The Government has adopted new property principles and has made changes to the name and activities of the State Property Authority1 (SPA) as part of putting them into practice. The new name of the State Property Authority is Government Property NSW, effective from 12 December 2012.

The requirements outlined in this Memorandum and the attached Government Property Principles apply immediately to all General Government Sector agencies and Public Trading Enterprises (excluding State Owned Corporations). Shareholding Ministers and Boards of State Owned Corporations are encouraged to use the services of Government Property NSW where their organisations do not have the necessary in-house expertise.

Following a review of real property asset management across government by the Property Asset Utilisation Taskforce, real property policy changes are being made in relation to:

• strategic asset management and planning

• depreciation and asset valuation

• financial management and planning within annual budgets and the longer term

• financial analysis of divestments and arrangements for reinvestment of the proceeds

• incentives connected with asset utilisation and realisation.

Government Property NSW has been assigned the NSW Government mandate to improve the management of the NSW Government's owned and leased real property portfolio. The key changes for the sector are:

Property Ownership Rationale – the central premise of public sector real property asset management should be that real property assets are only held by government when required, and in the form necessary, to support core government service provision (including holding and maintaining State strategic assets). It is the NSW Government's intention that leased or owned real property assets which do not meet this test should be relinquished or realised and the rental savings or unlocked capital put to better use, with a priority given to maintaining, improving and extending real property assets that are core to current or future service delivery.

New Leadership - Government Property NSW is the body for considering all strategic real property asset management issues. The Government Asset Management Committee is abolished and Government Property NSW assumes its former functions.

Incentives for agencies – to encourage better capital management, agencies will retain the net proceeds of divestments, to be used for reinvestment in maintaining, improving and extending the capital base required to support service delivery. This is subject to the residual right of the Government to determine overall budget priorities by reallocation of resources. In the case of more complex divestments, Government Property NSW will develop profit sharing mechanisms to encourage agencies to work with it to unlock latent value in asset bases.

Improved Real Property Sections of TAM Plans – All agencies are already required to submit Total Asset Management (TAM) Plans to Treasury. To enable a whole of government approach to real property assets in TAM Plan preparation, all agencies are now also required to work with Government Property NSW in preparing and submitting their TAM Plans.

Government Property NSW has the right to review the components of TAM Plans that relate to real property assets and has authority to require information to be provided at a summary or detailed level for any particular real property asset, class of real property asset, agency or geographic area. In relation to office accommodation and generic real property (i.e. property that is capable of being divested to a third party without affecting service delivery, eg carparks), Government Property NSW has the right to step-in where it is not satisfied that the agency has adequately completed the real property specific component of its TAM Plan.

Improved Capital Planning – In addition to its role in relation to TAM Planning, Government Property NSW will have an active role in advising on depreciation policy and the management of maintenance 'reserving' by agencies (i.e. use of 'sinking funds').

Enhanced Information – Government Property NSW will assume responsibility for the management of the Government Property Register (GPR). All agencies are required to cooperate with Government Property NSW in mapping all real property asset ownership data to the GPR with accurate, relevant and useful information as required to populate the register. A transition period of 18 months has been allowed for completion of data provision. After the 18 months transition (ie 30 June 2014) the proceeds of any real property asset sale retained by an agency will be capped at the then GPR registered asset valuation. Failure to cooperate in the application of the new Government property principles will give rise to a right (subject to the approval of the Expenditure Review Committee) for Government Property NSW to step-in and take action in relation to the property, based on its own view of the information.

To assist Government Property NSW to achieve its objectives, the Government has approved a real property policy framework. The framework outlines the relationship between agencies and Government Property NSW in relation to the acquisition, utilisation, management, maintenance, development and disposal of real property assets.

The key initiatives of the framework are:

• vesting ownership of all owned office accommodation in Government Property NSW;

• implementing a commercial rental charge for all owned office accommodation;

• transferring management responsibility of all Government leased office accommodation to Government Property NSW;

• Government Property NSW undertaking all negotiations for new or existing leases for generic real property in the Greater Sydney Metropolitan Area (as defined by the Department of Planning and Infrastructure);

• regular and ongoing reviews by Government Property NSW of agency real property portfolios to identify efficiencies to improve service delivery which will be reported to Government;

• all agencies providing accurate, relevant and useful information for the real property database, including through participation in surveys;

• Government Property NSW reviewing and endorsing all proposed real property acquisitions and disposals;

• Government Property NSW serving as the Government's central acquisition and disposal agency (assuming the roles of SPA and the abolished Government Asset Management Committee) ;

• Government Property NSW leading coordination of real property portfolio proposals, that is where acquisition or disposal action on multiple properties is linked by transaction timing, location or use; and

• the Department of Finance and Services, Government Property NSW and NSW Treasury working cooperatively with government agencies to address any staffing or funding implications which may arise from implementation of the policy framework.

The attached Government Property Principles provide further details of the real property policy framework and operational guidance that agencies should follow.

Government Property NSW will be accountable for achieving:

• strong customer satisfaction

• benchmarked financial returns on its property portfolio and investments

• effective real property asset utilisation and service quality

• competitive cost of service

• added value in client real property asset repositioning developments.

Appropriate key performance indicators will be established for this purpose.

Barry O'Farrell MP
Premier

1 The State Property Authority was established under the State Property Authority Act 2006 by the NSW Government as a corporation being a statutory body representing the Crown with functions which enable the State Property Authority to own, hold, manage, maintain, acquire, dispose, coordinate or participate in developing NSW Government owned real property assets by itself, through subsidiary corporations or in joint ventures. The State Property Authority was established as the NSW Government's real estate services provider and is responsible for acquiring and managing the NSW Government's generic and, by agreement, other real property assets.

Government Property Operating Principles

Vesting of government owned properties:

Principle 1

All owned office buildings will continue to be vested in Government Property NSW and lease arrangements will continue to be entered into with tenant agencies through a Memorandum of Understanding. Agencies will not be compensated for the vesting of real property assets, but will receive budget funding for net rental payments. Normal operating costs will be funded by agencies from existing resources. Under Premier's Memorandum M2008-06, vesting of office buildings commenced from 1 July 2008 and will continue into the future beyond the date of these operating principles. Subject to approval from the Expenditure Review Committee, Government Property NSW can make decisions, in the NSW Government's overall interest, to relocate staff into alternate office accommodation, in accordance with government policy.

All other generic real property (i.e. non-operational assets that are capable of being divested to a third party without affecting service delivery and excluding owned office buildings) will be vested in Government Property NSW on the same basis as office buildings. If the Minister for Finance and Services is satisfied that there is a sound rationale for the agency to retain ownership of specific generic real property, the Minister for Finance and Services may issue a direction that the specific generic real property is not to be vested in Government Property NSW. The Minister for Finance and Services may at any time revoke that direction.

Principle 2

Agencies may vest in Government Property NSW any or all of their non-generic owned real property assets subject to agreement with Government Property NSW and Treasury on resource and funding transfers associated with those properties. In some instances government may direct that certain properties or agency portfolios be vested in Government Property NSW.

Management of leased office space and other leased real property assets:

Principle 3

Government Property NSW will assume management responsibility for all leased office space and other leased real property assets. Sublease arrangements will be entered into with tenant agencies through a Memorandum of Understanding. Agencies will pay a management fee to Government Property NSW in addition to the rent payable under the head lease.

The program to transfer management of existing head lease responsibilities to Government Property NSW is to continue.

Subject to approval from the Expenditure Review Committee, Government Property NSW can make decisions, in the NSW Government's overall interest, to relocate staff into alternate office accommodation, in accordance with government policy.

Principle 4

Government Property NSW will conduct all lease negotiations (new leases, renewals and rent reviews) for real property assets required by Government agencies except where the Minister for Finance and Services determines otherwise. 

Principle 5

Consistent with Operating Principle 4, negotiations for all proposed lease pre-commitments must be conducted by Government Property NSW and in accordance with existing approval processes. All pre-commitments to acquire real property or office space must be assessed and approved in accordance with NSW Treasury's Public Private Partnerships Guidelines.

Acquisition of new real property assets:

Principle 6

Any request to Government Property NSW to acquire new real property assets must be consistent with the agency's Asset Strategy, supported by a business case and certification of funding availability for acquisition, rental and fit-out, as appropriate. Where an office accommodation requirement exceeds 1,000m2, agencies must provide Government Property NSW with a facility plan for approval before Government Property NSW can approach the market.

Principle 7

All proposed real property acquisitions must be referred to Government Property NSW to consider the proposed acquisition strategy and determine the appropriate agency to complete the transaction (based on the proposed incentive mechanisms). Normal Treasury requirements for acquisitions continue to apply.

Principle 8

No General Government Sector agency will approach the market to acquire real property assets, either by lease or ownership, other than through Government Property NSW unless the Minister for Finance and Services determines otherwise.

Disposal of government owned real property assets:

Principle 9

All proposed real property disposals will be undertaken, managed and approved by Government Property NSW unless Government Property NSW approves another agency undertaking those functions.

All proposals that involve either sale and leaseback arrangements or amortisation of fit-outs as part of lease arrangements must be referred to Government Property NSW and will require Treasury's specific approval.

Principle 10

Agencies will retain the net proceeds of divestments, to be used for reinvestment in maintaining, improving and extending the capital base required to support service delivery, subject to the residual right of the Government (through Cabinet) to determine overall budget priorities by reallocation of resources. In the case of more complex divestments, Government Property NSW will develop profit sharing mechanisms to encourage agencies to work with it to bring unlocked sites to market.

Utilisation of government owned or leased real property assets:

Principle 11

All government agencies must immediately advise Government Property NSW of any vacant, underutilised or no longer required office space or other divestible real property (if not already documented in the agency's TAM plans).

Principle 12

Car parking spaces that incur a cost to an agency should only be provided for official government vehicles including vehicles supplied under salary sacrifice arrangements used for official business. There are circumstances where approval has been given by CEOs for the parking of private motor vehicles in official car spaces. These approvals have been given on the basis of the particular needs of the agencies concerned. Pending finalisation of a sector-wide policy in respect to these motor vehicles, existing approvals are to remain in force.

Management

Principle 13

All agencies will enter into an agreed Memorandum of Understanding prepared by Government Property NSW for office space or other real property assets it owns or manages. If an agency fails to execute a Memorandum within a reasonable time, Government Property NSW, subject to Treasury approval, will deem the Memorandum to be binding on the agency. For leased premises the term is to be consistent with the head lease. For government owned accommodation the term may be negotiated between the parties, but subject to a specified minimum term.

Principle 14

Government Property NSW will enter into Service Level Agreements with agencies in relation to the provision and maintenance of owned or leased non-generic real property assets that meet their service delivery requirements and deliver best value for government.

Principle 15

Agencies are responsible for the provision of fit-out, changes to existing fit-outs and the make good of premises provided by Government Property NSW. However, no fit-out, make good or other alterations are to be undertaken without Government Property NSW's prior approval.

Agency property portfolio reviews:

Principle 16

In addition to the role of Government Property NSW in relation to the preparation and review of TAM Plans, Government Property NSW will conduct regular and ongoing reviews of agencies' real property portfolios, working with agencies to identify efficiencies to improve service delivery. The outcome of these reviews will be reported to the Minister for Finance and Services.

Guiding Principles

Principle 1

Government Property NSW is the body for considering all strategic real property asset management issues.

Principle 2

The title for all new real property acquisitions where the responsible Minister does not have the legislative power to deal in real property transactions is to be placed in the name of Government Property NSW. All real property related leases (including office accommodation) will also be in the name of Government Property NSW.

Principle 3

Government agencies are to achieve the office space use targets determined by Expenditure Review Committee on the advice of Government Property NSW.

Principle 4

Government agencies are to actively pursue opportunities to share common resources or services consistent with government policy or directives.

Principle 5

The preferred location for agencies in the Sydney CBD is in the southern sector or other sector where equivalent terms can be negotiated. No agency, however, will be provided with accommodation in the Sydney CBD core unless approval has been obtained from the Government Property NSW.

Subject to individual agency service delivery requirements, the preferred locations for Government agencies in the Sydney Metropolitan Area are those centres consistent with the Department of Planning and Infrastructure's Sydney Metropolitan Strategy.

Government agencies will ensure that decisions on the location and fit-out of office accommodation are consistent with planning for active living principles and sustainable travel options as referred to in the Premier's 'Why Active Living' Statement, including the necessary infrastructure such as showers, lockers and secure bicycle parking.

Principle 6

All Government agencies are to ensure that office accommodation complies with Government policy in relation to sustainability and energy conservation. The current policy is outlined in Premier's Memorandum 2004-04.