‘Café Premier bailout is wrong message to business’

Government is sending a message to the business community and lessees of government property that they would be better off not paying rent, income tax, VAT and other dues… even wait for government to bail them out once they go bankrupt, according to respected businessman Tony Zammit Cutajar.

Writing in the Times this week, Zammit Cutajar said he had been “baffled” by government’s decision to bail out the bankrupt lessee of Café Premier, in Valletta with a €4.2 million buy-out of a 65-year lease.

“This property could and should have reverted to the government at no cost once ground rent to the tune of €200,000 had not been paid,” he wrote.

MaltaToday this week was told that representatives of the company may have got a better deal than expected. A realtor privy to the company’s predicament said that at one point, Cities Entertainment Limited was demanding €3.5 million for the Old Treasury Street cafeteria.

Zammit Cutajar, CEO of P. Cutajar Co. Ltd, wrote that the decision to use taxpayer’s money to pay off a €2.5 million bank loan owed by the company, together with the arrears in rent, income tax and VAT was “unbelievable”.

Under the ‘bailout’, the government has now acquired Café Premier and its ‘Great Siege 1565’ waxworks attraction on Old Theatre and Old Treasury streets.

“The government should not use taxpayers’ money to bail out private enterprise. I am a member of the fourth generation of owners of a family business and never in my wildest dreams would I expect public money to be used to bail our company out if things were to go wrong,” Zammit Cutajar added.

Reiterating that government was “time and time again” sending the wrong message, the businessman said: “with all due respect, I think the prime minister needs much better advice from his kitchen cabinet”.

Prime Minister Joseph Muscat has defended the ‘amicable acquisition’ – as it was dubbed by the parliamentary secretary for lands – as having been intended at removing the catering facilities from beneath the overlying Biblioteca on Pjazza Regina.

Government has so far defended the decision to buy the title, instead of evicting the owners, and took a further step to report to the police allegations by Nationalist MP Jason Azzopardi, who asked whether “a commission” was paid for the acquisition.

Muscat denied the suggestion that a “bailout” had been brokered for Cities Entertainment, the company that took out the 65-year emphyteusis in 1998. “That is why I sent the allegations [of commissions] to the police for investigation,” Muscat said.

The company that had the title had amassed several millions in debt when the Lands Department commenced court action in December 2012 to force it to pay over €200,000 in arrears.

Then in June 2013, court action was stopped and in January 2014, the company was paid €4.2 million to relinquish the title.

The final deed states that the money had to be used to pay back the government outstanding dues on income and capital gains tax, VAT, rental and utility arrears, but also Cities Entertainment’s €2.5 million in private banking debts.

The government has confirmed that it chose not to expropriate Cities Entertainment from Café Premier “forcibly” – which would still have involved some form of compensation – and instead proceed with an “amicable” acquisition.

What remains unanswered is why it did not rescind the emphyteutical grant when it learnt that the café had ceased operating, and that the owners were negotiating with third parties to sell the business, both of which are not permissible according to the original emphyteutical deed.