[ANALYSIS] Living off the public’s land

ITS/City Centre

Silvio Debono’s db Group was the only bidder in a Request for Proposals (RFP), a peculiar mechanism which is technically not regulated by the public procurement regulations and is normally used to explore interest in a project. 

Debono’s interest in the site may have preceded the issue of the RFP as reported by MaltaToday in 2015. In an interview, db Group CEO Arthur Gauci claimed that Hard Rock had already expressed an interest in the site of the Institute for Tourism Studies, in St Julian’s, six years ago. Former Prime Minister Lawrence Gonzi rebutted that discussions for the Hard Rock Hotel were limited to the Bighi site, for which the government had other plans.

The call issued during the Christmas period in 2015, did not even include a development brief, stating clearly what could be allowed to be built and what could not, as has happened with most projects approved in the past decade. The site was included in the Paceville masterplan but the deal was signed before the approval of this plan.

The call’s title was ‘for a project of upmarket mixed tourism and leisure development’ but a phrase in the call also stated that ‘the project may also include a number of residential units’. The project as agreed to with the government includes 209 luxury apartments – in two residential towers. 

The government initially announced that the price tag for the project was €60 million. But a breakdown of figures confirms that that the direct payment (premium) would only consist of €15 million, €5 million paid in the first year and the rest over seven years, interest free.

The breakdown shows that €23,392,000 will be paid to the state upon the redemption of the land by the individual buyers of apartments and not by the db Group. The rest of the €56 million sum consists of the present value given to ground rents which will be paid over the next century.

Initially the deal was met by mild criticism by the opposition but following revelations that deputy leader Mario de Marco was involved in negotiations with the government over the deal, the opposition upped the ante, asking the Auditor General to investigate the deal amidst strong criticism by civil society and the media.

Development Brief: None

Deviations from brief: No brief

Competitive Tender:  Yes, but only one company applied

Direct payment to government: €15 million

Land area: 24,000 m2

Number of apartments: 209

Other development allowed: Casino, retail and hotel

Criticism from opposition: Mild to strong

Criticism from civil society: Strong

Pender Place and Mercury House

When in 2005 a call for offers was issued for the acquisition of the government land at Pender Place and Mercury House, it was clearly stated that development would have to conform with a brief that precluded high-rise buildings and foresaw a public square on the Mercury House site while allowing high-rise on the Pender site.

Pender Ville Limited had won the 2005 concession for the Pender and Mercury sites for Lm10.6 million (€24 million), seeing off the owners of the St George’s Park site as their main rivals for the concession. 

In 2007, an application for the “development at Pender Place and Mercury House sites according to the development brief issued by Government Investment Limited” was approved, although this came with a number of deviations from the brief. 

Curiously, the contract signed with the government itself did not even refer to the development brief but to the conditions presented in the call for offers. In fact the permit in the Pender area did deviate from some aspects of the brief.

In 2009, part of the Mercury House site (950 square metres) was sold to trade finance bank FIMBank plc for their global headquarters. Pender Ville, now Pendergardens Development, then sold 8,500 square metres of the Mercury House site to Gozitan developer Joseph Portelli.

The original deal did attract some criticism from opposition leader Alfred Sant who denounced that the deal favoured “someone in the government’s clique”. Sant criticised the project despite revelations that his deputy leader, Charles Mangion, had officiated the notarial deed for Pender Place.

Development Brief: Yes

Deviations from brief in permit: Yes

Competitive tender: Yes

Direct payment to government: €25 million

Land area: 18,000 m2

Number of apartments: 219

Other development allowed: Offices

Criticism from opposition: Mild 

Criticism from civil society: Mild

Fort Cambridge

In 2006 GAP Developments plc was awarded the tender for the Fort Cambridge Area by the Government of Malta following a public tender during which GAP Developments plc was the highest bidder. This had been preceded by a development brief setting the planning parameters for the project.

A permit was issued in 2008, which allowed the erection of a 20-storey tower despite a height limitation of 16 floors set in the development brief. The PA justified this deviation by limiting the 20-storey development to the height applicable to 16 storey buildings – thus allowing the developers to fit more apartments while abiding with the height limit established in the brief.

The deed itself does not refer to the development brief that guided Gap Holdings on the basis of which it had applied for the tender. This means that the developers will not have to pay more if planning parameters in the area are relaxed, as would be the case if a proposed 40-storey hotel is approved. 

The development brief for the site remains legally binding but has been superseded by new policies regulating high-rise developments.

Development Brief: Yes 

Deviations from brief in permit: Yes

Competitive Tender: Yes

Direct payment to government: €54 million

Land area: 29,225 m2

Number of apartments: 345

Other development allowed: Offices

Criticism from opposition: Mild

Criticism from civil society: Strong

Tigné Point and Manoel Island

The development brief issued in 1992 limited the residential units on Tigné Point to 300, a far cry from the approved 500.

Following the issue of a development brief, the government issued a call for expressions of interest in 1992 for the development of Tignè Point and Manoel Island. Midi was selected as the preferred bidder. Protracted negotiations with three administrations (including Alfred Sant’s short-lived one) involving both parties lasted eight years until agreement was reached and the deed of emphyteusis was passed by Parliament with the unanimous approval of all MPs on June 15, 2000.

“This is the only project in Malta that was approved by parliament without a division because we discussed at length with both sides of the house,” entrepreneur Albert Mizzi said in an interview.

MIDI had to pay a premium of €91,707,431 of which €32,145,353 was to be paid in kind. By 2009 MIDI paid €12,974,610 which was paid in installments without interest. A further €46,587,468 was to be paid in installments between 2010 up to 2023. It remains unclear how much of this sum has been paid to the government.

The remaining €32 million of the premium had to be paid by MIDI in kind: €20,964,361 had to be offset by the infrastructural works, which include drainage, water, electricity and telecommunications distribution systems. €11,646,867 were also offset by the cost of restoration works in Tigné.

The restoration works on the external fortifications of Fort Manoel were also offset against a €1,164,686 casino concession fee for MIDI’s new casino in Manoel Island.

The €92 million premium was based on the market value of land at Tigné and Manoel Island as determined by the government on the basis of expert advice at the time that negotiations were being held between 1996 and 2000.

In 2009 MIDI had valued its properties to be worth €238 million. According to the emphyteutical deed, MIDI also have to pay an annual ground rent of €1,118,100 (Lm480,000) until 31 March, 2025.

The rent will rise to €1,956,673 (Lm840,000) from 1 April, 2025 until 31 March, 2050, and again to €2,236,198 (Lm960,000) from 1 April, 2050.

Development Brief: Yes

Deviations from brief in permit: Yes

Competitive tender: Yes

Direct payment to government: €59 million (excludes €32 million meant to be paid in kind)

Land area: 237,000 m2

Number of apartments: circa 500 (excludes proposed villas in Manoel island)

Other development allowed: casino, retail, offices

Criticism from opposition: None

Criticism from civil society: Mild to Strong

Portomaso

The Hilton Hotel took off in 1964, when the Maltese government granted 31 acres of land to Spinola Development Co. Ltd for a period of 150 years, against a payment of Lm34,000 and an annual rent of Lm1,000.

The hotel and site were later bought by the Fenechs of the Tumas Group and, in 1995 and 1996, planning permits for the Portomaso project were issued with the support of both PN and MLP representatives of the PA board.

The entire area was leased by the State to the developers for €445,000 a year until 2114. It was eventually sold to the developers for €1.8 million in 2006, which pales into insignificance when considering the going rate for the luxury apartments the developers were allowed to build. 

Ombudsman Joe Sammut, who commenced an investigation triggered by a hunger strike by left-wing activists, reprimanded the government’s failure “to use its negotiating powers to maximise the benefits to be derived from the deal”.

The Ombudsman also stated that “in this case changes to the original conditions regulating the grant of land were so substantial, that in the public interest and in the interest of good administration, the government had a moral obligation to refer the proposed concessions for the scrutiny of Parliament”.

The Ombudsman’s report proposed a number of recommendations to ensure greater parliamentary scrutiny of land deals. This intervention proved crucial in subsequent changes to the law, obliging the government to seek Parliament’s consent before passing public land to private interests.

A clause in the Portomaso permit of 1995 stated that no further extension or development could be carried out in an area designated as an ecological zone but this decision was reversed in 2014 through the issue of a permit for 46 new villas.

Development Brief: No

Deviations from brief in permit: No brief

Competitive tender: No

Direct payment to government: None

Land Area: 38,750 m2

Number of apartments: circa 500

Other developments allowed: casino, retail, hotel, offices

Criticism from opposition: None

Criticism from civil society: Strong

Smart City

The Ricasoli land – a vast industrial wasteland the size of 40 football grounds – was offered to Tecom Investments for a ground rent of Lm65,000 (€150,000) a year, increasing by 5% every five years. Instead of paying a premium on the land, the developers offered 9% of the company shares to the Maltese government. The deed was preceded by a masterplan and changes to the local plan tailor-made for the new development.

The former industrial area was also included in development zones in 2006 prior to the land transfer. 119,000 square metres of floor-space (the size of 20 football grounds) were earmarked for real estate and commercial development which still has to take place. While supporting the investment, the Labour opposition did criticise the financial aspect of the project. 

Development Brief: Yes

Deviations from brief in permit: No

Competitive tender: No

Direct payment to government: None

Land Area: 360,000 m2

Number of villas: 127

Other developments allowed: Offices

Criticism from opposition: Mild

Criticism from civil society: Mild

American University of Malta

The land transferred to Sadeen Group through a parliamentary resolution comprises 31,000 square metres at Żonqor Point in Marsascala, 18,000 square metres of which are outside the development zone. The rest of the campus will cover the area currently occupied by the former national pool. The proposal does not include residential apartments but will include a dormitory, sports and catering facilities. No competitive call for expressions of interest was issued before the government handpicked the Jordanian developers for the project.

The contract binds Sadeen to use the land for educational purposes. The company did not pay a premium for the land. The project is the only major one involving government land to include ODZ land.

The Jordanian-owned Sadeen Group will lease public land for 99 years. Sadeen Education Investment will pay a ground rent that starts at €40,000 in the first year, increasing gradually every year for the duration of the lease agreement.

Sadeen’s title will be of a temporary nature and may not be converted to a perpetual emphyteusis.

Development Brief: No

Deviations from brief in permit: No Brief

Competitive tender: No

Direct payment to government: None

Land Area: 44,000 m2

Number of apartments allowed: Nil

Criticism from opposition: Strong

Criticism from civil society: Strong