Sensational-Adelaide.com

Somethign along the lines of 175ish metres would looks wonderful in this possition. Right up against West Pac. A modern tall glass tower would contrast wonderfuly.

Dreams are free?

how_good_is_he wrote:Certainly a bitter sweet moment - good to see something will be built but cant help but think it's US paying for it!
Good to see the ATO is being extra frugal with our hard earned dollars with a modest property & fitout - not.
For what they will pay in rent & fitout the ATO [ie US] could be buying the property itself - at least we get the benefit/capital gain one day.

Whilst I personally agree with you. It has long been Fed Govt policy not to own and maintain buildings or property, unless for national security reasons and even then it has to be a serious reason to do so

Oh I know its their policy but thats my point... a policy that defies logic and a sane explanation...yes that sounds like govt policy.

how_good_is_he how can you be so negative about such a good development ?

We don't see this type of building in Adelaide that often.

Also any predictions on how many cranes there will be on this project, it's a
fairly big footprint right ?

All for the development and all for the ATO to have new HQs. My point is for the same price they will pay to lease this building they could be owning it. And while I couldnt care less if it was private company doing it, its our/taxpayer money thats being lost.

Well, City Central 1 (ANZ Tower) had two, if I recall from memory, so yes, it seems likely this will have two as well.

how_good_is_he wrote:All for the development and all for the ATO to have new HQs. My point is for the same price they will pay to lease this building they could be owning it. And while I couldnt care less if it was private company doing it, its our/taxpayer money thats being lost.

The leasee doesn't have the risk of an owner or the even greater liability of a developer. I would guess that would be one of the reasons the ATO prefers to be a leasee and not an developer/owner.

Whats the risk to the govt as an owner occupier - the property will double in value in 5- 10 years & no lost millions in rent! [my guess is a $25m p.a.]
As for the developer arguement, the govt should have just contracted to buy the finished product at the end [and I expect that even as a tenant they will be doing the same work to have the building purpose-built to their specs anyway].
I also think the current developer will just on-sell the project to some OVERSEAS super fund [as CC1, CC2 etc was] so they can make a lazy $50m or so....

how_good_is_he wrote:Whats the risk to the govt as an owner occupier - that the property will double in value in 5- 10 years & no lost millions in rent! My guess is the rent/outgoings will be a lazy $25m a year or $500,000 a week.
As for being a developer, the govt should have just contracted to buy the finished product at the end -it will still need to be purpose-built to their specs anyway.
I also think the current developer will just on-sell the project to some OVERSEAS super fund [as CC1, CC2 etc was] and they make a lazy $50m or so....

The millions "lost" in rent would rather be tens or hundreds of millions spent as a straight upfront payment. And what happens if, say, the building was too big or too small for them, they would have to go through the sales process and everything else themselves.

Yeah but that say $200million will multiply to be worth say $400m in 10 years. What is 10 years worth of rent, say $250m, worth after ten years - nothing.
Net financial difference in the decision [to us the taxpayer] is maybe $450million.
The building being too big/small scenario is far worse if the ATO is the tenant as they are legally committed to the lease and have to fulfill it.
If they owned the building they would also have far more control over what they could/couldnt do - worse case if they had to move they would make money in selling the building, in the other scenario they would loose money.

Have you also considered the fact that the government would also need to borrow more money? The interest payments alone would be quite significant.

There's a reason why most offices in the city are rented out, it is to provide flexibility, low initial investment cost and there is no risk associated with changes in property values that might occur. And it's not the building that increases in value, only the land itself. The building will, no matter what, decrease in value over time.

The fed. govt can borrow money at a far lower interest rate than anyone else [say 3 -5%] which is far lower than the rate of return they would need to give on the building/ to the developer as rent - probably a return of 8% - 10%. So the interest [which is deductible] would be say half the cost of rent.
In highlighting the depreciation of the building you have highlighted even further benefits of the ATO being an owner as they could then claim significant depreciation benefits [esp. on a new building] which instead the developer will get [akin to a tax break of tens of millions] even though the land/property is actually appreciating!

The risk of building yourself and the likelyhood of finding a new owner are all risk factors that are not considered though. Also, what happens to the maintainance costs of the building?

This is getting too much into mangerical finance and, after working 12 hours on most days over the past few weeks I think my brain's had it

Yes in theory the government could make money by owning all the buildings it uses. They could also make more money by building other buildings with the easier financing and undercut the commercial operators. If you are going to advocate that the government start constructing buildings for profit why stop merely at the buildings they will be occupying?

how_good_is_he wrote:The fed. govt can borrow money at a far lower interest rate than anyone else [say 3 -5%] which is far lower than the rate of return they would need to give on the building/ to the developer as rent - probably a return of 8% - 10%. So the interest [which is deductible] would be say half the cost of rent.

You're telling us that the ATO can get an extremely low-interest loan, then that interest is deductable? Deductable? The ATO won't have to pay tax to themselves for the interest on their loan? Why would they?