Dar Malta rental plans thwarted by over-supply

Raphael Vassallo
Four years after the controversial Lm9 million (€21m) purchase of Dar Malta in Brussels, plans to rent out the extra floor-space to private business interests have failed to materialise on account of an over-supply of rental property in the Belgian capital, MaltaToday has been told.
Officials for MIMCOL, the government investments agency, this week confirmed that the nine-storey building at 25, Rue Archimedes – across from the European Commission’s head offices, in the city’s most expensive district – remains vacant despite “various interest” by potential tenants.
“The Malta House property in Brussels is currently managed and administered by Property Management Services Ltd (PMS), a fully government-owned company that falls under the auspices of MIMCOL,” a spokesman for the investment agency said.
“In order to scout for suitable tenants, PMS has engaged the services of a Belgian real estate agent, Business Space.”
MIMCOL told MaltaToday that some six large international firms, among several other smaller ones, had already expressed interest in the property.
These include: a reputable German law firm seeking to expand in central Brussels; a French firm enjoying worldwide legal practice; a leading real estate consultancy group; an information systems group of companies specialising in aerospace, defence and security; and a US-based energy company synonymous with the development and operation of natural gas; among others.
“In spite of the various interest expressed in the Malta House property in Brussels, Business Space has not as yet managed to conclude with any of the above,” the spokesman said. “PMS has actually been informed that in the face of the current economic situation, worldwide interest has dissipated, although new interest is being lodged.”
But the ‘current economic situation’ can trace its origins only to the first weeks of September – less than two months ago – while efforts to conclude rental negotiations go back well over two years: after extensive renovation work on the ageing building, and a delay in the issue of permits by the Belgian authorities.
Unsurprisingly, another possible reason for the failed negotiations was forthcoming:
“It may not be amiss to point out that today there is an over supply of space for leasing in Brussels, whereas some 339,000 square metres is up for leasing in the Grade A area of Brussels where Dar Malta is located,” the MIMCOL spokesman added. “This situation somewhat impinges on the take-up and on the conditions of lease, including the prime rent receivable eventually.”
Dar Malta was originally bought in 2004 for Lm6.5 million (€15m), ostensibly to house Malta’s Permanent Representation to the EU. However, an additional Lm2.5 million (€6m) had to be spent on renovation, including the removal of the highly carcinogenic asbestos: with the result that Dar Malta cost the exchequer almost half the total Lm18.6 million (€44m) government-approved expenditure for 2004.
According to an investigation by The Times in 2004, the choice of Dar Malta was “by far the most expensive among the purchases made by the 10 new member states”, almost three times as much as Poland’s representation office – the largest of the 2003 enlargement states.
Following public outcry at what was perceived to be a lavish and unwarranted expense, Prime Minister Lawrence Gonzi himself defended the investment, arguing that rental income would provide a lucrative source of revenue.
In March 2005, government officials told this newspaper that the decision to purchase this property in particular had been tied to its rental potential.
“Obviously, one can only rent out the floors once the major refurbishment is ready,” the same sources said when asked when the extra spaced would be leased out. “Government is currently investigating a number of options and timings for lease so as to maximise the potential revenues from such leases. Following this, a marketing exercise will be done to attract potential clients.”
But with the belated discovery of a glut of similar office space already on the market, it is uncertain whether the additional floor-space will be rented out in the near future, and even then whether it will attract the same profitable rates originally envisaged by the investors.

rvassallo@mediatoday.com.mt

 

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