Issue link: https://maltatoday.uberflip.com/i/800760
maltatoday, SUNDAY, 19 MARCH 2017 10 Analysis ITS/City Centre Silvio Debono's db Group was the only bidder in a Request for Proposals (RFP), a peculiar mechanism which is technically not regulated by the public procurement regulations and is normally used to ex- plore interest in a project. Debono's interest in the site may have preceded the issue of the RFP as reported by MaltaToday in 2015. In an interview, db Group CEO Arthur Gauci claimed that Hard Rock had already expressed an inter- est in the site of the Institute for Tourism Studies, in St Julian's, six years ago. For- mer Prime Minister Lawrence Gonzi re- butted that discussions for the Hard Rock Hotel were limited to the Bighi site, for which the government had other plans. The call issued during the Christmas pe- riod in 2015, did not even include a devel- opment brief, stating clearly what could be allowed to be built and what could not, as has happened with most projects ap- proved in the past decade. The site was included in the Paceville masterplan but the deal was signed before the approval of this plan. The call's title was 'for a project of up- market mixed tourism and leisure de- velopment' but a phrase in the call also stated that 'the project may also include a number of residential units'. The project as agreed to with the government includes 209 luxury apartments – in two residential towers. The government initially announced that the price tag for the project was €60 mil- lion. But a breakdown of figures confirms that that the direct payment (premium) would only consist of €15 million, €5 mil- lion paid in the first year and the rest over seven years, interest free. The breakdown shows that €23,392,000 will be paid to the state upon the redemp- tion of the land by the individual buyers of apartments and not by the db Group. The rest of the €56 million sum consists of the present value given to ground rents which will be paid over the next century. Initially the deal was met by mild criti- cism by the opposition but following rev- elations that deputy leader Mario de Mar- co was involved in negotiations with the government over the deal, the opposition upped the ante, asking the Auditor Gen- eral to investigate the deal amidst strong criticism by civil society and the media. Pender Place and Mercury House When in 2005 a call for offers was issued for the acquisition of the government land at Pender Place and Mercury House, it was clearly stated that development would have to conform with a brief that preclud- ed high-rise buildings and foresaw a pub- lic square on the Mercury House site while allowing high-rise on the Pender site. Pender Ville Limited had won the 2005 concession for the Pender and Mercury sites for Lm10.6 million (€24 million), see- ing off the owners of the St George's Park site as their main rivals for the concession. In 2007, an application for the "develop- ment at Pender Place and Mercury House sites according to the development brief issued by Government Investment Limit- ed" was approved, although this came with a number of deviations from the brief. Curiously, the contract signed with the government itself did not even refer to the development brief but to the conditions presented in the call for offers. In fact the permit in the Pender area did deviate from some aspects of the brief. In 2009, part of the Mercury House site (950 square metres) was sold to trade fi- nance bank FIMBank plc for their global headquarters. Pender Ville, now Pend- ergardens Development, then sold 8,500 square metres of the Mercury House site to Gozitan developer Joseph Portelli. The original deal did attract some criti- cism from opposition leader Alfred Sant who denounced that the deal favoured "someone in the government's clique". Sant criticised the project despite revela- tions that his deputy leader, Charles Man- gion, had officiated the notarial deed for Pender Place. Fort Cambridge In 2006 GAP Developments plc was awarded the tender for the Fort Cam- bridge Area by the Government of Malta following a public tender during which GAP Developments plc was the highest bidder. This had been preceded by a de- velopment brief setting the planning pa- rameters for the project. A permit was issued in 2008, which al- lowed the erection of a 20-storey tower despite a height limitation of 16 floors set in the development brief. The PA justified this deviation by limiting the 20-storey de- velopment to the height applicable to 16 storey buildings – thus allowing the devel- opers to fit more apartments while abid- ing with the height limit established in the brief. The deed itself does not refer to the de- velopment brief that guided Gap Holdings on the basis of which it had applied for the tender. This means that the developers will not have to pay more if planning pa- rameters in the area are relaxed, as would be the case if a proposed 40-storey hotel is approved. The development brief for the site re- mains legally binding but has been super- seded by new policies regulating high-rise developments. Tigné Point and Manoel Island The development brief issued in 1992 limited the residential units on Tigné Point to 300, a far cry from the approved 500. Following the issue of a development brief, the government issued a call for ex- pressions of interest in 1992 for the devel- opment of Tignè Point and Manoel Island. Midi was selected as the preferred bidder. Protracted negotiations with three admin- istrations (including Alfred Sant's short- lived one) involving both parties lasted eight years until agreement was reached and the deed of emphyteusis was passed by Parliament with the unanimous ap- proval of all MPs on June 15, 2000. "This is the only project in Malta that was approved by parliament without a di- vision because we discussed at length with both sides of the house," entrepreneur Al- bert Mizzi said in an interview. MIDI had to pay a premium of €91,707,431 of which €32,145,353 was to be paid in kind. By 2009 MIDI paid €12,974,610 which was paid in in- stallments without interest. A further €46,587,468 was to be paid in installments between 2010 up to 2023. It remains un- clear how much of this sum has been paid to the government. The remaining €32 million of the pre- mium had to be paid by MIDI in kind: €20,964,361 had to be offset by the infra- structural works, which include drainage, water, electricity and telecommunications distribution systems. €11,646,867 were also offset by the cost of restoration works in Tigné. The restoration works on the external fortifications of Fort Manoel were also offset against a €1,164,686 casino conces- sion fee for MIDI's new casino in Manoel Island. The €92 million premium was based on the market value of land at Tigné and Ma- noel Island as determined by the govern- ment on the basis of expert advice at the time that negotiations were being held be- tween 1996 and 2000. In 2009 MIDI had valued its properties to be worth €238 million. According to the emphyteutical deed, MIDI also have to pay an annual ground rent of €1,118,100 (Lm480,000) until 31 March, 2025. The rent will rise to €1,956,673 (Lm840,000) from 1 April, 2025 until 31 March, 2050, and again to €2,236,198 (Lm960,000) from 1 April, 2050. Portomaso The Hilton Hotel took off in 1964, when the Maltese government granted 31 acres of land to Spinola Development Co. Ltd for a period of 150 years, against a pay- ment of Lm34,000 and an annual rent of Lm1,000. The hotel and site were later bought by the Fenechs of the Tumas Group and, in 1995 and 1996, planning permits for the Portomaso project were issued with the support of both PN and MLP representa- tives of the PA board. The entire area was leased by the State to the developers for €445,000 a year until 2114. It was eventually sold to the devel- opers for €1.8 million in 2006, which pales into insignificance when considering the going rate for the luxury apartments the developers were allowed to build. Ombudsman Joe Sammut, who com- menced an investigation triggered by a hunger strike by left-wing activists, repri- manded the government's failure "to use its negotiating powers to maximise the benefits to be derived from the deal". The Ombudsman also stated that "in this case changes to the original condi- tions regulating the grant of land were so substantial, that in the public interest and Land deals used to be guided by development briefs and public tenders, before signing a deed and seeking planning permits. How does the ITS sale compare to similar residential and tourism developments, asks JAMES DEBONO? Living off the public's land JAMES DEBONO developments, asks JAMES DEBONO? DEBONO