The NSW Government sold Bligh House for $53 million in 2013. The new owner resold for $68 million in 2015. Credit:Anthony Johnson Already one trophy building sold by the NSW government in 2013 has given the new owner a $15 million fast profit. Property group Cromwell paid $53 million for Bligh House, then sold for $68 million in July. Cromwell bought seven government offices for $405 million in 2013, leasing six back to the government. The properties were valued at $535 million this year, $130 million more than the government sold for. The company is also profiting from the government leases, worth a minimum of $405 million over 15 years, with the ability to raise rents. Twenty out of 48 government buildings sold have been leased back to Government Property NSW.

The latest, the Parramatta Justice Precinct, sold for $170 million to Eureka Property. But the government will pay a minimum of $198 million back to the new owner over 15 years to continue to house the Department of Justice. According to Government Property NSW's annual report, average government rental costs are increasing because of the leasebacks. The report cited "competing objectives" within the portfolio, as it aimed to lower rental costs, yet average rents actually rose higher than CPI inflation as buildings were sold off. The leasebacks signed with Cromwell averaged $492 per square metre, compared to $408 for existing government leases, and $355 on other new leases. "While on average GPNSW faces a higher average lease cost as a result of asset sales, this is offset by the wider Whole of Government benefits of asset recycling," the report said.

A 2012 taskforce headed by Cromwell chairman Geoffrey Levy had recommended the NSW Government sell all buildings not needed for service delivery as "a default position", with no other financial analysis required. The taskforce was concerned at maintenance costs. Cromwell said in 2013 the conflict of Mr Levy's dual roles was disclosed during the expression-of-interest process of the competitive tender, and Mr Levy was "not involved in any way" in the transaction at the request of the state government. Opposition treasurer Michael Daley has accused the Baird Government of being "fanatics when it comes to selling property". "There is no merit assessment now. They have made an ideological decision, they just want to make a quick buck. But what's the point of selling a building or making a quick buck, when you are adding to your recurrent costs?" A spokesman for Mr Perrottet said an analysis of the cost and benefits of retaining or selling an asset was conducted for Parramatta.

"The analysis of the Parramatta Justice Precinct demonstrated that the costs of retaining the assets included substantial operating and capital expenditure over 15 years, with a significantly reduced sale value of the assets at the end of that period." The sale price of $170 million exceeded the benchmark needed to provide a net benefit to the state, the spokesman said, and the proceeds would be reinvested into infrastructure and services. Retired University of South Australia academic Rob Kooymans published a report on the Howard government's sale and leaseback of government buildings between 1996 and 2001, finding the policy had financially disadvantaged taxpayers. He said governments were making political decisions, not financial ones. "The Howard situation was backfilling calculations to justify a political decision. The basic idea was governments shouldn't be in public buildings." He said it was unknown whether the taxpayer would benefit from the latest sell offs. "My opinion is governments don't care."

He warned the decision to sell didn't take into account future problems likely to be encountered as a tenant, such as needing permission from the building owner to reconfigure offices. The government has earmarked the Four Seasons and Shangri-La sites at The Rocks for sale, but analysts likened this to selling the land twice. Both are on 99-year leases, paid in advance. Any new owner would wait 63 years and 77 years, respectively, for rent. The likely bidders are the hotels, who would pay a modest price to convert leases to freehold.