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Tuesday, 7 September 1993
Page: 1055

Senator GIBSON (3.22 p.m.) —I support my colleague Senator Bishop in her motion to take note of the answer to a question relating to ANAO evidence on rental of premises. Last Thursday, in the estimates committee hearing when this matter was being discussed, evidence was tendered from the Attorney-General's Department that it received advice from the Australian Property Group. That document read as follows:

. . . APG negotiated the lease clause by clause and achieved amendments which brought the document in line with all significant terms and conditions of the Commonwealth's Standard Expenditure Lease.

I question whether in fact that is so. There are two very unusual features with regard to this lease which, as my colleague points out, has not been signed yet: first of all, the length of the lease; and, secondly, the escalation clause.

  With regard to length, the advice I have received from the commercial area here in the city is that the Australian Property Group has normally signed leases with a length of 10 years. They sometimes have an option to go another five, but the critical point is that the normal arrangement is 10 years. It is my understanding that one would have to go back a very long way before one would find a 15-year lease, but in this case we have a 15-year lease rather than 10.

  In addition, we have the escalation clause. This agreement was negotiated—the original agreement was signed in April last year—at a time when the Australian property market had already crashed substantially throughout the nation. The winds of that change had even reached this city, and its property market was turning down. In spite of that, we have a clause in the agreement for nine per cent per annum for the 15-year period. As my colleague pointed out, that is against what the Department of Finance advised would have been fair and proper—one per cent—or what the commercial world would have said, which is that it should have been reviewed every two or three years. Marrying those two things together—the 15 years and the nine per cent escalation per annum—we have this extraordinary combination which gives the owner of the property the chance to make substantial gain—

Senator Patterson —And who is the owner?

Senator GIBSON —Who is the owner? The Labor Party, and it stands to make an extraordinary gain relative to what is a fair and proper commercial arrangement here in this city. I would have thought that the government would have been particularly careful in dealing with this building and with tenants, particularly in view of the fact, as I understand it, that the person who used to be the head of the Australian Property Group moved over to become manager of Lend Lease operations here in this city—

Senator Bishop —Which built the building.

Senator GIBSON —Which built the building. I support my colleague and I believe that the government should renegotiate this lease and put it on a fair and commercial basis for the taxpayers of Australia before the matter is signed.