Legislative Council Fifty-Second Parliament, Second Session (52-2) 52 2 Parliament of South Australia Legislative Council published Answers to Questions Land Management Corporation LAND MANAGEMENT CORPORATION The Hon. D.G.E. HOOD Legislative Council LAND MANAGEMENT CORPORATION 329 The Hon. D.G.E. HOOD (14 September 2011) (First Session). 1.	Will the Minister for Infrastructure explain why the agreement between the Land Management Corporation and AV Jennings Properties Ltd. dated 13 January 2011 only requires AV Jennings to pay a percentage of the land sale price to the Land Management Corporation for each allotment once it is sold and settled? 2.	Will the Minister confirm whether this payment is made only when that allotment is sold and settled with no final date by which all money for the Penfield land must be paid (i.e. no sunset date), thereby transferring all of the commercial risk on the development to the South Australian taxpayer? What controls have been placed on AV Jennings from taking a long period of time to sell this land? 3.	Is there anything to prevent AV Jennings from undercutting the market (and landowners who have paid full market rates upfront, in some cases buying land from the Land Management Corporation) at the expense of the South Australian taxpayer who will only receive a percentage of the land sale price when each allotment is sold and settled? 4.	What guarantee is there that the taxpayer will receive the best return on its assets? 5.	Was the Minister provided with a net present value analysis of the AV Jennings offer? 6.	Is it true that another offer was received with a fixed date by which all money would be paid (well before the 15 years anticipated by AV Jennings)? (a)	How did AV Jennings compare with this and other offers; and (b)	Did Treasury analyse the other offers? 7.	If a net present value analysis of the AV Jennings offer was prepared, what assumptions were made about— (a)	the number of allotments; (b)	the sale prices; (c)	the escalation rate on the sales prices; (d)	the sales rate; (e)	the interest rate and the inflation rate; (f)	what discount rate was used; (g)	what risk factor was assumed; (h)	whether the offer was stress tested for a fall in the market; and (i)	whether we can see this comparative market? The Hon. G.E. GAGO Legislative Council Minister for Agriculture Minister for Forests Minister for Regional Development Minister for Tourism Minister for the Status of Women LAND MANAGEMENT CORPORATION The Hon. G.E. GAGO (Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development, Minister for Tourism, Minister for the Status of Women): The Minister for Transport and Infrastructure has been advised: 1.	In order to address the difficulty experienced by developers in obtaining finance for the purchase and development of land as a consequence of the global financial crisis and the subsequent tightening of lending by the major Australian banks, the Land Management Corporation (LMC) offered the Penfield land for sale with three alternative land payment options. As noted in the answer to Question on Notice 322, AVJennings nominated a development deed approach, with payments comprising a significant development fee (paid on execution of the agreement) and a percentage of the revenue from the sale of each allotment. 2.	The payment is through the development fee described above and on the sale of each allotment, without a sunset date. 3.	The rate of development is controlled through undertakings in the development deed. The development deed obliges AVJennings to develop allotments in accordance with an approved schedule, with advice provided to LMC on the price of allotments prior to the release of each stage. 4.	While there is no guarantee that the Development Deed will provide the best return to the State, it was assessed as providing the best overall return which also reflected the highest net present value when compared with other offers. 5.	Yes. 6.	Yes. (a)	The AVJennings offer provided the best overall return and also reflected the highest net present value when compared with other offers. (b)	The offers received were analysed by LMC's finance team and the analysis was provided to the LMC Board. LMC Board papers are also provided to the Department of Treasury and Finance. 7.	In order for offers to be considered all tenders were required to provide the details as described in this question. The provision of such information by private sector tenderers is considered as commercial-in-confidence and as a consequence it would be inappropriate to disclose that information.