The O'Farrell Government signed a new lease for a lucrative property at Sydney's Circular Quay with a front company associated with disgraced NSW Labor powerbroker Eddie Obeid, on the same day a major corruption inquiry opened into his affairs last year.

The Arc Cafe is located on the edge of the harbour, opposite the Quay's bustling ferry wharves, and benefits from the millions of visitors who flock to the glittering tourist hot-spot each year.

In November last year, its lease was reissued to Circular Quay Restaurants Pty Ltd, a company which has acted as a front for the Obeid family for the past decade.

In 2003, it first acquired the lease, as well as those for two other prime properties on the ferry wharves at the Quay, for a combined $2.4 million.

On paper, the company is owned by Mr Obeid's brother-in-law, John Abood.

But in May last year, The Sydney Morning Herald revealed Mr Abood was acting on behalf of Eddie Obeid and his sons, and that revenue from the company's three leases at the Quay was flowing into Obeid family trusts.

Despite this, when the lease for the most lucrative of the three cafes expired several months later, the Sydney Harbour Foreshore Authority renewed it.

Sydney Harbour Foreshore Authority (SHFA) spokeswoman Michelle Weiss says the property is due to be demolished next year as part of a major redevelopment.

"The authority considered it highly unlikely that it would be able to secure a new tenant willing to pay a market rental for a lease for two years with no prospect of extension," she said.

"The Sydney Morning Herald article made a number of claims about a variety of matters.

"Had the authority abruptly abandoned its ongoing negotiations with the tenant solely as a reaction to the fact that the Herald had published an article, the authority would not only have faced a substantial loss of rent revenue, but also potentially exposed itself to legal challenge by the tenant."

Circular Quay leases at centre of latest investigation

Earlier this year, the Independent Commission Against Corruption (ICAC) levelled corruption findings against Mr Obeid, his son Moses, disgraced former resources minister Ian Macdonald, as well as a string of wealthy businessmen.

It found they had rigged a 2008 coal tender from which the Obeids reaped tens of millions of dollars.

Moses Obeid was found to have also acted corruptly in arranging a cheap Honda CRV for Eric Roozendaal, though no findings were made against the former treasurer.

Today the commission will open its third inquiry into the Obeids and their covert web of businesses.

The Circular Quay cafe leases are the core issue at the heart of the latest probe.

During the next three weeks of public hearings, the commission will examine Mr Obeid's efforts to lobby his colleagues for reduced rent and improved conditions for all properties in the area – including those in which his family had a hidden interest.

Both Carl Scully and Mr Roozendaal, former maritime ministers, have publicly declared they were lobbied by Mr Obeid.

Mr Scully told the Herald that Mr Obeid had asked him to grant the existing tenants a five-year extension on their leases.

He rejected the request, citing a long-planned public tender for the properties that was due in 2005.

"This was not well-received and for the first time Eddie became quite angry," Mr Scully said.

Crucially, in 2005, that public tender – which might have threatened the Obeids' control of their leases – was quashed by Mr Scully's successor in the portfolio, Michael Costa.

Mr Costa declined to comment to the ABC. But he is believed to have argued at the time that existing tenants should be allowed to renew their leases in keeping with the policy of other government agencies with property in the area.

Asked briefly about his lobbying at the previous public inquiry, Mr Obeid said he had made representations on behalf of all lease holders at the Quay.

"There's no obligation for me when I'm talking about an issue in general to be specific about my family," he said.

The ICAC has also announced the public hearings – which are set down for three weeks – will explore the Obeids' interest in Direct Health Solutions, which sells an absenteeism management service.

The company picked up hundreds of thousands of dollars' worth of public contracts under the former New South Wales Labor government, as well as $170,000 in work from Ryde Council.

The commission is also investigating a third allegation that Mr Obeid corruptly exercised his influence in a deal involving water licences for the same farm at the centre of its previous inquiry.

Do you know more? besser.linton@abc.net.au