The Corinthia Group managed to obtain a far better land deal than the db Group, according to a comparative analysis of their acquisitions along the same peninsula at St George’s Bay.
The db Group, which owns the Seabank Hotel in Mellieħa, acquired the right to commercialise public land – which is estimated to be worth a conservative €400 million at current market prices – for a premium of €15 million. On the other hand, the international hotel chain Corinthia is acquiring a commercial concession worth €700 million for just €17 million, according to a draft deed that must still be approved by Parliament.
The analysis was carried out by a group of property experts together with The Sunday Times of Malta.
The db Group is planning to build a five-star hotel and a residential 38-storey tower on 24,000 square metres of public land at the former ITS site. The Corinthia, which has three hotels on the peninsula, wants to turn a land concession exclusively for tourism purposes into a deal for apartments and offices to be included on a tract of 60,000 square metres.
Corinthia’s chairman Alfred Pisani and his team of negotiators appear to have secured several advantages over Seabank’s negotiators, led by chairman Silvio Debono.
The latter, for example, are obliged to fork out the whole of the €15 million premium over a specified seven-year period while the former will only have to fork out €4 million three years after the deed is signed.
Corinthia’s payment of the remaining €13 million, into public coffers, is based on how much of the commercial area it decides to develop and eventually sell.
“The balance in the sum of €13 million shall, subject to any reductions in accordance with the previous clause 10 below, be payable on a pro rata basis with respect to each portion of net internal saleable area designated for Office and/or Residential use on the Effective Date,” the still unpublished draft deed states.
The property experts consulted by the newspaper emphasised their “disgust” at the way the government is negotiating valuable public land.
The two deeds, they said, showed how the Corinthia had managed to obtain a “far better” deal from Konrad Mizzi, the Tourism Minister who represented the government on the two deals.
“Obviously, Corinthia had the advantage of negotiating terms which had already been made public on the ITS deed. Thus, as expected, the government was not really in a position to negotiate after the ‘ridiculous’ terms given to the Seabank db Group,” one expert said.
“For sure, Maltese citizens will be worse off from all this, as their land is going to be speculated for the benefit of a few families instead of the common good.”
Read: Corinthia deal talks reopen after warning on state aid
Dr Mizzi admitted in Parliament that negotiations with the Corinthia Group were based on the same parameters as those given to the Seabank db Group.
Prime Minster Joseph Muscat – who last week admitted that the government was now taking a second look at the negotiations following the public outcry – argued that he did not want to discriminate against Corinthia. This was a clear reference to the terms already given by the government to the db Group.
When it became public in 2018, the Seabank deal was slammed by the business community and the Opposition. It is now being investigated by the National Audit Office. Yet, permits have been issued for the db project to go ahead while the government based the Corinthia deal on its ‘dubious’ parameters.
When compared, the two deeds look very similar in the terms and allowances negotiated with the government. However, the Corinthia’s wins out on a number of counts.
While both deals are for an empythuetical grant of 99 years, Corinthia has also been given the right of first refusal upon the termination of the original grant.
Read: Developers say government selling land at below market prices
It was also granted unlimited rights to reclaim the seabed around the peninsula, a potentially lucrative clause which the ITS deal does not include.
Corinthia says it has no intention of using its land reclamation rights but when asked if it was ready to drop them, the group argued that this was up to the government.
Also, while db will have to fork out a minimum investment of €150 million in order to build their mixed development, Corinthia are only obliged to fork out €100 million for the first phase, which will take at least another decade to complete.
Corinthia has declared that for now, it only has the intention of completing the first phase, which will include the upgrading of the Corinthia Hotel St George’s Bay – without demolishing the current structure – and the building of 18,000 square metres of sea-view serviced apartments for sale.
It is only in the event that they decide to go for the full development of the peninsula, which allows them to build and sell up to 100,000 square metres of apartments and office/retail areas, that they will have an obligation to invest up to €300 million. No dates are set in the deed on when the whole project should be completed.
In another advantageous move for Corinthia, the government also conceded that the hotel group may renegotiate the whole deal in the event of a change in the country’s economic climate.
According to a specific clause inserted in the draft deed, if at some point in future “economic and other relevant conditions are not conducive to the implementation of the full Project and that the full Project is only attainable if FSHL (the Corinthia company) is to endure disproportionate economic hardship, then both sides shall agree in good faith on the optimum timing and best course of action at such point, in the best interests of both Parties, including the national economy”.
Read: Stop trafficking public land, NGO tells government
According to experts, this clause guarantees Corinthia a “risk-free” development.
While rights to the ITS site was subject to a public call for tenders – which surprisingly only the Seabank db Group submitted despite Corinthia’s initial interest– the rights to the rest of the peninsula were not.
The Corinthia argues that it already has possession of the land, which was granted to them in the 1990s for exclusive hotel use. However, the new deed will change the parameters of the concession, granting the hotel chain new rights to speculate with public land.
According to laws, this can only be done through a public tender and after a new parliamentary resolution. Under the current deeds, the Corinthia Group cannot build and sell any commercial property on the land.
The draft deed needs to be approved by a simple majority in Parliament, which is expected to debate the matter in February.
Paceville plot asking Price: €16 million
A 1,075 square metre plot of land in Paceville, not far from the St George’s Bay peninsula, is on sale for €16 million.
The plot is described on the websites of estate agents as “a unique and rare opportunity to purchase one of Paceville’s last remaining large sites” for mixed development.
Corinthia’s concession for the development of commercial property on a far larger tract of land was, by contrast, given away by the government for a premium payment of just €17 million. The Paceville plot is also far inferior to the St George’s Bay site, being inland.
The Times of Malta reported last week that the government has been given legal advice that the Corinthia deal might expose it to an infringement of EU State aid rules as it may put real estate developers on an uneven playing field.
The government denied this but admitted it has re-opened negotiations with Corinthia.
| Seabank db Group – ITS deal | Corinthia – San Gorg Peninsula deal | |
| Public Tender | YES | NO |
| Site Size | 23,975 sq metres | 60,975 sq metres |
| Maximum commercial building size allowed (GFA) | 58,502 sq metres | 100,000 sq metres |
| Land reclamation | NO | YES - Unlimited |
| Duration | 99 years | 99 years |
| Minimum investment obligation | €150 million | €100 million – Phase 1 |
| Estimated current market price of concession | €409.5 million | €700 million |
| Premium payment agreed with government | €15 million | €17 million |
| Payment terms | Staggered over 7 years | Staggered – according to development phases (can take decades) |
| Payment upon deed | €5 million | €1 million |
| Conversion of temporary to perpetual emphyteusis by third parties | YES | YES |
| Obligation of conversion to perpetual emphyteusis | NO | Yes – by third parties or Corinthia after two years from sale |
| Right to sell (transfer) concession | YES – with government consent | YES – with government consent |