St George’s Bay’s makeover gets started ahead of Paceville masterplan

The relocation of the Institute for Tourism Studies to Smart City in Kalkara and the construction of a new hotel will cost at least €14 million more than the price for the St George’s Bay land the government is selling to hotelier Silvio Debono.

The €74 million estimated of the new ITS was revealed by Prime Minister Joseph Muscat in parliament in reply to a PQ by Nationalist MP Claudio Grech back in December 2016. But the cost of the new ITS includes a campus that caters for 2,500 students, a 12-storey hotel with 135 rooms, gym and spa, government offices and underground car park.

Debono, owner of the Seabank Hotel, had long earmarked the ITS site for the €300 million Hard Rock Hotel he wants to develop. He will pay the government €60 million for a 99-year lease on the land.

His company DB San Gorg Property was awarded the land concession through a request for proposals issued in 2016 by Projects Malta, the private-public partnership arm helmed by minister Konrad Mizzi.

The government has already hinted that the new ITS school would be financed through a PPP, which means the private sector could foot part of the relocation bill. Set over 2,500 square metres, the new school would generate 800 daily trips into the area while providing space for 400 cars and 99 motorcycles.

No brief for St George’s

Unlike other major projects such as the Fort Cambrige development at Tigné or the Pendergardens construction in St Julian’s, the announcement of the Hard Rock Hotel came like a bolt from the blue: the deal was inked in the absence of any development brief for the site.

That means it will be the area’s local plans, as well as the high-rise policy, to determine the parameters for the projects.

It was only months since the controversial Paceville masterplan drawn up by Mott Macdonald and the Planning Authority – a collection of eight high-rise projects for the entire St Julian’s area – was shot down by environmentalists, residents and business community.

The parliamentary secretary for planning, Deborah Schembri, has now said the Hard Rock development will still be guided by the Paceville masterplan, once the new draft is published.

Until then, any construction at St George’s Bay has to be regulated by local plan, which calls for a restrictive approach on building heights, and to conform to existing heights – with the exception of the Portomaso tower, “which will not be used to determine future heights”.

So development in this area must be “strictly limited” to hotel use and ancillary facilities. As things stand, a revision of this local plan has not yet been completed, showing just how much these planning rules are in a fluid state.

And yet in June 2016, tourism minister Edward Zammit Lewis told parliament no project would be approved until the masterplan is completed.

But planning secretary Deborah Schembri said the fact that the masterplan is still being drafted, should not mean other projects be kept on hold. Arguably, Silvio Debono and his franchise partners must have got antsy about the slow pace of the masterplan after the public outrage that was raised.

Prime Minister Joseph Muscat also suggested that the price tag can be increased, if the masterplan allows more development than that envisioned when the ITS site was valued by Deloitte.

€429 per sqm for prime land

DB San Gorg will pay additional fees to the government if their project is granted more room to build, once the Paceville masterplan is completed.

Joseph Muscat described the €300 million project as a first, making special mention of Deloitte’s methodology in appraising the value of the land, and which will be used for all future land sales.

But in the Paceville masterplan, a large tract of the ITS site was included as part of a 15,000 square metre area on the upper part of St George’s Bay, tagged as a public open space. Expropriating this seafront land was valued at €128 million in the masterplan, or €8,500 per square metre as according to “prices provided by the Malta government” - but this figure applies only to land used for real estate.

Theoretically at that rate, the entire ITS land would have resulted in a €212 million price, although it has to be said that this rate would not have accounted for the different values Deloitte produced for the different permitted uses. In fact 'only' 2,000 square metres of the ITS footprint will go towards residential development.

Debono’s Hard Rock Hotel comes with 315 rooms and another 209 apartments and a 20,000 square metre shopping mall. This total floor-space of 140,000 square metres is being offered at an average €429 per square metre – but again the various uses of the projects each carry their own value.

When compared with the prime land offered for the development of Tigné’s Fort Cambridge in 2007, which yielded 341 apartments over 70,000 square metres, the land went for €54 million or €771 per square metre. That money was paid cash-on-contract. Debono’s group will pay €5 million on signing the deed, and then €10 million over seven annual instalments.

The shortcoming at Tigné was that the Fort Cambridge brief never limited heights, which is why developers Gap Holdings want the green light for an unprecedented, 40-storey tower hotel atop the historic British barracks. Will it be obliged to pay more for the increase in floor-space is approved? No.

Historical and geological concerns

Beneath the sheen of the Hard Rock’s futuristic design, lies the reality of the historical ITS building itself: a Grade 2, army barracks with the Victorian Royal Arms and those of Lieutenant-General Sir John Gaspard Le Marchant (1803-1874), governor of Malta, sculpted in the franka stone on top of the building.

Grade 2 buildings cannot be demolished, but internal alterations and changes are allowed, and new development next to such buildings is not precluded. Debono’s hotel group have said about the ITS building that it be “carefully protected, appropriately restored and integrated within the new development scheme and use”.

But it is not clear how this integration will take place. And in a document the developers presented in January to the PA, they refer to works envisaging the “careful” dismantling of the building and the “identification and logging of each piece.”

Of serious concern is the fact that a protected cave, known as Ghar Harq il-Hammiem, is located partly beneath neighbouring Moynihan House (across the road from the ITS building). A buffer zone intended to protect the cave includes part of the ITS. The cave is the only known fully submerged, terrestrial cavern in the Maltese islands. Residents include the rare albino shrimp. But it is unlikely that this crustacean will be of any trouble to planners and developers.

Right of reply from Seabank CEO Arthur Gauci - 6 February

1. It’s not true that the relocation of ITS will cost €74 million. The building of a new facility of the same size and retaining the same ITS facilities will cost a total of €6 million. This was also confirmed by the Parliamentary Secretary Deborah Schembri during the post press conference last Thursday. It is the government which has decided to build and operate a 5-star teaching hotel and offices for the new relocated ITS, which facilities go beyond the current ITS school.

2. The €60 million price tag was established by Deloitte and not by government or the db Group. It’s the highest ever paid for by a Maltese investor for a tract of public land. Furthermore, db Group is the first concessionaire to have had to agree to a fluctuating price mechanism applicable throughout the duration of the concession. In fact any additional development in excess of the gross floor area as per db Group’s tender submission, would attract an additional consideration to be paid to Government.

3. It is not true that the master plan says that the land costs €212 million. The €8,500 per sqm figure applies only to land used for real estate. Only 2,000 sq m of the footprint will go towards residential development. Again, it was Deloitte which took all this into consideration and arrived at the price tag.

4. The contract was signed without Government guaranteeing any approvals from the Planning Authority. The db Group is still subject to the prevalent planning policies applicable as at time of consideration of its application process.

5. The article makes reference to a payment of €429 per square metre for the ITS site versus a €771 per square metre for the Fort Cambridge site. This is a completely misleading interpretation of the numbers. In the case of Fort Cambridge, the price paid covers real estate on a freehold basis. As per Deloitte’s workings, out of the €60M paid by db Group, the sum attributable to the real estate part of the development is €44 M. This translates into a price per square metre for the real estate part of the development at the ITS site of €1,250.

5. Note that in addition to the €60 million for the land the government will also receive another €60 million in additional taxes by the time the project is completed. This without factoring what is termed as the multiplier effect on the Maltese economy as a whole, which is expected to reach nearly €800 million.

6. Contrary to the implications of your story we have taken all the precautions necessary to protect the underwater caves. Indeed we revised our original plans and shifted the two towers as far away as possible from the underwater cave, that is, to the opposite far end side of the location of the underwater caves.