The government is to charge PAVI shopping complex €5 million to commercially develop a parcel of land in Qormi despite a previous valuation that said it should charge them €14 million.
On Wednesday, government and opposition MPs in a parliamentary committee agreed to allow the supermarket giant to pay the much-lowered price of a second valuation after Lands Authority CEO Robert Vella told them that the discrepancy in prices was down to the fact that the first valuation was exceptionally flawed and a second, more realistic one had to be commissioned.
PAVI wants to acquire a parcel of land located at the back of its supermarket in Qormi to extend its shopping complex.
The 8,220-square metre undeveloped area belongs to the government but had been leased to textile factory Nylon Knitting, which is situated up the road from PAVI. The lease expires in 91 years.
The land is earmarked as an industrial area and new developments on it can only be of an industrial nature, but PAVI is interested in developing it as a commercial area, and the law binds it to pay the government for the difference in land use value, not least because a commercial parcel of land is more lucrative than an industrial one.
As part of the valuation process in February last year, architects calculated that PAVI owed the government €13,906,624 for the change in land use.
But on Wednesday, Vella told the parliamentary committee that the amount was based on comparisons drawn with other parcels of land which are far smaller than the site in question.
That made the comparison flawed and inflated, he said, because the value of smaller sites is not comparable to that of larger ones and the value of land per square metre varies according to several factors.
Furthermore, the prices of the lands that were analysed were taken from real estate websites, which further inflated the price unnecessarily, he said.
Vella said the valuation was further vitiated by an erroneous methodology and the fact that it assumed PAVI would only allocate 10% of the land as a circulation area for cars and pedestrians, whereas it was clear it would need to allocate around 30% to create a sensible circulation area.
Vella said that is when the Lands Authority went back to the drawing board and commissioned a private audit firm to undertake a second valuation. Five months later the firm came up with the price tag of €4,940,220, which the architects of the first valuation agreed with, he said.
Vella said the authority went for the private firm because it had a better grasp on this specific portion of the property market and their valuation is consistent with the current market prices.
On Wednesday, Lands Minister Silvio Schembri proposed the resolution to parliament’s National Audit Office Accounts Committee and asked them to approve the €4.9 million price tag.
PN MPs Darren Carabott and Rebekah Borg were initially hesitant to accept the resolution and wanted to know how the price plummeted so sharply between the first and second valuation. After Vella explained and walked them through the rationale, they agreed to vote in favour.
The resolution was approved unanimously, and it will allow PAVI to pay up the sum in 10 instalments spread over nine years.
But one other thing remains unclear. The second valuation appears to have calculated the value of the land assuming PAVI intends to develop a one-storey shopping complex. But the local plan for that industrial area allows developers to build up to three floors and a semi-basement. The issue was not brought up during the parliamentary committee.