By Cara Waters
Lord Mayor Nick Reece has defended the sale of the City of Melbourne’s Parkade car park to the Merivale group despite allegations of underpayment and exploitation levelled at the hospitality giant.
Councillors have questioned the due diligence undertaken by the City of Melbourne into Merivale before it signed the $55 million deal to sell the car park at 34-60 Little Collins Street in February.
Justin Hemmes and Melbourne Lord Mayor Nick Reece at Merivale’s Ivy complex in Sydney.Credit: LinkedIn
Merivale plans to turn the car park into a multi-level entertainment precinct including restaurants, cafes, bars, a hotel, retail and a “sky garden”.
When the deal was announced, it came under scrutiny for its sale price, which was significantly lower than the estimated $80 million valuation for the property. But within the council, red flags were also being raised about a 2024 investigation by this masthead into allegations of sexual harassment, exploitation and drug use at Merivale venues, which led the hospitality giant to begin its own internal inquiry.
The deal also came after Merivale agreed to pay $19.25 million to former staff following allegations they had been underpaid.
On Monday, this masthead revealed Fair Work is investigating Merivale following fresh claims it underpaid and exploited vulnerable workers, including eight migrant chefs who said they were recruited from Mexico under false pretences.
Speaking to The Age, before details of the latest Fair Work investigation were published, Reece backed the push by Merivale and its billionaire owner Justin Hemmes into Melbourne.
“I am convinced that Justin’s investments in Melbourne will be a great thing for our city,” Reece said.
Reece said the City of Melbourne welcomed investment from Shanghai to Singapore and should also welcome investment from Sydney.
“Justin has served his apprenticeship in Sydney, where he has been very successful,” he said. “He’s now ready for the big time and taking on Australia’s cultural and hospitality capital, Melbourne. He’s ready to move from second division to the Premier League, and we welcome it.”
An artist’s impression of the planned Merivale development at the Parkade car park. Credit: Merivale
After Monday’s explosive revelations, The Age asked Reece whether he stood by his earlier comments. “The allegations against Merivale should be properly investigated and responded to,” he said.
However, council insiders have questioned whether the council should have embraced Merivale with such open arms in the first place.
“We’ve let the wolf into the den,” said one council insider, who requested anonymity to discuss internal matters.
They said Melbourne’s hospitality operators were furious that Merivale was able to amass cash in Sydney while Melbourne was in lockdown during the COVID-19 pandemic and then swoop in and buy such a prized asset at a cut price.
Councillor Owen Guest raised concerns about the car park sale in February and said he was ropeable about the council’s closed-door decision to sell the car park “for a song”.
City of Melbourne councillor Owen Guest at the Parkade car park. Credit: Justin McManus
Guest was one of three councillors to vote against the deal and said he had pushed for questions to be asked of Merivale.
“The investigation [published in this masthead] does concern me,” he said. “Especially when it comes to what due diligence was done here at the Melbourne City Council because I did ask questions.”
When asked last week whether the allegations against Merivale of sexual harassment, exploitation, drug use and the underpayment of staff concerned him, Reece defended the deal.
“Justin Hemmes and Merivale stridently deny the allegations made in those reports,” he said. “I have been advised that Merivale have in place very comprehensive workplace procedures that prioritise the safety and happiness of their workforce.”
Reece flew to Sydney two weeks ago and met Hemmes for a tour of the Ivy, posting a photograph of the pair of them with arms around each other on his LinkedIn page.
Last week Reece praised Hemmes’ “amazing hospitality and entertainment empire” while spruiking “Merivale’s biggest project ever, Parkade in Melbourne”, which raised eyebrows among some council insiders.
“I took the opportunity to tour the Ivy entertainment complex on George Street, I was mightily impressed by what I saw,” Reece said. “It’s an entire village of restaurants, bars, hospitality venues of different sizes and themes, and it all comes together brilliantly.”
Reece said key politicians and staff at the City of Sydney had vouched for Merivale and Hemmes.
“When I met leading people in Sydney, whether that was the head of the business association, or Clover Moore, the lord mayor, or Chris Minns, the premier, they all spoke very positively of Justin Hemmes’ impact on Sydney,” he said last week.
On Monday, following further revelations regarding alleged underpayments of migrant workers, Reece clarified his position: “The conversations I had with Lord Mayor of Sydney Clover Moore about Merivale were high level and extended only to matters relating to local government, such as planning and development applications.”
Merivale has also faced opposition to the Parkade deal from the Melbourne Club, with the proposed development set to overlook the exclusive private garden of Melbourne’s oldest men-only club.
The Parkade plans include a Melbourne version of Coogee’s Mimi’s restaurant on its top floor – where patrons dine on caviar bumps – and another branch of Merivale’s Italian restaurant, Totti’s, which is in Bondi, Rozelle and Lorne.
Melbourne Club has used a long-held option – a legally enforceable right – to acquire a 50 per cent stake in an existing lease of the car park from property giant Dexus. The lease has another 12 years to run, at a cost of $5.5 million.
A source at Melbourne Club, which has observed a long-held convention of not discussing its affairs with the media, said it was unlikely to negotiate with Merivale to end the lease earlier than its 12-year term.
Reece said he had not been party to any discussions between Melbourne Club, Merivale and Hemmes.
“I have spoken to people at the Melbourne Club who have told me that they are supportive of what Hemmes is proposing,” Reece said. “I’m also aware that there are others at the club who have concerns.”
Reece said his understanding was Melbourne Club’s committee of management overall had a “positive disposition” towards Merivale’s plans to develop the car park.
“I understand that there is an ongoing dialogue between Merivale, the Melbourne Club and Justin Hemmes, and that’s a good thing,” he said. “That’s how it should be with a major project like this one.”
Merivale’s only operational outpost in Victoria is the Lorne Hotel, which houses the hospitality group’s Italian trattoria, Totti’s, in its lower level.
Merivale bought the Lorne Hotel for $38 million in 2021, but plans to renovate the pub entirely have not progressed beyond the ground floor.
In 2021, Merivale also purchased Flinders Street’s Tomasetti House for $40 million, but the opening, originally slated for 2023, is three years behind schedule.
In 2023, Merivale spent $15 million buying Kantay House at the top end of the CBD and next to the Parkade carpark, which houses independently owned Argentinian steak restaurant San Telmo and pizza restaurant and hidden bar Pizza Pizza Pizza.
The purchase of the Parkade car park for $55 million brings Merivale’s total investment in Melbourne to $110 million over five years, without opening a venue.
In an interview with this masthead in 2023, Hemmes said he had a special affinity with Melbourne.
“I’ve always wanted to open in Melbourne,” he said. “My parents had a fashion shop on Collins Street and it was a wonderful boutique. I’ve always said we’ve had an affiliation with this part of town, the CBD.”
Merivale did not respond to a request for comment.
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