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Despite the high corporate interest rates characteristic of the Hawke and Keating years, peaking at 20 percent, several financial institutions went into receivership, including BFC, while AMP, SGIC and the South Australian Superannuation Fund Investment Trust (SASFIT) lost considerable sums invested in a devalued property market. With a 20 per cent vacancy rate in city office buildings, devaluation of commercial property was inevitable.
The corporate style of SBSA during the Bannon decade, mirrored by financial institutions in all states, was summarised by Royal Commissioner Jacobs in his final
The story of the Bank is one of a professionally aggressive and entrepreneurial Chief Executive without sufficient appreciation of the need for prudent banking controls and management; of an incompetent Executive Management happy to follow where their Chief led without independent professional judgment; of a Board of Directors out of its depth and, on many occasions, unable or unwilling to exercise effective control; and ultimately, of a Bank that thrived on the full faith and credit of the people of South Australia.6 The Development Lobby Developers did not form their own lobby group — they did not need to because individually they could successfully lobby several members of ACC and personnel in the state government, and they did so in competition with one another. Thus, they do not fit the definition of an interest group in the sense that they were not formally organised, except through BOMA, but in most respects they were like-minded and Paul Coombes, ‘Finance to Dry Up Following “Witch-Hunts”’, Australian Business, 10, 46, 12 September 1990, p.81.
SJ Jacobs, Royal Commissioner, Royal Commission into the State Bank of South Australia, Final Report (Netley: State Print, 1993), p.9.
Heritage Politics in Adelaide lobbied for the same objective of an unfettered planning system.7 Large national development companies, such as Fricker Corporation and Hooker Multiplex Pty Ltd, as well as superannuation funds and insurance companies, developed property in Adelaide during the 1980s along with family corporations and individual developers.
Some were both investment and development companies, such as Mancorp and the Kambitsis Group, which own and lease the properties they develop. Many individual developers set up a company for each project to limit their liability and to benefit from taxation advantages when they sold the development. John Roche, for example, developed the Aurora Hotel site in Hindmarsh Square through Vensa Pty Ltd and proposed to redevelop the Gawler Chambers site in North Terrace through his Adelaide Development Company. Occasionally developers would collaborate in joint ventures if one developer who owned a site needed finance or the expertise and experience of another, or they might collaborate with a government in a joint venture.
While residential development continued to proceed at a regular pace, office development mushroomed in the CBD. The office vacancy rate had been very low from the 1970s recession, leaving the CBD ripe for the pent-up demand at the beginning of the boom. Much of the private demand came from professionals — architectural, engineering, law and accountancy firms — seeking to expand and upgrade their office accommodation. Whereas previously they occupied lowergrade offices in and around Grenfell and Pirie Sts, they now sought new A-grade accommodation, and they often leased more office space than they would use in anticipation of future expansion.8 Most of the new occupancy was taken by tenants shifting from older buildings to new, leaving the older buildings vacant and vulnerable to redevelopment. State government departments also shifted staff to new buildings during the boom: ‘This was to keep employment up’, according to developer Gerry Karidis,9 as part of the Bannon government’s crane-led recovery.
Developer Theo Maras further commented in an interview, ‘it was an artificial boom. There was no growth. We were transferring deckchairs, taking tenants from one building to another’.10 Theo Maras of Mancorp was a developer who restored historic buildings and was an exception to their common view that heritage protection should be limited to less than 200 buildings in Adelaide.
Joe Walker, personal interview, 25 July 2003.
Gerry Karidis, personal interview, 18 July 2003.
Theo Maras, personal interview, 19 June 2003.
The Interest Groups With easy access to finance, many developers speculated in office construction without securing a tenant. Building development can be a creative process, bringing together a tenant and a site with architects and engineers to construct a building that is appropriate for the client’s needs. During the speculative boom, the design of many office buildings was generally far inferior to their pre-war forebears along King William St, the signature buildings that bore the names of companies concerned about their corporate image: ‘From 1970 onwards buildings were built to a dollar, with design parameters dictated by developers who had no long-term interest in the building but a short-term holding for the purpose of profit only’.11 Even BOMA News reported the observation of developer Grant Pember that ‘the public sector was totally price-driven, which did nothing to encourage excellence in external design aesthetics’.12 New commercial buildings embodied the ‘impersonality of modernism’ described by Alexander Linklater,13 and many observers referred to them as computergenerated buildings or worse, as ‘punitive architecture’ or not architecture at all but mere buildings. Architect Peter Birdsey described working hurriedly on sites in the late 1980s boom, without completed plans: ‘That was the tenor of the period.
Architecture was very much a pragmatic, State Bank controlled, developer syndrome that was based merely on building for economic reasons’.14 Not only did the developers have easy access to finance, they had considerable political influence. They lobbied the state government through its Special Projects Unit for project approval, and through the State Heritage Branch when appropriate.
Developer Gerry Karidis, who won his bid to develop the Dame Roma Mitchell building and pedestrian underpass in North Terrace, said, ‘I am disappointed in developments through the government. I never [saw] open tenders with [Bannon’s government]’.15 But most often city development proposals were lodged with ACC. Developers and/or their architects met with city planners to discuss a proposal before it was submitted to ACC. Often their plans would exceed the allowable plot ratio for the precinct in ambit claims to get the best result for themselves. Whatever recommendations the city planner made to ACC regarding approval or refusal of a ibid.. Maras’ company, Mancorp, is an investment company that plans for long-term ownership after developing a site.
BOMA News, 4, 4, August/September 1992, p.18.
Alexander Linklater, ‘The Master Builder’, Review section, Financial Review, 19 August 2003, p.1.
Peter Birdsey, personal interview, 2 July 2003.
Gerry Karidis, personal interview, 18 July 2003.
Heritage Politics in Adelaide project, ACC had the final vote on the matter. It was critical for a developer to ensure a majority of councillors voted for approval of his project, and it is not surprising that they all lobbied councillors. Some also contributed to election campaigns, but information regarding councillors’ financial interests was not available to the public in the 1980s or 1990s.16 The Advertiser reported in 2010 that developer Con Makris of the Makris Group had donated $351,000 to the Rann Labour government since 2002 as well as $30,000 to SA Liberal Party in 2009. The Makris Group is the developer of the Le Cornu site in O’Connell Street, North Adelaide. The development was fast-tracked through the state’s Development Assessment Commission in 2008 but the project has not proceeded. It is possible other developers have also donated funds to both local and state governments when it was in their interests to do so.
Lobbying and donations might ease the process, but development proposals required the approval of a majority of ACC members. George Kambitsis described the developer’s plight in preparing a proposal for ACC: ‘it is a difficult, arduous process fraught with danger that requires that you bring along with you literally a football team of consultants all of whom have to be paid along the way, with no guarantee where you will be at the end of it’.17 Developers sought to change this process. In its 1991 submission on the review of ACC representation, BOMA contended ‘that the City of Adelaide is a state asset and, as such, its future development should be overseen by a representative body with appropriate skills and expertise. Accordingly, it has recommended that revised management arrangements should be introduced to determine future major development proposals within the city’.18 That is, BOMA believed councillors representing residential wards did not have the appropriate skills and expertise to assess major development proposals.
About three years would elapse from the time ACC approved a building until its completion. Those who lodged development applications early in the boom made millions, but developers who gained building approval from 1989 onward completed In 1998, the Australian Electoral Commission introduced a Register of Donations to Political Parties. Donations to political parties of more than $500 were required to be reported. This minimum amount was raised to $10,000 in 2004. Smaller donations were not reported, nor were donations that were made in the run-up to an election. Developers could hide donations by registering them in the names of subsidiary companies or other sources. Many commentators have observed that developers would not donate to political parties unless they received something in return. Under the SA Local Government Act (1999) a Register of Interests required elected council members to declare donations to their campaign, but the register is closed to the public soon after council elections.
George Kambitsis, personal interview, 24 June 2003.
BOMA News, 3, 6, December 1991, p.6.
The Interest Groups construction or went into liquidation when the boom was over. The boom ended primarily because of an oversupply of office space and secondarily because of rising interest rates, lowered property values and withdrawal of bank loans. There would have been an oversupply in any case, but it was compounded by technological changes that reduced the number of employees working in city offices. Joe Walker mentioned the example of Nestle Corporation in Currie St, which leased additional floors in Frome St: ‘Now all their reps move around with laptops and mobile phones and don’t need the space’.19 Government departments, a major occupier of office space, were also downsizing to meet budget constraints.
Another factor was the centralisation of national and international companies that established head offices in Sydney or Melbourne and abandoned their regional offices: ‘Small regional centres like Adelaide got consigned to a large extent to being back offices and mere regional offices, resulting in the wholesale laying off of staff in places like Adelaide’.20 Developers blamed ACC’s ‘zone X policy’ for local decentralisation of office accommodation from the early 1980s. Zone X was Adelaide’s core district, or CBD, where ACC prohibited car parks in new buildings.
Staff were expected to park in ACC’s designated parking stations, driving small to medium commercial development to the fringe suburbs, along the eastern side of Fullarton Rd and the southern side of Greenhill Rd, where staff could park their cars within their building site. Once residential streets of architectural quality, they are now mainly strips of modern, small-scale office buildings with undercroft parking. These office buildings attracted businesses away from Adelaide, increasing the vacancy rate in the CBD. Without the zone X policy, the developers say, those roads would have remained residential and the office development would have been located in the city. The CBD would have been much better off economically and the residential areas architecturally.21 BOMA surveyed office vacancies annually, and the Adelaide rates for the period 1991–93 show the trends. In mid-1991, 14.7 per cent of office space in the core district was vacant and 19.3 per cent in the frame; in mid-1992, 17.2 per cent was vacant in both districts; and in mid-1993 more than 19 per cent of office space was vacant in both districts.22 These vacancy rates referred to buildings that were on Joe Walker, personal interview, 25 July 2003.
George Kambitsis, personal interview, 24 June 2003.
Developers circumvented Principle 10 by adding basement ‘storage’ to office buildings, where executives stored their cars during the day. Joe Walker, personal interview, 25 July 2003.
Building Owners and Managers Association, Adelaide Office Market Reports (Adelaide: selfpublication), January 1992, January 1993 and January 1994.
Heritage Politics in Adelaide the market. If it were not on the market — for example, empty office space under lease — it would not count as vacant. Sub-leased offices also would not count as vacant. Thus, the real rates of unoccupied office space were substantially higher than the vacancies published by BOMA.
Overcommitted financially and unable to find tenants or sell their office buildings in the aftermath of the boom, some of Australia’s major development companies were forced into liquidation. Fricker Corporation was first in 1989, followed by LJ Hooker (Australia) Pty Ltd and the Emmett Group. The Adelaide-based Kirkwood Pty Ltd faced liquidation in 1990 and major individual developers such as Joe Emmanuel, John Baggio, Vince Oberdan and Dennis Savas went under. Three members of ACC with property investments were obliged to resign because of financial difficulties — Brian Anders, Michael Harrison and Roger Rowse — and Alderman Con Bambacas moved to Brisbane to start a new business. In addition, developers of hotels and retail complexes became insolvent. For example, work on the Royal Adelaide Hotel in Franklin St was stopped in July 1990 because of the collapse of the Victorianbased Pyramid Building Society, and the Ramada Grand and Hindley-Park Royal lost millions. As developers went under, they owed sub-contractors and their workers millions of dollars. The CMEU threatened work bans on construction sites in 1990 after the state government refused to set up a trust to safeguard money earmarked for workers on major developments. These were all signs of a depression in the property sector by 1990.
Building Owners and Managers Association (BOMA) BOMA SA Branch, now the Property Council of SA, was the key lobby group of the commercial property industry in the 1970s–1990s. Its membership included not only property owners and developers, but also government (including ACC) and financial institutions, architects, engineers, accountants, builders and related service businesses. In 1985, BOMA’s membership was about 1600 shopkeepers and a similar number of businesses and professional people in the city who objected to heritage lists and city rates on commercial properties. Developers comprised only 6 per cent of the membership, less than government bodies at 8 per cent, and property owners at 15 percent. Architects and engineers together formed 22 percent of the membership in 1991.23 BOMA maintained that ‘as policy holders and share holders in financial institutions as well as superannuation funds, the public own nearly half BOMA News, 3, 5, November 1991, p.5.
The Interest Groups of the buildings in the CBDs of every Australian capital city’,24 and implicitly should favour unrestrained development.