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OUTPUT 4.1: Property management

Output 4.1: Quality and quantity information

Quality indicators

Quantity indicators

Portfolio condition

OPO assessed the overall condition of the overseas owned estate in 2002 to be satisfactory, using the assessment model described on page 181. A review in 2003 showed an improvement in the overall condition of the estate. This was primarily due to the completion of the construction project for the new Berlin chancery, and increased levels of expenditure on repairs and compliance resulting from OPO's rolling five-year program of repairs, refurbishment and construction, directed at ensuring that properties meet requisite standards.

The condition of properties in the estate can be expected to improve significantly as a result of planned refurbishments and proposed major construction projects (see output 4.2).

Tenant satisfaction

OPO conducts twice-yearly overseas tenant surveys on property management issues. The surveys deal with the services provided through the department's overseas property management alliance with United Process Solutions (UPS)—formerly PricewaterhouseCoopers (see output 4.2). Survey results during 2002–03 reflected general tenant satisfaction with services provided where UPS facilities managers were attached to posts.

The results were mixed where tenants used services coordinated through UPS's Australia-based call service, which responds to direct requests from posts on a 24-hour a day basis. Tenants were satisfied, however, with call centre access. During the year, following a departmental review of the service contract, an estate management group was set up in OPO to oversee and manage liaison between tenants and the service provider (see also output 4.2).

Quantity information for Output 4.1

Return on investment

The rate of return on investment on the overseas owned estate in 2002–03 was 16.1 per cent. This was considerably higher than the 5 per cent returned in the previous year, reflecting the increased value of major projects completed, especially the Berlin chancery. In contrast, the level of capital expenditure was relatively low, but it is anticipated to increase significantly over the next five years. Income from the recently concluded divestment program also influenced the rate of return.

These results are not expected to be replicated in 2003–04 but are consistent with achieving a long-term return on investment of the order of 7 to 8 per cent.

It is not possible to establish a truly comparative industry benchmark for the overseas owned estate, due to the estate's geographic diversity and composition, and the fact that it includes residential as well as commercial property.

Management expense ratio

The management expense ratio indicates the relationship between costs of management and value of the estate. For 2002–03 the ratio is assessed at 0.76 per cent, which was consistent with external industry benchmarks derived from data measuring the performance of listed Australian property management companies.

Annual dividend

The department paid the Government an agreed dividend of $90.75 million relating to the overseas portfolio for the financial year.

Returned equity

The department returned to the Government $15.1 million, the agreed divestment target for 2002–03.


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Department of Foreign Affairs and Trade Annual Report 2002–2003
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