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Taxpayers slugged again as Gillman deal collapses

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The Weatherill Government has been left red-faced and more than $140 million in the red after its disastrous Gillman land deal collapsed today – leaving taxpayers to fork out for a bungled compulsory acquisition of city council land.

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InDaily can reveal the Government has had to pay the council more than $20 million dollars for 276 hectares of land at the Dean Rifle Range it onsold as part of the Gillman sale to consortium Adelaide Capital Partners but which never went to tender – and the funds for which failed to materialise by today’s “drop dead” deadline.

Ironically, that means the Government will do what both Treasury and the board of Renewal SA originally advised – offer the land to market through a transparent tender process.

The Government today confirmed ACP had informed it that it would not proceed with the purchase of the industrial land at the former Multi-function Polis site, which was purchased for around $120 million before the 2014 election, with the first $45 million – for 150 of the proposed 407ha sale – due to be settled by 5pm today.

Premier Jay Weatherill said today he was “disappointed but not surprised” by the outcome, saying the project had “sailed into significant headwinds from external forces since it was first announced”.

But the political damage was largely self-inflicted, with subsequent inquiries – including an ICAC investigation – scathing of the handling of the sale.

We’re now the proud owners of some swamp

“This was an ambitious project… what we received was an unsolicited bid … to turn (Gillman) into employment land,” Weatherill said today, alluding to his long-promised “oil and gas hub”, a pledge that has now vanished into the ether.

“[ACP] told us that they wouldn’t be a bidder in a competitive process.

“We gave them every opportunity [but] we’ve seen the halving of the oil price which has had an effect on the ambition for an oil and gas hub [so] we’re now the proud owners of some swamp.”

Weatherill maintained that the land was sold for premium value, saying “those people that said that it was undervalued have never been able to demonstrate that fact”.

“We think we did receive a good price for it [but] that wasn’t our main motivation – our main motivation was employment.”

He maintained the sale to ACP “was recommended to us by the Economic Development Board”, but conceded that the bungled process had led to an overhaul of how the Government handles unsolicited bids.

“We don’t want to discourage people coming to us with [unsolicited bids],” he said.

“There have been some lessons learnt.”

Infrastructure Minister Stephen Mullighan said the Government was advised by ACP this morning that the sale would not proceed.

He said ACP had proposed a revised settlement with an “adjustment of terms”, but the Government was unwilling to contemplate it.

“We’re ready to roll, to go out to market,” he said.

In a statement ACP said it had “satisfied all obligations and conditions precedent under the Option Agreement with the SA Government” but that “extensive investment market testing demonstrated the need for a different schedule of payments for the land than was [previously] envisaged”.

Chairman Stephen Gerlach said: “ACP was not seeking to change the price that it had agreed with SA Government on the land it was to acquire for the first stage of the development, however we needed to vary the timing of payments to the government.

“The need for a different payments schedule was identified after extensive international investment market testing proved the original schedule did not deliver an acceptable risk adjusted rate of return for a broad range of institutional and professional investors… despite the various challenges, the development plan was very well progressed and we had secured the investor support and end user commitments necessary to underpin the first stage of the estate.

“The proposed variation to the payments schedule was required to help make the vision for Lipson Industrial Estate a reality, but we acknowledge that we must now accept the State Government’s decision not to accept the revised timing of payments.”

The disastrous land deal reached new levels of catastrophe today, with the Government revealing to InDaily it has reached a settlement for the purchase of the rifle range at the southern end of the site it compulsorily acquired from the Adelaide City Council and on-sold as part of the Gillman sale.

The council took legal action after the Government took the land off its hands for $1.52 million in 2010, with both parties now agreeing to a financial settlement that will cost taxpayers more than $20 million.

The final compensation payment of $20,630,000 is more than 13 times more than the Government’s original valuation, with the agreed value of the land now determined to be $11.21 per square metre.

In a statement to InDaily, the Government said that Renewal SA and the Adelaide City Council “agreed that a further compensation payment of $20.630 million (excluding GST) was appropriate, reflecting an agreed value of the acquired half share, interest on the outstanding amount and an allowance for other costs incurred by the council”.

The council’s associate director of property Mike Philippou said that the settlement proceeds had now been received.

“Council is satisfied that all issues have been fully resolved,” he said in a statement.

“No decision has been made about how the funds will be utilised, with council to fully consider this matter in due course.”

Opposition Leader Steven Marshall said the result was “a damning indictment on the State Labor Government”.

“Yet again Jay Weatherill has let down South Australians by failing to deliver on a promise… he promised 6,000 jobs would be created by his Gillman deal and not one job has been delivered,” he said.

“On top of Mr Weatherill’s failure to deliver jobs with his Gillman deal the Premier has cost South Australians millions of dollars in legal fees and departmental waste.”

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