Land in St Julian’s transferred to the Corinthia Group to develop a residential and office complex was “grossly undervalued” and could trigger a building industry collapse, real estate agents fear.
“The prevalent market prices for such a site, 60,000 square metres, would fetch a minimum €700 million. By no stretch of the imagination can we understand how Deloitte valued the land at €121 million and the government agreed to hand over a whole peninsula to Corinthia forever for the quoted price of €52 million,” a leading estate agent said.
Another estate agent said the concession to the db Group in connection with the adjacent ITS site was already a very bad decision and greatly jeopardised the future of other developments in the area.
Corinthia chairman Alfred Pisani argued his group was taking “huge risks” to invest in the area a minimum of €300 million
“The Corinthia peninsula deal is much worse and could be the beginning of the end. Businessmen paying millions of euros per tumolo of land, with no seaviews, in the same location were shortchanged by this bizarre deal and cannot compete,” an executive at a top estate agent said.
“Investors in our industry are being driven out of the market by the government when such prime land is being given out for pure speculation for less than peanuts,” another lamented.
Tourism Minister Konrad Mizzi, who is piloting this deal as he had done in the case of the db Group, told a parliamentary committee last week the valuation of the land to be given to the Corinthia Group was made by Deloitte “on the same basis of the deal negotiated with the db Group”.
According to Dr Mizzi, who did not submit any valuation documents to committee MPs, Deloitte used “an innovative formula” and valued the land, the size of 10 football grounds, on the prime site at €121 million.
He also noted that, according to estimates by Deloitte, the Corinthia Group was given multi-million discounts “to compensate” for the title of hotels it already held, with the end result being the group will pay €52 million.
It is not yet known how Corinthia will pay this amount, whether these include third party taxes from eventual property buyers and what terms have been granted to the group. The draft contract has not been made public yet.
Deloitte had also advised the government on the valuation of the ex-ITS land to the db Group, using what they dubbed as an “innovative valuation model”. This model was harshly criticised by the Malta Developers’ Association, the Chamber of Commerce, Enterprise and Industry, the GRTU – Malta Chamber of SMEs and other organisations claiming it priced public land wrongly and well below market rates.
The Times of Malta reported that, according to a draft deal already negotiated, the Corinthia Group would be rescinding its title on the 60,000 square metres of public land at St George’s Bay granted to it in the 1990s on condition it would only be used for touristic purposes.
Instead, it will acquire the same land for a 99-year term where it would be able to build two hotels, one of them in the ‘six star’ category, and to develop a maximum of 100,000 square metres of residential and office real estate to sell or rent to third parties. The number of hotel rooms will be dropping from over 600 to 375 as one of the Corinthia’s-owned hotels there will be closed down.
Corinthia chairman Alfred Pisani argued that the project was “in the interest of Malta”, adding his group was taking “huge risks” to invest in the area a minimum of €300 million.
The proposed development will have to be approved by Parliament. It will, of course, require Planning Authority permits, including a change in the local plan.
Leisure industry sources said the new Corinthia property could adversely impact the db Group project next door because a tower or two forming part of the proposed development could partially block the views from the db tower, one of the City Centre’s main selling points. Apartments at the City Centre tower have a price tag exceeding €1 million for a single bedroom flat. Mr Pisani did not say how many apartments Corinthia intended to build but admitted his company was looking at a development not exceeding 18 storeys.
The government agreed to postpone a vote on a parliamentary resolution to authorise the transfer of public land after Nationalist MPs on the House National Audit Office Accounts Committee sought further information during a meeting just a day before Parliament rose for the Christmas holidays.
The Nationalist Party had opposed the db Group project and demanded an investigation on the deal by the National Audit office.