PLANNING PANELS VICTORIA

PLANNING SCHEME AMENDMENT: Kaufland Stores Advisory Committee

PLANNING AUTHORITY: Mornington Peninsula Shire Council; Hume City Council & Kingston City Council

SUBMITTER: Vicinity Centres Pty Ltd & ISPT Pty Ltd

SUBJECT LAND: 1158 Nepean Highway, Mornington1550 Pascoe Vale Road, Coolaroo1126-1146 Centre Road, Oakleigh South

OUTLINE OF SUBMISSIONS

VICINITY CENTRES PTY LTD & ISPT PTY LTD

Introduction

1. These submissions are made on behalf of Vicinity Centres Pty Ltd & ISPT Pty Ltd (Vicinity) in relation to the Kaufland Stores Advisory Committee (the Advisory Committee).

2. In additional to these submissions, Vicinity relies upon its earlier submission in relation to net community benefit and the expert evidence of:

a) Brendan Rogers – Urbis (Planning – Mornington & Oakleigh);

b) Rhys Quick – Urbis (Economics – Mornington & Oakleigh);

c) Rob Milner – 10CG (Planning – Mornington);

d) Colleen Peterson – Ratio (Planning – Coolaroo); and

e) Brian Haratsis – MacroPlan (Coolaroo).

3. Vicinity welcomes Kaufland to the Australian market and hopes that Kaufland is a successful new operator to add to the retail offer in Australia.

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4. Vicinity owns and operates over 60 centres and has significant land holdings in a range of centres around Victoria (and across Australia) and openly invites Kaufland to make contact with Vicinity and other land holders within centres with a view to securing accommodation for its new stores.

5. Vicinity seeks to make it clear that it is hopeful that Kaufland is successful in its new Australian venture – but not if it is to be done as Kaufland propose in the Tranche 2 manner.

The Kaufland Australia construct

6. The Minister has asked the Advisory Committee for advice on what Kaufland proposes for Australia.

7. It is submitted that one of the key pieces of advice that the Advisory Committee should give the Minister is that Kaufland is an organisation that has displayed that it doesn’t just have one or two store formats.

“Kaufland real estate. Full of possibilities.’ ‘Modern architecture, maximum flexibility.’ ‘…solutions that are tailored to every location. …we’ve got it all covered’. ‘A variety of building concepts. A multitude of possibilities.’

8. This is how Kaufland advertises itself1 and it is apparent by reference even to the limited sample of stores that Mr Dimasi and Mr Stephens visited that this ‘flexibility’ and ‘tailored solutions’ are what Kaufland provides overseas.

9. In this respect, the Advisory Committee is referred to the portfolio provided by Vicinity which explores each of the Dimasi/Stephens stores.

10. But what is it about Australia that calls upon Kaufland to adopt an inflexible approach that is apparently not exhibited elsewhere in the world? That is, stores on sites which are:

1 See document 137.

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a. minimum 17,000m (apparently changed from 13,000m22);

b. area of 2 to 3 hectares;

c. 400 car parks (apparently changed from 300 car spaces3);

d. Freehold land;

e. Main road location.

11. This are the parameters of the Kaufland Australia Construct (‘the Construct’).

12. It is submitted that the Advisory Committee should advise the Minister that:

a. the days of overseas retailers dictating land use and built form outcomes to Victoria are over;

b. there is no rational basis as to why the Victorian Planning System ought be side-stepped to accommodate the Construct.

13. Kaufland claims that finding sites to accommodate the Kaufland is ‘very difficult or simply impossible’ in-centre.

14. It makes this claim in the absence of any consideration of in-centre locations, and more will be said about this below, but the Construct is an unsubstantiated and self-serving concept clearly designed as a grab for out-of-centre locations.

15. Even a cursory analysis of the limited sample of stores that Mr Dimasi and Mr Stephen’s visited demonstrates that the Construct is just that.

16. In Kaufland’s Part B submission, Kaufland refers to Wittner Pty Ltd v Kingston CC [2014] VCAT 789 in support of its claims for an out-of-centre location. The Wittner decision related to a 713 square metre shoe store – it is hard to imagine a more irrelevant case to the

2 See document 78.3 See document 78.

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present circumstances. Similarly, the questioning about ‘beauty contests’ in relation to permit applications. This is not a permit application. This is an entirely different forum. That why’s that line of questioning and the cases referred to in the Kaufland Part B submissions about permit applications are not of assistance.

17. Kaufland has continually sought to point to VC100 as somehow being supportive of the Kaufland stores. That might be an interesting point if Kaufland were proposing small supermarkets or small scale shopping opportunities, but it is doing neither.

18. Paragraph 45 of the Part B submission also suggests that VC100 was a direct result of a concern expressed by Aldi to the Productivity Commission that suitable sites were simply not available in centre.

19. Sounds like a familiar mantra.

20. But the near ubiquitous nature of Aldi stores located in-centre illustrates that the mantra is a falsity.

21. Kaufland has made reference several times to the ‘extensive market research’ that has been undertaken specifically for the Australian market that has led to the specific requirements of the Construct.

22. None of this ‘market research’ has been presented to the Advisory Committee, nor to any of the expert witnesses engaged by Kaufland.

23. The Advisory Committee is instead being asked to accept that:

i. such a body of work has been done;

ii. that this work determined that the Australian market requires the Construct;

iii. Kaufland won’t enter into leasehold arrangements in-centre;

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iv. the store formats that Kaufland displays in other parts of the world will not work in Australia.

24. It is also striking that not even Mr Dimasi was provided with business financial model or any other relevant information by Kaufland. So not only was Mr Dimasi left to ‘fly-blind’ in relation to the operations of Kaufland, but so has every other person because Kaufland has not provided any information to support the assertions that the Construct is a requirement.

25. The claimed ‘efficiencies’ and ‘cost savings’ and ‘competition’ have not been quantified in any way. And no information has been put into the public domain that allows anyone to scrutinize these claims. As submitted by Blackrook Pty Ltd, it is ‘little more than untested fanfare and puffery.’

26. As to the suggestion that Kaufland will not enter into leasehold arrangement. As stated in the evidence of Mr Stephens, it is a ‘requirement of Kaufland to have freehold ownership of the site4.’ At paragraph 13 of the Kaufland Part B submission, Kaufland’s states that it would not never contemplate a leasehold arrangement. This submission was made after Vicinity asked Mr Stephen’s whether he knew of the offer made at the in-centre location. Mr Stephens was not aware of the offer that Kaufland made. It was submitted in that same paragraph that ‘Kaufland attended one meeting with Vicinity Centres on 28 November 2018 for a high level discussion about the potential for Kaufland to locate a store within Broadmeadows Central. That location did not meet Kaufland’s internal requirements relating to layout, loading and car parking, and that potential site was not investigated further’.

27. Vicinity has instructed that this does not accurately record what has occurred. Vicinity has instructed that the following has taken place in relation to the in-centre location:

• 14 August 2018 - Meeting at Vicinity with Kaufland

4 Paragraph 3.12 of Mr Stephen’s statement.

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• 31 August 2018 – Tenancy lease plan, Centre disclosure plan provided to Kaufland

• 4 September 2018 - Store layout plan provided to Kaufland

• 10 October 2018 – Kaufland issued scope of works

• 16 November 2019 – Kaufland requested DWG file and request for Commercial terms

• 23 November 2018 – Phone conference call between Vicinity and Kaufland – discussion on planning, market share and broadly commercial terms

26 November 2018 – email correspondence between Vicinity and Kaufland - confirmation and interest from Kaufland for proposed meeting time of 28 November 2018

• 28 November 2018 – Phone conference call between Vicinity and Kaufland – discussion on planning, market share and broadly commercial terms

• 30 November – Kaufland advised that commercial terms will be issued

• 25 Jan 2019 – Kaufland issued a letter of offer (confidential document).

• 29 Jan 2019 – Kaufland requested CAD plan of the tenancy

• 29 Jan 2019 – Kaufland sent email tendered by Kaufland on 26 March 2018 (confidential document). Its contents are enlightening in terms of illustrating Kaufland’s intentions in relation to in-centre locations.

28. The Advisory Committee has been provided with a copy of confidential documents. The circumstances of this in-centre location further undermines the Construct and the falsity of suggestions that Kaufland:

a. is not able to find in-centre locations;

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b. must be in the format of the stores that are proposed;

c. isn’t able to apply the flexiblity that it applies overseas in Australia;

d. isn’t able to locate in existing buildings;

e. isn’t able to located in-centre without adding additional carparking;

f. requires freehold.

29. The fact that Kaufland did not disclose the proposed in-centre location either to its experts or more importantly, to this Advisory Committee until after it was raised by Vicinity is very troubling in the context of Kaufland continuing to claim that finding sites in centre is difficult or simply impossible and that the Construct is a requirement.

30. It is submitted that the Advisory Committee ought to treat the Construct with a high degree of skepticism.

31. Further, it ought to advise the Minister that the Construct ought be rejected in Victoria.

Site specific considerations

Mornington

32. Vicinity relies upon the discussion of the Local Planning Policy Framework (LPPF) applicable to Kaufland’s proposed Mornington site, as set out in the evidence of Mr Rogers and Mr Milner.

33. Relevant policies of the LPPF generally seek to concentrate retail uses within, or immediately adjacent to activity centres, and Clause 21.07-3 specifically identifies that the Mornington Peninsula does not require any new activity centres.

34. The Mornington Peninsula Activity Centres Strategy was adopted by the Mornington Peninsula Shire Council on 30 April 2018.

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35. The Vision Statement for the Strategy is provided on page 2:

The Mornington Peninsula’s existing activity centres will continue to be the focus for new retail development and key locations for business, community activity and social interaction in the Shire. Council will work with stakeholders and the community to maintain and enhance the existing hierarchy of activity centres to meet the needs of both the local community and visitors to the Peninsula. The activity centres will be highly accessible, support positive environmental, social and economic outcomes, and provide safe, attractive and diverse places for local residents and visitors to enjoy. Future development will be appropriate to the character, role and function of each centre.

36. At page 23:

It is possible that applications for retail or commercial development in the C2Z or IN3Z could impact on the activity centres hierarchy. For this reason, careful consideration is required of possible retail and commercial development in the C2Z and IN3Z, and the implications of such use and development for the existing activity centres.

37. At page 25:

In planning, an activity centre hierarchy is a policy tool which recognizes that centres have differing capacities and roles in the provision of retailing and other forms of commercial activity and, in turn, require different levels of public investment to facilitate safe, functional and attractive centres. By identifying and supporting a hierarchy of centres and the expected scale and role of different centres, planning aims to provide greater certainty for public and private investment and to ensure a high overall level of service to the community, delivered through the network of large and small centres. While the benefit to the community of increased competition must be considered, and this is a key argument for ‘out-of-centre’ development proposals, this must be weighed against the benefits of maintaining viable, attractive and diverse town centres.

38. Action 5.2 provides that Council ‘…will only consider the creation of significant out-of-centre retail development where there is a demonstrated service gap which cannot be met by existing centres and/or where it is part of a new integrated neighbourhood development”.

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39. There is no evidence to suggest that there is a service gap and there is no suggestion or claim that the Kaufland proposal is in any way integrated. It is noted that Kaufland land week produced a plan (well after its experts has gone home) hinting at a potential road and pedestrian connection to the north – looks more like a desperate scramble made in afterthought. To suggest that there is ought be some future masterplanning exercise to bring about integration does not stand to reason as there is no mechanism available to require anyone to do a future masterplanning exercise – particularly Kaufland as it would be effectively removed from the operation of the planning scheme under this proposal.

40. Vicinity relies upon the evidence of Mr Rogers that Kaufland Mornington would ‘…create a significant core retail node at the northern end of the Mornington Homemaker centre that is likely to alter the nature of this precinct to one that competes with, rather than complements the Mornington Major Activity Centre’ (paragraph 48) and his evidence that no evidence of the challenges of the out-of-centre location, or the effect of the development on the Mornington Major Activity Centre or the Mornington Homemaker Centre has been provided to the Advisory Committee (paragraph 66).

41. Vicinity also relies upon the evidence of Mr Milner that:

125 The economic and social benefits to the community, measured in jobs, investment, reduced escape expenditure and greater choice of retail offer would be more than off set by the consequences and implications of an inappropriate site.

126 The hierarchy of activity centres will be weakened rather than maintained or strengthened by this proposal and amendment that performs poorly against the tests of industrial policy; orderly development; and the creation of safe and pleasant environments.

42. Vicinity further relies upon the evidence of Mr Quick that the impact on Mornington Central will be more than 12%. This is a large impact on any view – certainly well above the 10% figure.

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Submissions as to this level of impact are set out later in this document.

43. As with Coolaroo and Oakleigh, at Mornington, Kaufland, nor any of its experts considered in-centre locations as part of their strategic assessment of this site.

44. That is frankly stunning.

45. Particularly when Kaufland is seeking to claim finding sites in-centre is ‘very difficult or simply impossible’.

46. The Minister has asked the Advisory Committee to undertake a strategic assessment and consider any relevant matters raised in the course of the process – an obvious, relevant and necessary enquiry in fulfilling this role is to look at locations that are strategically preferred – that is, in-centre.

47. Vicinity also relies upon the expert evidence in relation to the inconsistency of the Kaufland proposal with policy as it relates to industrial land. That analysis is contained within the expert witness reports and is not repeated here. It is noteworthy however that the policy for Industrial Areas5 requires consideration of the extent to which any commercial development would be better located in an existing activity centre – this is further reinforcement of the obvious and necessary enquiry to look in-centre.

Oakleigh

48. Vicinity relies upon the discussion of the Local Planning Policy Framework (LPPF) applicable to Kaufland’s proposed Oakleigh site, as set out in the evidence of Mr Rogers.

49. As to the position of the Council, with respect, it is submitted that the Council simply hasn’t engaged with its own planning scheme.

50. The Oakleigh site is in a strategic location that encourages industry and warehouse, and seeks to prohibit most types of shop – including supermarket.

5 Clause 22.01-4.

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51. The Oakleigh site is located in a well-established industrial area, outside of an Activity Centre and with poor public transport access.

52. Vicinity submits that the development of this site with a Kaufland supermarket is not supported by planning policy.

53. Vicinity also relies upon the expert evidence in relation to the inconsistency of the Kaufland proposal with policy as it relates to industrial land.

54. Kaufland’s submissions include that it cannot be said that the Oakleigh store would lessen the availability of industrial land – as the existing land use is non-industrial. Hardware stores are an appropriate land use within the industrial zone. Regardless of the fact that Bunnings has operated at the site, this proposal would remove the land from industrial use and replace it with a core retail use. There is no doubt that the proposed Kaufland store would permanently remove this land as an industrial resource because the prospect of a core retail function returning to an industrial land resource are remote.

55. At paragraph 166(a) of the Part B submission, Kaufland submits that the site is sufficiently large to accommodate its National Headquarters and supermarket in a ‘campus style development’. No evidence has been provided to assure the Advisory Committee that this is the case – despite the fact that the Terms of Reference call for consideration of the National Headquarters.

56. Paragraph 174 of the Part B submission suggests that the reason why the National Headquarters is no longer before the Advisory Committee is because of Mr Blades’ evidence recommending ‘future master planning’. It further asserts that ‘the establishment of the National Headquarters can afford a slight delay, to allow the master planning process to roll out.’

57. That submission simply doesn’t withstand the most basic level of scrutiny. Mr Blades wasn’t engaged until January 2019. As long ago as June 2018, Kaufland were no longer proceeding with the

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Headquarters through this Advisory Committee (see June 2018 Planning & Property Partners report). In June 2018, Kaufland expressed an intention to locate its Australian headquarters in Oakleigh South ‘subject to successfully delivering the proposed tranche of six stores in Melbourne6’. It had nothing to do with allowing ‘the master planning process to roll out’.

58. It is submitted the Advisory Committee ought advise the Minister that because there is no proposal for a National Headquarters, if Kaufland promised the headquarters to the Minister, that he ought not proceed on the basis that the promise will be delivered upon.

Coolaroo

59. Vicinity relies upon the discussion of the Local Planning Policy Framework (LPPF) applicable to Kaufland’s proposed Coolaroo site, as set out in the evidence of Ms Peterson and Mr Haratsis.

60. Kaufland has long asserted that the Coolaroo site is in-centre. This assertion began in June 2018 in the Planning and Property Partners report for the Coolaroo site. It is apparent that Mr Biacsi accepted that assertion without scrutiny of what the planning policy says and the assertion continued through to the Kaufland Park B submissions7.

61. Both the PPP report and Mr Biacsi sought to suggest that the site was in-centre by reference to a finding made in 2010 by the Oxygen Advisory Committee. As has been demonstrated by Ms Peterson, had PPP or Mr Biacsi undertaken an analysis of the changes to the planning scheme since 2010, they would have found that the site is out-of-centre.

62. There is no room for debate that the Coolaroo site is out-of-centre.

63. Unlike some planning schemes, the Hume Planning Scheme is crystal clear that the subject site is out-of-centre.

6 See section 2.4 of June 2018 Planning & Property Partners report.7 See for example paragraph 198.

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64. This was explained in detail by Ms Peterson and in oral submissions on behalf of Vicinity.

65. Practice Note 58 does not displace what the planning scheme says. It also does not apply here – it specifically says that it is a practice note to provide ‘guidance to councils on the activity centre structure planning process.’ The Activity Centre boundary has been defined and included within the planning scheme. Practice Note 58 is a pointless distraction here.

66. There is also no room for debate in terms of what land is contained with in the Roxburgh Park Major Activity Centre. The Scheme defines it:

a. Clause 21.05-1 – Major Activity Centres – Roxburgh Park Shopping Centre;

b. Clause 21.06-3 Roxburgh Park Major Activity Centre – ‘Roxburgh Park Shopping Centre is a large shopping centre consisting of both internal and external shopping areas. It benefits from passing trade on Somerton Road and access from Roxburgh Park Station’.

67. It is clear that no land to the south of Somerton Road is within the Major Activity Centre.

68. The land which is subject to clause 22.12 is illustrated below8 and is described in text at the start of clause 22.12:

This policy applies to land zoned Commercial 2 at the south-east corner of Somerton Road and Pascoe Vale Road, Coolaroo, being Lots 1 - 7 inclusive and Lot S3 on Plan of Subdivision 422330A.

8 See last page of the Policy Reference document to clause 22.12 ‘Somerton Road and Reservoir Drive, Coolaroo Strategic Analysis Report' dated September 2003

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69. The subject land is also outside of this area.

70. Mr Biacsi’s evidence was that ‘not much hangs on whether the site is in or out of centre’. That evidence demonstrated again that Mr Biacsi unfortunately was not aware of the changes to the planning scheme that have taken place since VC100 – clause 21.06, Strategy 1.4 which illustrates that a lot hangs on whether a site in in or out of centre. For an out of centre location, Strategy 1.4 states:

Discourage community, leisure and health facilities and large supermarkets outside of identified activity centres.

71. This new clause 21.06 was implemented through amendment C176 on 19 October 2017 – post VC100 with an obvious reference to the consequences of large supermarkets as compared to those facilitated by VC100.

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72. Mr Haratsis was asked generic questions (that is, he was not asked whether the second strategy of clause 17.02-2S applied to the subject proposal) about clause 17.02-2S – but that strategy does not apply because this is not a proposal to expand a single use retail facility.

73. Vicinity relies upon the evidence of Ms Peterson that the site does not form part of the Roxburgh Park Major Activity Centre. Nor does it form part of the land to which clause 22.12 applies.

74. Vicinity further relies upon the evidence of Ms Peterson and Mr Haratsis in relation to strategic and economic assessment.

75. The evidence of Mr Haratsis is that the impact on the Major Activity Centre (the only one in the MTA of the proposed Kaufland) will be in the 10-15% range.

76. It is submitted that this is a level of impact on its own that is alarming.

77. In this respect, the Advisory Committee is referred to the following findings of the Advisory Committee that considered the expansion of Epping Plaza – not only in relation to the significance of the 10%, but also because of the way in which the Advisory Committee considered impacts on individual centres – that is, the same approach that Mr Haratsis has adopted here (as has Mr Quick at the other locations), but neither Mr Dimasi, Mr Stephens or Mr Shipp used that approach (see pages 70-71 of the report of the Advisory Committee – Stage 2 Expansion Epping Plaza Shopping Centre, September 1997):

It has generally been accepted through many previous Panel, Administrative Appeals Tribunal and Advisory hearings that a level of impact of greater than 10% on any other centre results in unacceptable levels of impact, and a major reason why an expansion of a shopping centre should or should not proceed. The figure of 10% is generally considered to be a

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competitive effect and one where detrimental effects to a centre are encountered (page 70).

…

See table at top of page 71 for analysis Centre by Centre

…

The key issue for the Advisory Committee is whether it can be satisfied that there will be minimal impacts (ie less than lO%)on other shopping centres due to the expansion of Epping Plaza (page 71).

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The Advisory Committee is not convinced that the impact of the proposed expansion on other centres, particularly the smaller, neighbourhood centres such as Lalor and Lalor Plaza, would be less than 10% and it concludes that the proposed expansion of Epping Plaza will have detrimental effects on the trade of these centres within its area. (page 72).

…

The proposed development is inconsistent with local planning policies of the City of Whittlesea and it would undermine state planning policy, particularly the imperatives of the strategic intent of the Plenty Valley Strategic Plan. The economic need for the expansion has not been justified and indeed an expansion at this time is considered to be premature. The level of impacts of the expansion on other local shopping centres within the trade influence of Epping Plaza would be in the order of 10% to 15% and would thus be unacceptable. It would concentrate a number of social services and facilities away from the local catchment of the eastern parts of the City of Whittlesea, thus resulting in inequities of access and opportunity. (page 114).

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78. The evidence of Mr Haratsis is that 10 million shoppers per annum will not come to Roxburgh Park MAC if the Kaufland store is approved on the subject site. That number is a stark demonstration of how the proposal is contrary to central tenets of Activity Centre policy relation to agglomeration and the multiplier benefits of co-location.

Conclusion

79. The proposed Kaufland stores Mornington, Oakleigh and Coolaroo:

a) have no strategic justification;

b) are contrary to strategy;

c) will not deliver on strategy;

d) are inconsistent with the Mornington Peninsula, Hume and Kingston Planning Schemes;

e) will not deliver a net community benefit;

f) are inconsistent with activity centre planning and policy.

80. The Advisory Committee is respectfully requested to recommend to the Minister that the three proposals ought not be approved.

Peter O’Farrell

Carly Robertson

Counsel for Vicinity Centres Pty Ltd & ISPT Pty Ltd

Instructed by Rigby Cooke Lawyers

27 March 2019

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