Dar Malta: whodunit - whodidnt?

The fact that Dar Malta, the 13-storey building in Rue Archimède, Brussels, bought by the government in June 2004 to house its EU Permanent Representation, opened its doors on Monday, does not mean that the controversy concerning its acquisition has been closed.

The workers from a Belgian construction company may have dismantled the scaffolding last weekend, enabling close to three-score Maltese officials to move in along with their documents and other belongings, as reported by The Times' Brussels correspondent yesterday week. Many of the questions raised at the time of the purchase of the property are revived by the basic details that underpinned that report.

Those of us who have visited the previous (leased) offices of our Permanent Representation in Rue Belliard will probably confirm that better accommodation was required for the Maltese officials to function properly. But, did Dar Malta have to be situated "just metres away from the European Commission's headquarters"?

The building will also house the Maltese Embassy to Belgium. Between the two units Maltese officials and diplomats will be occupying the top five floors. One must presume the floors will be reasonably comfortable, allowing the Permanent Representation and the Embassy to work as efficiently as can be. That will still leave another four floors and space in the three-storey underground garage available for leasing.

When the government bought the Rue Archimède building, one of Prime Minister Lawrence Gonzi's first actions, the bare criticism - that is, criticism not clothed in political apparel - was based on two key points. One was that the property was too large relative to Malta's needs and, in comparison to offices opted for by bigger EU members, was unnecessarily central. Call that the Grand Factor.

The second point of criticism was that Malta had paid above the odds, at that point in time.

The building was bought for Lm9 million, including the cost of refurbishment, which - the government says - went up only to the extent that inflation affected the cost of the refurbishment works that were carried out under the eagle eye of a committee that operated under the auspices of the Finance Ministry in Malta. The purchase outlay and the refurbishment estimate were strongly criticised at the time. Call that the Excess Outlay Factor.

The latter point of criticism can only be put to the test in commercial terms not available to observers and commentators like this columnist. The terms would be made up of a detailed and informed Belgian opinion about what the property would fetch were it to be sold today, and what return the net receivable would leave on the original capital outlay, allowing for the cost of money (the interest foregone on the funds used to purchase and refurbish the property).

Rather than getting entangled in the undergrowth of various hypotheses, I suggest one should stick to the factual. That essentially consists of the fact that around half the modernised building housing Dar Malta is still unoccupied.

What is to be done with the empty space? When the property was purchased, Dr Gonzi defended the deal. He did so, among other things, by pointing out that the part of the building not used by Malta would be let out, and thereby earn a good commercial return. If memory serves me right, he was quite startled when a journalist suggested that there might be legal restrictions on letting in that context.

"God forbid!" - Dr Gonzi had exclaimed. Here we are, now, the refurbishment completed and the Maltese officials settled in, and the public is told yet again (through the media) that "the government plans to lease almost half of Dar Malta to private firms and other third parties to generate income to compensate for the capital investment". That is why the can of worms opened through the original purchase has not been closed up again.

Once the building became the property of the State of Malta, the architects who were to be in charge of its adaptation to Malta's needs and refurbishment would, no doubt, have acted according to the lower-case abc of such matters. They would have planned and overseen the execution of the rehabilitation of the whole building. They would have supplied the Ministry of Finance committee co-ordinating the project with details of how much space would be available for letting to third parties.

No doubt, the architects would also have provided the committee with detailed designs, which one could even 'view and walk through' on a normal PC or laptop, as if the project was already completed.

Since time is money, and empty property is income foregone, one should presume that the government sought professional assistance in Belgium to attempt to let to third parties the space left over after the planned occupation of Dar Malta by the Permanent Representation to the EU, and by the Maltese embassy.

Over the 25 months that have elapsed since the government bought the Rue Archimède property with the people's money, consideration would have been given to the possibility or otherwise of housing other Maltese units in Dar Malta. Since, so late in the day, there is not the slightest sign that such housing will take place, it may safely be presumed that there was no interest all along.

Either that, or there was some interest but the rates requested by the government of Malta were so much above what these other units are already paying that those in charge balked at the prospect of adding the excess to their operating costs.

The government has implicitly contributed to this hypothesis by declaring that it would not subsidise rentals. One should presume that the intention to charge rent at commercial rates was clear all along. All along, therefore, those in charge of the other Maltese units showed no effective interest (as in effective demand, or demand backed by money, in simple economics).

Such reasoning seamlessly leads to the conclusion that the government was in duty bound to explore the possibilities of letting out the available space in Dar Malta to non-Maltese third parties. To assume that it did not do so would be to imply that the government neglected its clear obligation to ensure that Maltese capital was deployed in a remunerative manner, and not be left with a zero return.

To date, the Ministry of Finance has not given details, either to the extent that these were supplied by the project committee, or as they arise out of the ministry's broader role of keeper of the public purse. One did come to know, though, that the Permanent Representation to the EU feels that at least one other floor should be kept vacant, to be utilised once Malta assumes the presidency of the EU in six years' time. That, in itself, is a premise which begs for fresh controversy to be built on it.

What would be the opportunity cost of keeping a floor, and presumably related garage space, vacant for several years? Might it not make more sense to receive commercial rent for the floor in question - assuming there is effective demand for it - and build up a fund to supplement the Dar Malta office space when the presidency-turn arrives?

The argument could stretch like good chewing gum: would one extra floor be enough? Or will all the extra floors be required, as indicated by the Times correspondent in Brussels? (One does get the feeling that Maltese sources in Brussels are suggesting one thing, whereas government sources in Malta differ.)

Whether the extra floors and other space are leased on short-term contracts, so that they can be used "when Malta assumes special EU functions, such as the presidency", or on a longer basis, my query remains: Why, at this late stage, is there still so much empty space, yielding Malta nothing at all? It is no doubt of some interest to learn that "a high security system and a communications link-up between the Office of the Prime Minister and the Ministry of Foreign Affairs in Valletta and the Permanent Representation in Brussels have been installed" - as reported in The Times yesterday week - though one hopes our ministers, diplomats and other officials have not become security-minded to the point of costly paranoia.

It would be far more interesting to be assured that rental income is not going to be foregone for much longer. Property developers in Malta are experts at selling or leasing "on plan" - that is, before a unit has been completed. Some developers manage to sell the larger part of a good project before they have even put two building blocks on top of each other.

The government may be presumed to have as much sense as the local developers. Did it apply it to the Dar Malta project, or didn't it?

The Malta-Brussels whodunit - or should that be whodidn't? - continues...