db Group CEO Arthur Gauci insists the main objections to the Pembroke project were addressed, as he distances himself from the negotiation shortcomings. Keith Micallef reports.

ITS project developer db Group believes they have been “unfairly singled out” while rejecting allegations that the prime public site was transferred to them through a “tailor-made” agreement with the Labour government. 

Db CEO Arthur Gauci spoke to Times of Malta in the wake of fresh criticism of the project after it was scaled down.

The group is insisting it downsized the development by reducing the height of the residential tower from 37 to 31 floors, lowering the adjacent hotel by two floors and increasing public open spaces.

Though in 2018, db had been granted a permit, last year they were forced to go back to the drawing board after it was annulled by a court, as one of the members on the Planning Authority board who had given the go-ahead had a conflict of interest which was not declared.

“Far from being a done deal, we had been exploring this project many years before Labour was elected to government in 2013, when Lawrence Gonzi was still prime minister,” Gauci said.

He said around a decade ago, the idea had been floated in a meeting with Gonzi but the then prime minister was only interested if the project would be developed at the Marsa Menqa.

“For us it was a non-starter as we believed the area earmarked by the government at the time was not fit for such upmarket development,” Gauci said.  

A five-year saga

The controversy has been dragging on since 2015 when the government issued a request for proposals for the Pembroke site, which until then hosted the Institute of Tourism Studies. The school was housed in the last surviving block which formed part of a complex of military barracks constructed at the turn of the 20th century.

When db were awarded a 99-year concession for the site spanning over 24,000 square metres, concerns were raised in the wake of the group’s long time interest, as well as the €60 million price tag which had been described by some as “a pittance”.

NAO report – ‘db cannot answer for government’s shortcomings’

The controversy took a political twist when, in 2017, then PN leader Simon Busuttil requested a full investigation by the National Audit Office amid claims of wrongdoing, irregularities and possibly corruption.

The probe was completed last March with the auditor general questioning the regularity of the site transfer amid transparency concerns such as no records of the negotiations being kept.

Other shortcomings flagged had been the absence of the Government Property Division from the process, the refusal of the then Tourism Minister Konrad Mizzi (who was politically responsible for Projects Malta, which handled the deal) to be interviewed by the NAO and questions on the reasons behind the government’s decision to dispose of the land in the first place.

“The report vindicated our position with respect to the €60 million price tag as it confirmed it was a true reflection of the market price. We also paid a €7.5 million guarantee unlike Vitals Global Healthcare who had been awarded the hospitals concession with no such obligation,” Gauci pointed out.

While admitting that this saga had thrown bad light on the group, he insisted the NAO had found no wrongdoing by db. Gauci said the group had commissioned three legal firms, including one in Germany, to review the process from which they all concluded that EU procurement regulations had not been breached. He said he was not divulging further details so as not to jeopardise any legal action which could be looming.

“It’s not fair that we shoulder the blame for any shortcomings on government’s side,” he said.

Following the report, the Malta Developers Association had urged the government to seek if it was possible to revoke the deal.

Gauci said there has not been any contact from the government side following the publication of the report, but noted that when there had been breaches, such as the acquisition of a Valletta property, known as the Gaffarena scandal, the authorities had no qualms to revoke the deal.

From €17 million to €60 million ‘in five minutes’

The government had insisted the €60 million price for the land was established through an independent evaluation by renowned auditing firm Deloitte.

Originally, db had offered a fraction of that – €17 million. Gauci insisted such valuation reflected the price paid for a tract of land nearby which had been acquired by Villa Rosa.

So how come they accepted to acquire the site for more than triple the price? Was the original bid an attempt to con the government, many had asked.

“It only took us five minutes to accept the revised €60 million evaluation as during negotiations we realised our valuation assumptions were not in line with the market,” he said.

The controversy was further stoked with the publication of the defunct Paceville masterplan in September 2016, according to which the ITS site was worth €200 million, which equates to around €8,500 per square metre.

Gauci shot down such an evaluation on the grounds of the mechanism used to reach this figure.

“Slicing up all the ITS land in individual plots at €8,500 per square metre does not make sense,” he insisted.

While pointing out that not all of the land could be developed as they had to leave open spaces, a correct evaluation must give different weighting to whether the land will be developed for commercial, hotel and residential purposes rather than a flat rate.

Gauci pointed out that both the NAO and Deloitte had adopted this model to reach the €60 million evaluation. He added the €8,500 rate was for sea front property whereas part of the ITS site faced inland.

‘Why is NAO not investigating MIDI?’

While noting that the rate per square metre paid by db was the highest ever imposed for a private company buying public land, the CEO said the feeling of being “unfairly singled out” by the media and the objectors was even more palpable when making comparisons with other major land concessions.

“The only time the government sought an independent evaluation on the price was in our case, as no such procedure had been followed before when transferring land to Hilton, Fort Cambridge, Pender Gardens and MIDI.

“MIDI were given 23 years to pay, they only developed the real estate part, and have been not paying since 2012. Why did the NAO not investigate this?” he asked.

[In a reply, MIDI plc said this statement was false. "All payments of ground rent and cash premia due by MIDI PLC up to end 2019 have been settled in full in line with the terms detailed in the deed," the company said.]

Residential tower has been downsized

The residential tower has been downsized by 31 metres, which is equivalent to seven storeys, an eight-metre reduction in the adjacent hotel building, while the separation between these two structures has been increased by 11 metres up to 10 metres. Moreover, commercial spaces like the casino and offices have been removed.

The tower will be comparable to other high-rise buildings such as Town Square, Fort Cambrige and Mercury Tower.

‘We listened to the criticism’

Did you downscale because of the COVID-19 slowdown?

That is ridiculous. You don’t prepare such plans in a few weeks. We did not want to ride roughshod on the criticism levelled. We sat with the stakeholders and addressed their concerns as much as possible. 

What about the historic ITS military building, which had grade 2 protection?

In the revised proposal this building will not be dismantled and shifted but left intact, restored and incorporated into the project. Moreover, there will be no excavation close to it.

But it will be dwarfed by the hotel and tower…

A stone’s throw away from the site, there is a historic 17th century tower, which is only visible from sea as it was completely surrounded by the Corinthia San Ġorġ. In our case, the ITS building will be very prominent and visible as it will be on a sort of elevated platform.

What does the public stand to gain from this revision?

Gross developable floor space has been reduced by 50,000 square metres, excavation reduced by 58,000 cubic metres while historic buildings like an old reservoir and a Cold War substation will be incorporated with the project. Public open spaces have been increased to a total of 7,000 square metres, which is more than a third of the entire footprint housing the tower and the hotel. There will be a pedestrian walkway along the southern edge (overlooking St George’s Bay) while the overall massing of the building envelope had been reduced by about 25 per cent.

Another controversial aspect was the impact on Għar Ħarq Ħamiem. What is being done to address this issue?

No excavations will be made on the rear side of the cave while a 24-metre buffer (rock) will be separating the subterranean structure from the complex. Furthermore, the development right on top of the cave, where there will be excavation of not more than three metres, has been downsized from three to two storeys. To put this into context, Triq Walter Ganado, is just nine metres above the cave and there has never been an issue.

What about traffic?

Following the issuance of the original permit in 2018, Infrastructure Malta had announced a project to upgrade the road network including a new tunnel from the upper part of the Coast Road right to the ITS junction. All traffic to the hotel will have to go through this route, meaning there will be no impact on Pembroke residents.

Do you think it is fair taxpayers will be forking out the bill for a tunnel which db had originally proposed as part of the project?

The tunnel will not only cater for this project but for traffic generated by other large scale developments in the pipeline from the Corinthia Group and Villa Rosa. The upgrade for the road network around Paceville had been in the pipeline for more than a decade as part of the ten-t network upgrade.

The revised plan will still result in shadowing on neighbouring residents. You are being criticised this was only a marginal improvement. 

The project will only affect three per cent of Pembroke residents living in the close vicinity. From our studies it transpires the worst case scenario will be in December, which will result in a reduction of about 90 minutes of sunlight per day while in June the daily impact will be 30 minutes. In reality, some blocks are already being shadowed by existing adjacent residential flats.

As part of our obligation, we are also proposing to finance a private parking facility for residents only with a capacity for 99 vehicles, which would be administered by the council, a family park, CCTV cameras and removable beach decking platforms.