The South Australian government will take control of the $1 billion redevelopment of the old Royal Adelaide Hospital site, following its rejection of the preferred developer’s final offer for not representing “the best value for South Australian taxpayers”.

The news has outraged the opposition, Infrastructure Partnerships Australia and the development consortium Commercial & General and John Holland, which may launch legal action for compensation.

Premier Jay Weatherill said the area was arguably Australia’s most premium development site, and he didn’t want it to be “fenced off for years to come and left to the market to dictate what happens and when”.

“The old Royal Adelaide Hospital site is a once-in-a-lifetime opportunity in the heart of one of the world’s most liveable cities, so it’s critical that the redevelopment delivers a first class result for all South Australians,” Mr Weatherill said.

He said government control of the project would ensure the interests of South Australians was placed above those of private developers, and this was the same model as has been implemented at award-winning urban regeneration projects like Tonsley and Bowden.

Under the original proposal, the seven hectare parklands site was set to be given to a consortium that included Commercial and General, and John Holland, which would build a luxury hotel, a “university innovation quarter”, an arts and culture precinct and about 1200 apartments, including a proposed 23-storey residential tower.

The government plans to keep the hotel and provide two hectares to the Adelaide Botanic Garden, but has scaled back the residential development, which was criticised by both Adelaide City Council and the Park Lands Preservation Association as inappropriate.

The government will soon begin demolition of defunct and contaminated buildings, and is now calling on a range of contractors for the development, including:

  • The procurement of a landscape architect to design the integration of the two hectares into the Botanic Garden
  • Opening a Registration Of Interest (ROI) for a new, minimum 5 star hotel
  • Opening Expressions Of Interest (EOI) for new uses for the retained heritage buildings
  • Launching an international search for a world-class team to design the proposed Adelaide Contemporary Gallery project

But not everyone’s happy

The government’s reasons for backing out of the bid process was labelled as spin by the Commercial and General/John Holland joint venture’s Trevor Cooke.

“The vision the joint venture cast for the precinct was world-leading and structured to drive South Australia into the next era,” he told The Australian.

“The proposal offered exceptional value-for-money for South Australia and we have been as flexible as possible with regard to outcomes.”

The developers are considering seeking compensation for the work put into the proposal, however that has been shot down by the premier.

“They had the right to an exclusive negotiation and we carried that out in good faith and now we’re at the end of that process and we’ve made a decision that we’re going to do it in house,” Mr Weatherill said.

Infrastructure Partnerships Australia said the renege was “the next in a litany of major project failures”.

“This is a disaster for South Australia and shows politics trumping projects again and again,” IPA chief executive Brendan Lyon said.

“The idea that the South Australian government will now do a $1 billion property development itself should put a chill up the spine of every taxpayer, given the problems the state has had on every major project and South Australia’s experience with the state bank.”

Liberal opposition leader Steven Marshall said the move had created a “billion dollar black-hole”.

“The premier’s abject failure to deliver on his promise is a shocking indictment on Labor’s ability to deliver major urban regeneration,” Mr Marshall said.

However, the government has lambasted Mr Marshall for having a range of contradictory positions on what the development should contain.

“As with his missing energy policy, Steven Marshall is still yet to provide any detailed plan for what the Liberals would do with the site,” housing and urban development minister Stephen Mullighan said.

“Last year we released the concepts for the site including handing back over 30 per cent of the site to the Botanic Gardens, retaining and re-using all heritage buildings on site, providing new facilities for research and commercial innovation activities, and residential accommodation to support both day and night-time activity.

“We will continue with the delivery of these elements, and by managing the project directly we can also emulate our award-winning redevelopments at Bowden and Tonsley, where we have partnered with multiple local developers.

“Directly controlling the site will ensure that this development is also carefully staged for the benefit of the whole community.”