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Thursday, 3 February 1994
Page: 302

Senator CAMPBELL (10.24 a.m.) —On behalf of Senator Hill, I move:

(1)That there be laid on the table of the Senate, by the Leader of the Government in the Senate (Senator Gareth Evans), not later than immediately after question time on 10 February 1994, with respect to the leases referred to in paragraph (2), being leases claimed to be comparable in terms of net rental with the net rental paid at Centenary House, a statement of each of the following items of information:

    (a)what is the address of the property;

    (b)what is the net lettable area;

    (c)what is the commencement date of the lease;

    (d)what are the lease terms;

    (e)what is the breakdown of the building outgoings on a per square metre per annum basis; and

    (f)what is the effective value of the incentive.

(2)That the leases with respect to which information is ordered under paragraph (1) be as follows:

    (a)June 1993—the pre-commitment lease in NSW where the rental is $462 per square metre gross ($420 per square metre net approximately), and

    (b)May 1993—the pre-commitment lease in Victoria where the rental is $399 per square metre semi gross ($370 per square metre net approximately),

  being the two leases referred to in the Australian Property Group answer to a question on notice given to Estimates Committee D in 1993.

During Estimates Committee D there was a lengthy debate about the rental, terms and conditions and processes by which the Australian National Audit Office entered into a lease in the building known as Centenary House and owned by the Australian Labor Party. I do not intend revisiting all of the arguments and the political controversy about that deal here today. There are other forums where that will be pursued.

  However, during the inquiries at Estimates Committee D, ably supported by my colleagues Senator Parer and Senator Minchin, I sought information from the Australian Property Group and the Australian Valuation Office in relation to comparable rentals in Canberra. We also put to the Australian Property Group and the Australian Valuation Office the contention that, in the current property climate, this would be one of the highest effective net rentals in the whole of Australia, including all of the large commercial capital cities such as Sydney and Melbourne.

  That is a contention I still hold, but it is something that is hard to establish unless we have information, and this is the information that we seek here today. It is information that we sought during the supplementary estimates process. The information has been partially provided by the Australian Property Group, but what we seek here is information which will actually help the Senate reach a conclusion on this important point.

  At Estimates Committee D, I asked the officers whether they could find any evidence of any higher effective net rental anywhere in Australia, and in answer to that question the Australian Property Group officers provided me with a very short piece of information which is effectively no information. They said that they had found that in June 1993 there was a pre-commitment lease somewhere in New South Wales at $462 per square metre, and that somewhere in Victoria in May 1993 there was an effective rental of $399 per square metre.

  When discussing this matter privately, Madam Acting Deputy President, I have said to colleagues that that would be very similar to someone coming to me and claiming that his house is worth $100,000 and, when I ask, `Why is that house worth $100,000?', saying to me, `I know that somewhere in Victoria a house was sold for $100,000'. Of course, it is very interesting to know that somewhere in Victoria a house sold for $100,000, but one needs to know whether that house is made of wood or stone, and whether it has got three bedrooms, four bedrooms or five bedrooms and what size land it is on. In fact, unless one knows all of the crucial details of the property, it is hard to establish the relevance of the fact that somewhere in Victoria a house was sold for $100,000.

  When we come to commercial property, the same principles apply. It is no use saying that somewhere in New South Wales or Victoria a certain rental was set unless one knows where the building was, what sort of building it was, and how large the area was. As Senator Parer said to me this morning, one needs to know whether it was a street-front shop of only 50 square metres or whether it was a massive amount of space which might accommodate 200 or 300 people. Those are crucial pieces of information, and without that information the simple provision of a bland rate per square metre is of little help in our inquiries.

  I have had it put to me that the government defends this by saying that it would offend the credibility of the Australian Property Group if it were to provide this information. Madam Acting Deputy President, I say that it is offensive to the credibility of the Australian Property Group to provide information to the Senate that has no credibility in terms of property professionals: that is, to provide a bland rental rate with no supporting evidence. It offends the credibility of that organisation that it would even seek to have senators accept that sort of information without at least some detail as to the relevance of the rental rate.

  I seek further aspects of the information to determine what is known as the effective rental. I do not want to bore the Senate too much with what an effective net rental is, compared to what a net rental is, but most of my colleagues from Western Australia—and I see Senator Chamarette here—will know that during the late 1980s property developers went mad and ended up building a lot of very big buildings that no-one really needed. The developers have, in recent years, been offering people enormous inducements to attract them into the buildings. Those inducements can be free fit-outs, free partitioning and so forth; they can be free rental, which means that one can enter into a lease for 10 years and not pay any rent for five years; or they can be reduced rentals. There is a whole range of inducements that are being used to attract people to the empty buildings in Perth, Sydney and Melbourne.

  Of course, that reduces the effective rental that is received by the landlord. If one is doing a comparison of rentals paid in a building where there was no incentive paid with those in a building where there was an incentive paid, it is very hard to say that one rental rate is comparable to another for the purposes of a valuation, because the bland rental that is put into the lease agreement may well not reflect the real rental value of that building. When it comes to taxation purposes, when it comes to local government ratings and water ratings and so forth, one needs to determine a figure that is a net effective rental, which is the real rental that is being paid to the landlord. I think that is the simplest explanation I can give of what an effective rental is.

  To put it in more simple terms for people, when it comes to renting out houses, for example, if a person were to rent out his house for $200 a week but give away the first six months of that year as free rental to induce someone to come in and rent the house for a year, the effective rental would be only $100 a week instead of $200 since no rent would be received for the first six months. I think that is probably the simplest explanation of what an effective rental is.

  In this information, we are seeking to find out the value of the inducements that may surround the thin information the APG has provided to the Senate. We need to know the value of those inducements; we need to know also the breakdown of the outgoings, the insurances and all the other amounts relating to the leases so that it is possible to determine what is the core rental that gets paid to the landlord, the Australian Labor Party, in that building. Then we can find out whether or not this is the highest net effective rental in the whole of Australia, which is what I suspect.

  For these reasons, we have had to go to this further length to get what I consider to be quite simple and important information. I cannot understand why the Australian Property Group would not provide this information to the Senate. It is not commercial-in-confidence information. It certainly does not breach the confidentiality of APG customers, which the Minister for Administrative Services, Senator McMullan, said in his answer to my question on notice No. 889. This information, as I have said privately to the Democrats and to the Greens, is information that is readily handed across the counter at the Australian Valuation Office every morning to valuers and trainee valuers and their secretarial support. It is information that is handed across the counter at a state valuer-general's office.

  When people are valuers or trainee valuers, as I was once many years ago, and they are seeking to do a valuation of a particular suburb or a particular building, they go to the government, be it state or federal, and they nicely ask whether it can provide them with recent information about rentals or leases or property sales in the area. They pay a small fee, which is usually to cover the photocopying. That information is provided, and it is provided without any questions being asked. It is outrageous that a junior trainee valuer, as I was many years ago, can go and get that information from a government agency such as the Australian Valuation Office or the Land Titles Office or the valuer-general's office of state governments, but that, for reasons considered confidential, the Australian Property Group will not provide that sort of information to the parliament of Australia in what is a genuine investigation into the credibility and confidence the Australian people should have in the property dealings of the federal government as they relate to the Centenary House deal.