The company set up to fund the City Gate project, Malita Investments Plc, will sell up to €15 million worth of shares to the public to go towards the €82 million cost of the new parliament and roofless theatre.
The rest will be funded through the government’s injection in the company – €25 million – and a €40 million loan from the European Investment Bank, as well as the ground rent from public land handed over to the company for management.
The 20 million shares, with a nominal value of €0.50, will go on sale on July 23 and can be topped up with a further 10 million shares at the same price in case of over subscription.
Subscriptions will close on July 27 with the shares expected to be listed on the Malta Stock Exchange on August 16, with trading starting a day later.
Malita chairman Kenneth Farrugia said the company, which is 70 per cent owned by the government, was tasked with acquiring and managing a portfolio of immovable assets of strategic national importance, of which the City Gate project was the first.
Mr Farrugia said the government had so far bought 50 million shares through a direct investment of €25 million and a further 68 million shares in return for the transfer of the groundrents of the Malta International Airport, valued at €21.5 million, and the Valletta Cruise Port, valued at €12.5 million.
Malita will pay the government a ground rent of €100,000 a year but has also signed a lease agreement for the Parliament building for 20 years and the open air theatre for 30 years, against an annual lease of €5.2 million.
With regard to the €40 million EIB loan, Mr Farrugia said €25 million would be repaid over a 20-year period, while the rest over 25 years at fixed interest rates of between 3.19 per cent and 3.45 per cent.
In case the public does not show interest in investing in the shares being put up for sale, the company has already secured a stand-by loan with a local bank to make up for it.
He said the government has waived its right to a dividend until the end of 2014.
Mr Farrugia said he and the other company directors – who include Vincent Mifsud, Frederick Mifsud Bonnici, Danny Rosso and Ann-Marie Tabone – intend to distribute a total dividend equivalent to between 60 and 75 per cent of profits. They intend to offer an annualised gross dividend yield of seven per cent on the issue price.
This is possible because the company has “visibility” – it knows what its revenue is and knows exactly its costs.
“The company’s business model is imple and revenue is visible and quantifiable, given that they arise from long-term contractual agreements.
“These contracts also provide for the periodic revision of the ground rent and rental income,” he said confidently.
Revenue is primarily derived from four core long-term contractual arrangements: the ground rents from Malta International Airport and Valletta Cruise Ports as well as the lease payments from the parliament building and the open-air theatre.