of support from the council and the HDC contributed to the project’s demise, an assertion the HDC and the council reject. The church denies making an excessive profit on the deal, saying the Empire site had cost the diocese $4.5 million in the two years it had owned it.

But Labor Deputy Lord Mayor Declan Clausen has hit out at the church saying it had been “an outrageous example of land-banking” that delivered a profit of $5.5 million.

 The diocese’s vice chancellor, administration, Sean Scanlon, said on Wednesday that the church was extremely disappointed it could not deliver affordable housing on the Empire site, saying “we have spent a lot and not achieved our aims”.

“Unfortunately, given the frenzy of activity within the local building industry we were unable to secure a builder who could complete the project within our cost constraints,” Mr Scanlon said. 

He defended the diocese’s property purchases, saying it had built 74 “affordable housing” dwellings at Maitland, Mayfield, Booragul and Mount Hutton in the past few years.

“We will now look for other opportunities to provide accommodation for the most vulnerable in the community,” Mr Scanlon said.

The quest to have the Empire site redeveloped began in 2010 when the state, under Labor, paid $2.3 million for the derelict old pub, knocking it down in early 2011.

In mid-2013, the HDC announced it was seeking a builder for an affordable housing project, and in May 2014 it announced that a local consortium, Newcastle First, would build a 14-storey tower on the site, with 25 of a planned 114 apartments to be “affordable”. 

The council would provide $2.9 million of Building Better Cities money to help pay for the affordable component.

When that plan fell over, the HDC put the site back to tender in July 2015, and announced the Catholic plan in May 2016.

Originally envisaged as a $30-million project comprising 128 units over 14 storeys, the plan was approved in December last year with 120 units over 15 storeys.

The approval, which transfers to the new owners, allows for 54 normal residential units, 66 affordable housing units, 128 parking spaces over two levels and two ground floor commercial units.

But even before the December approval, the church was butting heads with the council.

In September, Cr Clausen spoke out against the diocese’s application to have an estimated $575,000 in section 94 fees – paid to the council for infrastructure provision – reduced or waived because of the project’s affordable housing component.

A Joint Regional Planning Panel approved a discount on the fee in December, but the project was already in deep trouble.

“The bottom line is that we couldn’t find a builder who could build it within a reasonable price to make it work,” Mr Scanlon said.

He said the quotes they received were “millions higher than we expected”.

He said the church went back to the council and HDC seeking more financial help but neither organisation would help. Mr Scanlon said the $2.9 million the council had promised in 2014 was allocated to another organisation.

“A number of suitable builders withdrew because they had other work and that impacted on our pricing,” Mr Scanlon said.

“We were left holding it with no suitable builder and we decided we couldn’t proceed at this stage. As soon as we said that, the builders were on the phone wanting to buy the site. The builders are the winners here.”

Mr Scanlon said that after the Empire experience, it would be interesting to see how the HDC fared with its proposal for 30 affordable housing units on the railway corridor at Merewether Street.

But HDC said it had received various offers from “high-quality community housing providers and was “very confident” of selecting a preferred partner in the next six weeks.

“We are disappointed the project is not proceeding and will watch with interest how the new owner proposes to develop the site,” HDC said.

It said the amount of affordable housing on the site was always a matter for the Catholic church. 

Cr Clausen wants any profit from the sale committed to victims of church abuse.