Issue link: https://maltatoday.uberflip.com/i/1065920
2 maltatoday | SUNDAY • 23 DECEMBER 2018 NEWS Corinthia development CONTINUED FROM PAGE 1 But it also got a further €9 million as compensation for the existing Marina Hotel which will be demolished, as well as €33.4 million for the Radisson, and another €12.9 million for "additional tour- ist-related development" that takes place on the site. That brought down the to- tal valuation of the area to €50.3 million, slightly revised upwards to €51.4 million. DB Group, granted a neighbour- ing site for a 38-storey high tower, was slated to pay €60 million. On its part, IHI plc made it a point to state that it already enjoys long-term exclusive rights to the land. IHI chairman Alfred Pisani – who was present at the par- liamentary committee hear- ing on the proposed project – backed up justifications by tourism minister Konrad Mizzi that such a six-star de- velopment was conditional on "compensation" for forgone hotel assets that will be de- molished in the process. "This investment comes with some considerable sacrifice… the revenue that will come in for the country will be three times what it is today. One has to respect the risk, and vision for the country… to introduce to this country a standard it has never seen before." In comments to MaltaToday, Konrad Mizzi said IHI had to buy the Radisson to deliver a "holistic project [entailing] the upgrading of the entire peninsula into a six-star des- tination". "Given that a significant por- tion of the proposed devel- opment will be undertaken on the land occupied by the Radisson, it is only logical that one deducts the cost of acqui- sition in order to determine the difference in value be- tween current and proposed use, once the restrictive use clauses are lifted," Mizzi said, adding that the €33.4m value is an estimate for what IHI paid for the Radisson. Apart from that, IHI's credit for additional tourism devel- opment of €12.9 million was explained as the forgone value from the additional tourism development IHI could have reaped on its three hotels had it carried on business as usual – at the rate of €50 per sq.m. Observers will note that while IHI was expected to pay a high price for the political green light to redevelop the peninsula, the government is also generous in applying a 57% discount in the form of 'credits' to the total price. Even the Malta Developers Association said it disagreed with Deloitte's estimate of the land prices, saying it was "far below market prices", and that since the ITS valuation, prices had risen. "When government sells public land to be used for residential purposes at below current market prices, it dis- torts the property market and abandons the concept of a lev- el playing field for all the play- ers in this market," the MDA said. Mizzi defended the valua- tion, saying that upon becom- ing tourism minister in 2017, fresh negotiations were held with IHI to improve upon the 2015 memorandum of under- standing to raise the original €38.7 million payment for the waiver of restrictions, to €51.4 million. That included limiting resi- dential and commercial devel- opment to 100,000 sq.m, in- creasing the premium paid up front to the government from €12 million to €17 million, and also increasing the rates of converting the emphyteusis to a perpetual title. "The project will bring about significant direct and indirect income to the government [and] multiple tangible ben- efits to Malta as a direct re- sult of this development that will yield far-reaching positive benefits to the island in gen- eral," Mizzi said. But there is still a big ques- tion as to why such arbitrary credits were needed to bring the higher valuation of the land, down from €121 million to €51 million. When in 2015 IHI plc ac- quired Island Hotels – osten- sibly the only deal it could do if it was to acquire the Radis- son for its St George's project – its new assets comprised the ownership of the two Radis- son hotels in St Julian's and Golden Sands, Island Cater- ers, the former Hal Ferh com- plex, and the operation of Costa Coffee in Malta and in parts of Spain. That added a total of €91 million to the value of IHI's principal properties, of which the Radisson St Julian's was valued at €37.7 million in 2015. Since then, the hotel's performance has also im- proved, with gross operating profit jumping by 73% from €2.6 million in 2015 to €4.5 million in 2016. Island Caterers too benefit- ed from the EU presidency in 2017, to see revenue grow by €500,000 to €6.5 million in 2017, while the Costa chain across 11 outlets saw sales in- crease 14% by €900,000 to €8 million in 2017. mvella@mediatoday.com.mt Corinthia land value Residential and office areas at €1,250/sq.m €121.7m Deductions • Infrastructure costs €16.1m • Marina Hotel compensation €9m • Radisson Hotel compensation €33.4m • Potential tourism development €12.9m Total net value €50.3m Higher total compensation €51.4m Payment terms • Upfront premium €1m • Premium 3 years from date of deed €3m • Premium subject to project development €13m Perpetual titles • €250/sqm internal office & residential €24.3m • €37.50/sqm external (residential/office) €1.1m • €37.50/sqm car park €1.8m Ground rent • Residential/office at €75,000 per annum 5% capitalisation €1.5m • Hospitality areas at €200,000 per annum 3.5% capitalisation 5.7m Deloitte land value The Corinthia San Gorg, which IHI plc will retain in its redevelopment, but add two storeys The Marina Bay Hotel, which will be demolished The Radisson SAS, acquired as part of the Island Hotels Group in 2015, valued then at 37.7 million