DHA makes cost-saving claims

The DHA wants to develop the SAS’ Seaward Village.
The DHA wants to develop the SAS’ Seaward Village.

“If DHA is the developer, the net cost could be reduced. It is expected the houses on 140 blocks of 250sq m would bring about $1.5m each,” a DHA briefing paper obtained by the Western Suburbs Weekly told Minister for Finance Mathias Cormann and former Defence Minister David Johnston on March 19, 2014. The paper said DHA valued the blocks “at cost” at $10 million but if they were sold at between $820,000 and $1.1 million, sales would bring “in the order of $110m”, profit “around $85m” and a dividend produced of “about $50m”.

DHA’s proposal also replaces 154 established soldiers’ homes, with a separate precinct of terraced and semi-detached military houses south of the SAS’s Campbell Barracks.

The paper said the neighbouring civilian part of the redevelopment could have a cash shortfall of $17.6 million in its second year and $54 million in the third year.

DHA subsequently asked the Government to approve the shortfalls to be offset against claimed higher returns later in the seven-year project.

“This is an unusual project in that costs cannot be met through DHA Sale and Leaseback program or under annuity arrangement with the Department of Defence,” the paper said.

Redevelopment opponents have been unable to test the claimed costs because no business case for the proposal has been released, but a Government-ordered review has asked DHA for a new costing in a falling real estate market.

Cottesloe-based House Real Estate agent Frank Torre said DHA’s year-old estimates could remain valid because of the village’s “unique location on the coast”, the area’s recently obtained land values of $2000/sq m to $3000/sq m and lower building costs.

Mr Torre said a staged release of 140 lots would not impact on local values “that much”, and “good” architects could accommodate Army-imposed design restrictions for security purposes.

Asked if DHA stood by its 2015 figures, DHA acting managing director Jan Mason said DHA would not comment while the Seaward review was being conducted and before the Government considered its report.