The Sea Bank Group will be paying €15 million for the former ITS site in St George’s Bay and not €60 million as Prime Minister Joseph Muscat said last week.
Also, according to the contract and related documents published by the government, the group will be bound to invest €150 million in the project, rather than the €300 million quoted during the press conference given at Castille to launch the residential and touristic mega project that will include three hotels.
An exercise conducted by the Times of Malta on the contract signed between the government and DB San Ġorg Property Ltd – owned by hotelier Silvio Debono - shows that the private company has so far paid €5 million of €15 million for 24,000 square metres of prime property in what is dubbed the ‘golden mile’.
The contract stipulates that the remaining €10 million will be paid over the span of seven years in annual instalments to start in January 2018.
The payments will be interest free and the concession given for 99 years.
In its negotiations with the government, the company has also managed to strike a good deal on the payment of the related ground rent due on the massive site.
Although, according to the contract, the company is supposed to pay €1.5 million in annual ground rent, the government accepted cutting the sum due to €1,000 until the completion of the project, estimated to take some five years from when permits are issued by the Planning Authority.
Real estate industry sources said the documents published indicated the company, which was the only bidder after a call for an expression of interest made by the government, got a very good deal and had the potential to make tens of millions of euros in profit from the project.
When launching the investment, Prime Minister Joseph Muscat said that the company would be paying €60 million for the land and invest €300 million.
“The contracts clearly show that Mr Debono’s company will be paying just €15 million. Any other figures mentioned are not in the contract,” the sources said.
Asked how the government could have come to the €60 million figure, the sources said the “estimated commercial consideration” mentioned by Dr Muscat was not the price of the land to be paid, as was the norm in the market.
“Strangely, the €60 million figure includes the €15 million consideration for the land, €3 million stamp duty and the presumed payments to be made by future purchasers of apartments, offices and garages.
“The latter will not be paid by the company being given the land but by future clients in the eventuality that they decide to redeem the ground land of the properties they purchase,” the sources pointed out. The controversial issue of selling the ITS property on the cheap has been raging from day one, when the government announced negotiations with Mr Debono. According to the draft Paceville master plan released last November, the price of seafront land in St George’s Bay was estimated to be €8,500 per square metre.
Although, according to this estimate, the land that was conceded to the DB Group could fetch €212 million on the market, experts said that the whole site was not considered to consist of seafront land. In a presentation given by the Minister Within the Office of the Prime Minister, Konrad Mizzi – who was the Prime Minister’s representative regarding this deal – the valuation of the land was based “on an innovative model” to be adopted in other developments in the future.
According to Dr Mizzi, this model was designed by audit firm Deloitte.
In a reaction, the government this morning said it will collect every single cent of the €60 million valuation of ITS land.
"Independent and professional valuation by Deloitte estimated the value of land of the ITS site at St George’s Bay at €56 million, excluding the almost €4 million in taxes at a total value of €60 million. The Government will collect every single euro cent as per the structure of payments which was set up by the same independent firm."
The payment will be split in this way:
Conversion from Temporary to Perpetual Emphyteusis
Car Park conversion
Redemption of ground rent
Hospitality ground rent
Retail ground rent
€56, 114 million (exc taxes)
It said the €15m value quoted by Times of Malta only included the development premium component. In addition to this component the government will receive ground rent for hospitality and leisure facilities as well as ground rent for residential properties or redemption premiums if such residential properties are redeemed.
Taking into account inflation, if the ground-rent is not redeemed, the investor will pay circa €250 million over the lifetime of the lease of land.
In Parliament yesterday, Dr Mizzi said the contract entered into with the DB Group was “very robust”, unlike that entered into by the previous administration for Smart City, where the amount paid was 40c per square metre and the developer had the freedom to sell the property, sub-lease and give land to a contractor.
Dr Mizzi added that the valuation of €56 million was attributable as: premium payable of €15 million, conversion from temporary to perpetual emphyteusis of €5.9 million, car park conversion of €0.5 million, redeption of ground rent of €23 million, hospitaly ground rent of €2.49 million and retail ground rent of €8.7 million.
Dr Mizzi also said government would ensure that the money would be recouped and not as happened in the case of Manoel Island, where MIDI paid €12 million over six years and the rest is still being negotiated because of lack of enforcement in the early years.