Georgiou exaggerated Landgate building’s ‘$100 million transformation’, breakdown shows

More than half of construction company Georgiou’s $100 million “transformation” of the Midland Landgate building will not be directly spent on its refurbishment.

Georgiou Capital purchased the building for a below-market value price of $17.3 million from the WA government in March, and in September announced work had commenced “on a $100 million-plus transformation” for “a comprehensive refurbishment of the 30-year-old office asset.”

But a breakdown of that $100 million claim provided to WAtoday shows Georgiou included the $20 million spent to buy the building – inclusive of stamp duty paid and bid costs – as well as a $29 million lease incentive payment to be paid to the government for office fit-out costs.

In terms of actual work on the building, Georgiou plans to spend about $55 million and expects the work to be completed by 2024.

About $30 million, which was detailed in a development application earlier this year, will be spent on external upgrades and significant changes to the ground floor that will convert most of it into an undercover car park and gym.

About $25 million will be spent on energy improvements and internal work, including new ceilings, carpets, lighting and electrical works, as well as new and refurbished lifts, an air-conditioning plant and plumbing works.

The government has maintained the deal will save taxpayers $12 million, but the cost breakdown adds support to the opposition’s claim that the government could have retained the building and done basic refurbishments itself rather than offload it at a rock-bottom price.

It has prompted renewed calls by opposition planning, lands and heritage spokesman Neil Thomson for the government to disclose every aspect of the transaction and clear the air on the controversial deal.

“The apparent recycling of money via ‘rental incentives’ which are then paid back to the government tenant muddy the waters on what should have been a straightforward contract at market value,” he said.

“This is particularly concerning, given this sale wasn’t subjected to normal competitive processes.

“Full disclosure is needed with reference to every aspect of the transaction … it is very concerning that the more questions are raised, the murkier the transaction appears.”

In its responses to past media queries, the Department of Finance also adopted Georgiou’s “$100 million transformation” claim to demonstrate how much money the government was saving by offloading the building. 

Neither Georgiou nor the department directly answered a question about whether the $100 million transformation claim was disingenuous, given more than half of it was made up by the purchase price and lease incentive payment.

However, in written statements, they both characterised the $100 million as an “investment”.

“Building owner, Georgiou, has outlined their significant $100 million-plus investment in this project, which includes lease incentives, base building upgrades, fit-out and other associated costs,” a department spokeswoman said.

Georgiou developments executive director Jon Smeulders said: “the $100 million-plus investment in the former Landgate building in Midland will see a comprehensive modernisation and refurbishment of the 30-year-old asset.”

The sale was done through the government’s controversial market-led proposals process, which Smeulders said was rigorous.

“Georgiou took part in a detailed, rigorous and competitive market-led proposal process, adhering to a high standard of probity and scrutiny by the Department of Finance, state government assessment panel and advisers,” he said.

Earlier this month WAtoday revealed the Landgate building was sold for $22 million less than the amount Landgate itself had valued it at – $39.77 million.

As part of the sale, WA taxpayers are on the hook to lease back two-thirds – or 13,700 square metres – of office space in the building in a 15-year lease agreement that will cost $85 million.

The government has continued to defend the deal, saying financial modelling suggested taxpayers would be $12 million better off over the next 15 years.

The $29 million lease incentive will be paid regardless of the final fit-out.

Its appearance in the deal suggested the rental cost hit to taxpayers would be softened, but neither Georgiou nor the state government would reveal when the payment would be made.

The department has refused to release any financial modelling, citing commercial confidentiality.

Earlier this month, Planning Minister Rita Saffioti, who has carriage of the market-led proposals system, said she trusted the independent processes run by bureaucrats who recommended cabinet accept the sale.

Saffioti recently announced changes to the system that would improve transparency and disclosure requirements.

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