REVEALED: Festival Plaza developer’s lump sum payday
Newly released documents show the State Government’s deal with the developer of the Festival Plaza, Walker Corporation, will deliver the company a $30 million up-front payment from taxpayers.
State Government images showing the concepts for the revamped plaza and the Walker office building (top right).
InDaily can today reveal that the State Government will pay 30 years’ of car park rent to Walker in a lump sum at the beginning of the agreement, in a deal described by the state Opposition as “incredible”.
The contract between the State Government and Walker has been released to the Liberals under Freedom of Information laws, and deputy leader Vickie Chapman says she is astounded the development company will receive three decades of rent in one payment.
Walker is paying the Government $40 million for the right to redevelop the plaza car park and build a 24-storey office tower and retail area on the site.
The State Government has always said that it would lease back 400 of the 1460 car parking spaces from Walker Corporation for $30 million (the Adelaide Casino will also lease spaces from Walker). It also stated, as long ago as 2014, that the lease period would be 30 years, but the contract stipulates 70 years.
What it didn’t reveal previously was that the $30 million would be paid in full, upfront. The contract says that “on or before the date of commencement of the Carpark Sublease, the State shall pay Walker Carpark $30 million (GST exclusive)”.
The Government has defended the deal, saying the rented car parks will provide ongoing revenue for the Festival Centre, and that the project as a whole will create jobs and regenerate an important part of the CBD.
The contract shows that Walker will hold the leases on the car park, office tower and retail area until 2085.
In total, Walker will invest $430 million on the new buildings, carpark and public area, while the taxpayer will contribute $180 million to the redevelopment of the tired plaza.
The contract also indicates the Government is interested in leasing some of the space in the office block, with the state securing first right of refusal to sublease a portion of the ground floor, and the whole or a portion of the first floor. Similarly, the state will also have first right of refusal over part of the retail area.
It shows that Walker has created three entities to run the deal: Walker Carpark, which is paying $12 million for the right to build and run the carpark; Walker Office, which is paying $25.2 million for the right to build the office building, and Walker Retail, which is paying $2.8 million for the right to construct and lease the retail area.
Chapman says the upfront payment of the rent is highly unusual.
“I have never seen it in any other contract,” she told InDaily.
“Essentially, Walker gets in there for $10 million – he doesn’t have to pay for the plaza (public realm) and he gets 70 years’ occupancy for the plaza buildings.
“It’s an incredible deal.
“It’s also a question of what’s going to happen with other contracts. Will other companies coming to South Australia want a similar deal?”
She said it was obvious the Government would lease space in the Walker building, despite it being coy on the idea in the past (Treasurer Tom Koutsantonis was reported earlier this year as saying the Government “didn’t have plans” to do so).
Another Government image of the proposed redevelopment.
Chapman said the Auditor-General was examining the deal, but it wasn’t clear if his deliberations would be in his report to be tabled in Parliament today, or in a separate report.
Urban Development Minister Stephen Mullighan scoffed at Chapman’s concerns, saying the Liberals were “trying to undermine another important investment in Adelaide’s future”.
“Not only is the Festival Plaza expected to support 2500 jobs over the course of the entire project and at least 400 ongoing jobs, it will transform one of the city’s most neglected public spaces into a focal point for sporting, arts and festival goers, and all South Australians,” he said in a statement.
“Despite receiving all requested documents and being briefed on it twice, it’s clear Vickie Chapman still doesn’t understand the basics of this development.
“There is no commitment by the Government to take up office space in the new building.
“The Government is paying $30 million for its 400 car parks in the new development, which will generate ongoing car park revenue for the Festival Centre.
“The Government has made it clear from the outset that we are funding $180 million towards the Festival Plaza development, with a $40 million contribution from the developer towards the public realm. This will make up part of a $900 million development and will complement the significant investment already made on the Riverbank by the Government including the Adelaide Oval, the footbridge and the Convention Centre.”
The slow-moving saga of the Festival Plaza began in 2012, when Walker was given the exclusive rights to develop options for the plaza.
To the chagrin of other interested parties, the company’s proposals evolved to include the office tower, which eventually became the key to the deal.
Several years of painful behind-the-scenes negotiations came to a head before the 2014 state election, when Liberal leader Steven Marshall wrong-footed Premier Jay Weatherill with an announcement that the Festival Plaza would become our own version of Melbourne’s Federation Square under a Liberal Government.
In response, Weatherill declared: “We won’t be having a 13-storey building on the plaza area.”
“We can rule that out straight away but we are entertaining a proposition that we went out to tender for which is essentially a car park and associated with the car park we do think we can do something exciting with the plaza in a way that does create some of the excitement that we’ve seen in Melbourne with a Federation Square-style development.”
The issue went underground again until a year later, in early 2015, the Government announced an office block of up to 24 storeys would be built on Station Road.
The plaza redevelopment was given the green light earlier this year, with construction expected to take three years.
InDaily has approached Walker Corporation for comment.
Correction: A previous version of this article said the carpark lease was for 30 years (which was previously stated by Walker and the Government). The lease is for 70 years.
