'A sorry saga': How a bold plan to redevelop a CBD went awry

The man behind a bold vision to develop a creative precinct in the heart of Launceston with enthusiastic state government and council backing may have been running insolvent companies at the time, according to liquidator reports, ultimately racking up debts estimated at more than $16 million.

Launceston entrepreneur Chris Billing, the operator of defunct creative education institution Foundry, was the director of a company called Creative Property Holdings, which was behind the $80 million creative precinct idea, publicised in 2020 as a way to revitalise the city centre.

It was to be built on prime real estate, being operated as a ground-level car park on Paterson Street — land owned by another would-be developer with their own plans for the site — that would first need to be acquired for the project to go ahead.

The plan received strong support from the state government's coordinator-general as well as the Launceston City Council.

Altogether, $12 million in state and council funding was swiftly promised for the project, and $10 million in federal money from a drought grant was secured.

Community members are now questioning whether adequate due diligence was done before government authorities threw their support behind the still-unrealised development.

Cornerstone of creative precinct potentially insolvent

As momentum for the creative precinct grew, the council also purchased the adjacent former Birchalls building at a cost of $8.8 million, in the hope of linking the development to Launceston's Brisbane Street Mall.

But the intended cornerstone of the project, Mr Billing's creative education provider Foundry, may have been insolvent since late 2016, and "likely" even earlier, according to investigations undertaken by a court-appointed liquidator.

The company that traded as Foundry owes more than $8.5 million, according to the liquidator's investigations, and a second company directed by Mr Billing, a branding agency called For The People, owes an estimated $8 million — the vast majority of that to the Australian Taxation Office.

The liquidator's statutory report to ASIC reveals Foundry may have already been insolvent when it received more than $400,000 in taxpayer funding for its operations in 2017 and 2018.

Employees of Foundry are still owed just over $200,000 in unpaid superannuation.

The ABC approached Mr Billing for comment, but he declined to provide an on-record response.

Launceston community member Lionel Morrell raised concerns about the creative precinct development in 2020 and was "astonished" to discover the level of debts accumulated by Foundry.

"All the way through those negotiations, there were grave concerns in the community about the status of Foundry and the creative precinct organisations," Mr Morrell said.

"Many people should have egg on their face, including the state government, for funding and supporting this concept."

Mr Morrell said he was concerned about the level of due diligence done by the council and government bodies before they decided to back Mr Billing's project.

"Whilst there's never any satisfaction at the end in being right, it looks like the public have dodged a bullet in relation to this proposal, which clearly should never have got off the ground had the general manager of council and the mayor done the proper checks on the integrity of Foundry and Creative [Property Holdings]," he said.

Launceston councillor Tim Walker said he was extremely concerned to discover Foundry may have been insolvent throughout the time the council and coordinator-general were working with its director, Mr Billing, on the creative precinct plan.

"Those people in those administrative positions, including the [former] Launceston CEO, should have done their due diligence and looked at financial records of the Foundry before involving the state government or Launceston [City] Council with them," he said.

"In hindsight, none of these were good decisions."

Councillor Walker said the Office of the Coordinator-General had questions to answer over its involvement.

"I understand his mission is to bring investment into Tasmania, that's a wonderful thing, but it can't be at the cost of probity and good governance … it's appearing more and more likely that this might be the case."

Council GM working with developer to secure site

Documents obtained by the ABC under right-to-information laws reveal a series of behind-the-scenes exchanges between coordinator-general John Perry, then-Launceston City Council general manager Michael Stretton, and Mr Billing about acquiring the car park land from its current owner, including discussions of potentially taking the matter to court or compulsorily acquiring the site.

In one email written in July 2020, Mr Stretton wrote to Mr Billing that he had acted to "shut down" the landowner's attempts to discuss the matter with the then-mayor and deputy mayor.

"Last week I acted to shut down [the owner's] approaches to the mayor and deputy mayor in which he was again trying to re-negotiate the sale of the property to include a 'swap' for the Bathurst Street Carpark and/or an extension to the settlement period until the end of the year," Mr Stretton wrote.

"However, my sense is that [the owner] will allow the sale to drag on, as it's in his best interest to maintain the revenue that is being generated by the car park for as long as he is able.

"I think we need to force the matter by taking the signed contract to court to have the matter determined. If the sale of the property ends up failing as a result of the court process, we would need to commence a compulsory acquisition process. This will all take time."

The car park's owner put forward his own alternative development plans for the site in 2021, to build a car park, shops and apartments.

In a response to the ABC, Mr Stretton, who now works at the Hobart City Council, said as he no longer worked for the Launceston City Council, he did not have the authority to comment on these matters, instead directing inquiries to Launceston's current management.

Coordinator-General John Perry wrote to the council in December 2019 outlining a proposed government contribution of $6 million towards the Launceston Creative Precinct.

His office was also listed as the contact on the council's application to the federal government for the $10 million drought grant to help fund the project.

A spokesperson for the Office of the Coordinator-General said it had a "well-established process" for conducting due diligence on organisations it engages with.

"This detailed process varies in activity, focus and intensity depending on the organisation, the type of engagement, the level of services provided by the OCG, the type of project that may be involved and their risk profiles," the spokesperson said.

"The assertion that there was inappropriate or lacking due diligence in this matter is rejected."

They said the proposed development was entirely separate from Foundry, and the financial position of Foundry was not material to the creative precinct proposal or parties.

A spokesman for the Launceston City Council said "any and all" funding provided to assist in the development of the project was repaid in full.

"The project was subsequently terminated, and council had no further role in relation to the development or sale of the car park."

Council provided $1.2m deposit despite being aware of Foundry problems

The ABC first reported concerns that Foundry had failed to pay staff entitlements in May 2020.

Documents obtained by the ABC after a years-long right-to-information case show that shortly after reporting in May 2020 revealed staff had gone unpaid, Launceston's then-council general manager Mr Stretton raised concerns in an email to Mr Billing that "Foundry now has a massive credibility problem," saying "any organisation which experiences difficulties in paying staff entitlements is an indication of a failing business model".

However, those concerns were not enough to convince the council to walk away from the creative precinct plan.

In the months that followed, the council fronted up $1.2 million of ratepayer money to cover the deposit for the prime CBD land Mr Billing hoped to develop.

When the ABC published a second story revealing Foundry had been locked out of its premises for unpaid rent in November 2020, documents reveal Mr Stretton urgently tried to contact Mr Billing to check the money was safe.

Mr Stretton wrote:

The council requires urgent advice on the status of the property settlement and, in particular, the status of the $1.2 million deposit which has been provided by the council for the settlement.

It is beholden on me to explore the council's legal options in this matter and I expect to receive timely communication from yourself to enable this to occur.

The following day, Mr Billing reassured Mr Stretton that the project was moving forward.

Six years later, the land remains a car park. The $1.2 million was returned to the council.

Mr Morrell labelled the council's decision to provide the deposit as "irresponsible".

"This is playing big-time with ratepayers' funds," he said.

"The public purse, when it comes to rates, seems to be something akin to a slush fund."

To date, the creative precinct has not materialised, and neither has the promised luxury design hotel unveiled by Mr Billing in 2024, despite that project receiving the endorsement of Premier Jeremy Rockliff in a press release.

Mr Morrell points out the council refused to approve the alternate development proposal for the car park land as it stood behind plans for the Creative Precinct instead — and ultimately, that prime real estate in the heart of Launceston remains a ground-level car park.

"We're still haunted by what many believe should be regarded as vacant land, ground-level car parking, in one of the most central sites that could be developed in the city," he said.

"It is so undercapitalised as to be embarrassing."

Late last year, the council handed the former Birchalls building over to a consortium of developers.

Mr Walker said the situation had been a "disaster" for Launceston.

"This has just been a sorry saga that's been cloaked in secrecy from the get-go,"

he said.

"The public deserve that right to know what happened, what went wrong? Why didn't this [project] happen after years and years, nearly a decade and nobody knows how much money spent, the result has been giving away [the former Birchalls] building and that's all," he said.

A spokesman for the Department of State Growth said the promised $6 million in state support for the creative precinct was never paid and was no longer available.

The $10 million federal drought grant was withdrawn.