Gozitan businessman Michael Caruana is on the verge of buying Fort Chambray after an agreement was concluded yesterday with the Investments Ministry netting the government Lm3.7 million for its share.

The decision has been approved by Cabinet but the final contract will still require the rubber stamp by Parliament.

Dr Caruana and his firm, Joseph Caruana Company Limited, will also buy out all the present developers, including Italian businessman Roberto Memmo, at a cost estimated by sources to stand at about Lm2 million.

When contacted yesterday evening Dr Caruana refused to reveal the exact amount he was paying to buy out the developers - Mr Memmo, Alex Grech and Paul Abela - saying it was still premature to reveal such details.

He insisted that Mr Abela, one of the previous developers, though instrumental in concluding the deal, was no longer involved.

"I made it clear right from the start that I have to be the sole shareholder. I cannot enter such a mammoth project and have others holding me back in taking the decisions," he said.

The contract gives Dr Caruana the option - exercisable within a year - to choose whether to retain the original plan for a hotel and 246 apartments or whether to develop the entire site as a residential area.

Dr Caruana would not be drawn into revealing his plan saying instead he was leaving all his options open and that the project would "not just benefit me but all of Gozo".

Controversy has long shrouded Fort Chambray, which overlooks the Mgarr Harbour, after it was given for development on a temporary lease of 99 years to Fort Chambray Co. Limited in 1993.

Antimen srl, owned by Mr Memmo and registered in Monaco, had a 51 per cent share in this company, while the government had the remaining 49 per cent.

The plan was to build a hotel and 246 apartments and, until development was stalled in July 2002, work on the larger share of the flats had started and were in various stages of completion.

The characteristic buildings known as Dar it-Tabib and the Polverista were restored, while the restoration on the building known as the Knights Barracks has not started, with little being done in terms of common infrastructure for the whole area.

In that same month, July 2002, all the development permits had lapsed and were not renewed by the present developers because of serious financing difficulties.

Moreover, the Malta Environment and Planning Authority has issued six stop notices. It also raised various issues with the present developers holding that the development methods used inflicted damage on historical sites and are not in line with the permits issued.

Following intensive and lengthy negotiations, it has been agreed, among others, that the new developers will not transfer the development to any third person until the development is completed.

The new contract will transfer the land on lease to the new developers for the remaining period of the original grant but under new conditions.

The government will also have a first-ranking hypothec of Lm3.9 million to secure its rights over the development.

The new developers have committed themselves to deposit the sum of Lm100,000 with Mepa within seven days of the new contract to address the issue of the existing stop notices.

They also have to apply to Mepa within 30 days to re-activate the existing permits with no variations from the permits as originally approved.

While the apartments can be sold, the new developers will always remain responsible for the fortifications, the Knights Barracks, the Polverista and the common parts. They also have the obligation to conserve these sites and to ensure that no damage is caused.

In a statement yesterday, Investments Minister Austin Gatt said he was satisfied that, notwithstanding the legal and financial difficulties, a solution has finally been found to the impasse.

"The completion of the development is an important added value for the Gozitan economy since it should attract to the island people wishing to have up-market accommodation in Gozo," Dr Gatt said.