AN ugly, brown, concrete hillock that will ultimately be demolished is the unlikely last defence in a civic and community campaign against what is touted as Adelaide’s most prestigious apartment development. Indeed, Magic Mountain at Glenelg has become the focal point for debate about development on Adelaide’s foreshore, raising questions about who profits and what value is placed on community assets.

“Platinum on the beach” in this instance lives up to the developer’s spiel. It is as valuable as platinum – absolute beachfront land at the very heart of Adelaide’s premier tourist beach. But is its value as a development that generates employment and economic activity, thus creating a valuable asset that increases stamp duty for government and rates for the local council, and boosts facilities for residents and visitors? Or is its value measured as profit for developers and as choice assets for the wealthy who fancy a glamorous pad by the sea on cheaply won public land?

Platinum is part of the Holdfast Shores development. A master plan for the development was signed in 1997 that included a commercial agreement between the Olsen government and the Holdfast Shores consortium (then Baulderstone Hornibrook, Kinsmen and Woodhead Architects) to share profits, and another regarding public infrastructure with the Holdfast Bay Council. Stage 1 included the construction of the marina, Marina East apartments near the new Patawalonga weir, and the Marina Pier and Light’s Landing apartments (the ones that block views from Anzac Highway).

The second stage was the Pier Hotel development. At this time, arrangements changed. Hotel developments are widely regarded as risky business. The government opted out, selling the site to the consortium, which also changed, with Urban Construct replacing Kinsmen and Woodhead. It was originally planned that the Pier Hotel would also take in the site of the Platinum apartments, but Baulderstone development director Brent Blanks says commercial pressures led to the site being split into two. A denser hotel went ahead and the rest of the site, home to the Glenelg Life Saving Club, was left until later.

Just north of Magic Mountain, the proposed Platinum apartments became part of stage 2B, which includes an entertainment precinct, a retail complex next to the Town Hall and demolition of Magic Mountain to restore open space.

At one point a more expensive 15-storey, 450-apartment scheme was mooted. But community concerns about perceived overdevelopment on the foreshore prompted Urban Development Minister Jay Weatherill to present a compromise, setting a limit of 130 apartments in nine storeys. The developers offset this by scrapping proposed cinemas and removing a level of underground car parking.

Weatherill says it has been a challenge to balance competing needs to achieve the best outcome in terms of delivering open space and an entertainment facility for future generations to enjoy. He says the public won’t share in any profits or wear any losses from Stage 2B but “if the project goes ahead, the public gets the benefit of new facilities”.

A public-opinion survey by consultant Janet Gould galvanised community pressure in the lead-up to the May 2003 local government election and caused the Holdfast Bay Council to rethink its support for stage 2B. While it remained in favour of the retail, entertainment and open spaces, it withdrew support for the apartments on April 8. A new mayor, Ken Rollond, was elected on a platform of opposing further apartments on the foreshore. Rollond says the current proposal contravenes the master plan with council. Blanks argues the project remains similar to the commercial master plan and expresses disappointment at the backflip which he claims “flies in the face of commercial reality, good faith over years of negotiations, and … what the community really does want. They don’t want Magic Mountain but they do want its facilities.’’

The Glenelg Residents Association has a different view of what the community wants. President Jane West says the GRA isn’t anti-development but believes it’s wrong environmentally and in principle to put apartments on the foreshore. She says association membership has surged, due to concern about not just Holdfast Shores but 1000 more apartments in the nearby Liberty Towers, Fresh and proposed Watermark projects. “Is this sustainable? Certainly not on the foreshore it isn’t.”

Weatherill partly agrees. “The opposition ... has more to do with the quantum of apartments that have been approved by council in Glenelg than it has to do with this particular development (Platinum) which will see open space where Magic Mountain currently stands.” State Cabinet is due to consider the Platinum plan in February. The developer’s position is that some form of high-rise apartment is necessary to offset the community infrastructure component of the foreshore redevelopment. In November, glossy brochures inviting VIPs to buy apartments off the plan were sent out. Despite the simmering concerns, would-be buyers snapped them up. Coming well before public consultation over the project had concluded and the proposal going before Cabinet, critics described it as a tactic to pressure the government into granting development approval regardless of wider community views.

It’s interesting to note at this point the views of the former ward councillor for the area and one-time chair of the council’s planning and development committee, Sandra Deakin. She resigned from council, sold up and “got out” because of the development. “We understood profits from early stages of the project would fund the public infrastructure, then the developers said the profits didn’t eventuate. Baulderstone Hornibrook has a lot to answer for. We thought they were quite gallant in expecting the shops and things to work. They didn’t, and now they’re saying profits from Platinum will fund it – but why would that be any different to the previous stages?” Deakin wouldn’t be surprised if it never happened full-stop. Meanwhile, she says, the traffic is “horrendous’’, there’s not enough parking, public land has been usurped into buildings for the wealthy, and residents are told they’re benefiting through increased land values “but all they see is rising rates”.

The consortium claims the public infrastructure will cost about $16m. It includes foregoing the lease Baulderstone holds on Magic Mountain ($2.5m, but more on that later) demolition of Magic Mountain ($.5m) a new surf life saving club about 50 metres back from its present foreshore position ($2m), and landscaping, paving and lighting ($4.2m). That’s a shade over $9 million. Blanks says add 30 per cent for finance costs, design costs and sundry fees and that’s about $12 million. Then add about $4m for what he says is the non-profitable, all-weather entertainment facility, exclusive of fit-out costs.

If the community infrastructure is a $16-million albatross, why not, as one property identity suggests, tender it out and, if it can be done for less, there may be no need for the apartments? “Because it’s not commercially viable in itself, who would take it on?” Blanks asks. “There are two issues: under our development agreement we have to produce that, and that’s got to be done before or during the construction of the apartments, so we could not afford to lose control of it.”

At this stage the figures become harder to assess. Platinum is advertised as a $100m development. Apartment prices start at $349,000 and exceed $2m for the penthouses. Blanks says more than 90 per cent have been sold off the plan, worth between $70m and $80m. If it’s costing $100m to build, and is barely paying for itself, how can it fund another $16m in public infrastructure? And what about the cost of the land it’s all being built on, yet to be included?

“It’s tough going,’’ Blanks says. “Platinum will probably cost $85 million. This is a difficult end of the project and we have continuously said that for the past five years. All other things being equal, we will get our margins out of it. Revenue from the retail element will help.” Commercial confidentiality precludes him revealing projected cost and income for the shops and restaurants fronting Moseley Square.

By contrast, he says rising values meant off-the-plan sales for the earlier stage didn’t make a “single cent” and the retail elements haven’t sold so that profit hasn’t been realised. No profit for the project perhaps, but the individual companies would have made money on architectural work, building contracts, and sales commissions. As for suggestions the Pier complex made a profit of $20m to $30m, and Platinum might do even better, Blanks declined to put an end to speculation by revealing the actual figures, exclaiming only “I wish!”

But how will citizens know whether they have received a fair deal for a development on public land if the process isn’t transparent? Blanks says the project has been intensely scrutinised by the state government and the public must trust that the consortium and the Government will get it right. Weatherill talks of “enforceable arrangements in place” to ensure the public elements of the development are delivered as part of the project. “The developer will not be able to build the apartments first and then walk away from the project.’’

On the contentious issue of how much the consortium paid for the land, Blanks says he “asked the State Government whether I had the liberty (of revealing the cost of the publicly owned land) and it was suggested I probably shouldn’t… but it’s a significant factor”. A figure of $3.5m has been mentioned – “it is substantially in excess of that” Blanks says. How does it compare with the Economic and Finance Committee’s inquiry into Holdfast Shores of November 2002, where government experts valued the land at $10m to $11m? Blanks says the consortium is not paying that much.

“That surprises me. If you say somebody can build on that land unaffected by the need to provide any other community facilities, then that might be about right. But if you’re going to put covenants on that and say by the way, we want you to provide the car parking, leave nearly 70 per cent as open space, we want you to landscape that, etcetera, well, you’ve got to start adjusting your land value (down).” At Glenelg’s south esplanade, a property of 350 square metres with development approval for 17 apartments over five storeys recently sold for $4m. Platinum, at 1700 square metres, is nearly five times the footprint, has a superior absolute beachfront location, and the potential for 130 apartments over nine storeys. At similar rates on an unencumbered basis, the Platinum site would be worth close to $20m. Blanks says it’s an unreasonable comparison.

“We don’t have unfettered right to develop as we wish. There’s a mandatory requirement to deal with a range of issues – new seawalls, public promenades and so on. Imagine Magic Mountain – if you had open slather on it, it could be worth $10m, $12m, maybe $14m. But you can’t build there, so it’s worth nothing, zip. ”

The nature of land valuation is clearly an issue. Put simply, land is worth only what someone will pay for it. Several property types privately commented that on the open market, the 1700 square-metre Platinum site, 1800 square-metre entertainment site and 2200 square-metre retail site, along with 650 square metres for the surf club, would be a bargain at $10 million, with some suggesting it could achieve double that. But it is burdened by 9200 square metres designated as open space. Who will buy land with the caveat it cannot be built on? The argument goes if no one is willing to pay, it is worth nothing. Valuation only considers commercial worth, not community worth.

The council has produced its own alternative – a plan that scraps the nine-storey apartment building in favour of a three-storey surf club with commercial tenancy space, and a scaled-down entertainment precinct paid for by delaying demolition of Magic Mountain and carpark construction. Blanks dismisses it as unviable but Mayor Rollond says that, over time, the community can afford it. “It’s not whether we build on the site, but what. People are opposed to apartments, so this is the alternative”.

GRA President Janet West says the council plan deserves serious consideration. “We think opposition to more apartments on the foreshore goes beyond local residents. Petitions now circulating are showing broad opposition across Adelaide. ”

The mayor wants the new plan taken seriously and says the council has a last card up its sleeve – it owns the Magic Mountain site, whereas Baulderstone owns just the lease. “They bought the lease for $2.2m, and now want to sell it back for $2.9m, which the council won’t accept… we own it and won’t give it up unless the apartments are overturned. They can’t leave it untouched as they’ve told buyers it will be demolished. The Government will have to compulsorily acquire it for the developers and they’ll have a fight on their hands.”

Blanks bristles. “We’ve actually offered the council the lease free. We’re absorbing the cost. Any suggestion otherwise is utterly scurrilous,” he says. He expresses confidence that if the project has to proceed around Magic Mountain, it can and will. But he hopes negotiation will prevail. “There is a handful of noisy agitators peddling misinformation, but thousands out there don’t share their views. I don’t believe there is a public outcry – it’s an urban myth.”

Weatherill, too, is hoping for a non-compulsory aquisition outcome. “If approval is granted for the project to proceed, we expect council will see that it doesn’t make sense to oppose the creation of open space.”