News | Sunday, 11 January 2009

PRINT THIS ARTICLE

Casino license exchanged for Fort Manoel restoration

The prospectus for MIDI plc’s €30 million bond issue sheds new light on the financial arrangements between MIDI and the Maltese government, which included offsetting parts of the premium against infrastructural and restoration works undertaken by the company.
This included the waiving of the casino concession fee in return for the restoration of Fort Manoel.
According to the emphyteutical deed, MIDI have to pay an annual ground rent of €1,118,100 (Lm480,000) until 31 March 2025.
The rent will rise to €1,956,673 (Lm840,000) from 1 April 2025 until 31 March 2050, and again to €2,236,198 (Lm960,000) from 1 April 2050 onwards.
However the consortium is presently benefiting from a so-called “administrative abatement” through which the ground rent payable by MIDI during the initial period is reduced.
MaltaToday asked the Lands Department to state how much ground rent has been paid by MIDI and to quantify the “abatement”, but no reply was forthcoming.
Apart from the annual ground rent, the developers also have to pay a premium of €91,707,431 (Lm39,570,000) of which €32,145,353 will be paid in kind.
So far the developers have paid €12,974,610 (Lm5,570,000) payable in installments (up to the year 2006) without interest.
A further €46,587,468 (Lm20,000,000) will be paid in installments between 2010 up to 2023 without interest.
The prospectus reveals that the government had the option of subscribing for 10,000,000 Preference Shares “A” in MIDI by 2006 instead of waiting till 2023 to recover this sum.
But this option was not exercised by the government, and therefore MIDI will have to pay the full sum.
The remaining €32 million of the premium will be paid by MIDI in kind: €20,964,361 (Lm9,000,000) will be offset by the infrastructural works, which include drainage, water, electricity and telecommunications distribution systems.
But according to the same prospectus “it is not clear” whether works in the public areas and reclamation in Manoel Island are included in this part of the sum.
€11,646,867 (Lm5,000,000) were also offset by the cost of restoration works in Tigné.
The prospectus also reveals that restoration works on the external fortifications of Fort Manoel will be set-off against a €1,164,686 (Lm500,000) casino concession fee for MIDI’s new casino in Manoel Island.
The €92 million premium was based on the market value of land at Tigné and Manoel Island as determined by the government on the basis of expert advice at the time that negotiations were being held between 1996 and 2000.
But MIDI now claims that the value of the property has increased considerably since that time and the market value of MIDI’s properties has been assessed by independent valuers at €238 million.

MIDI still awaiting MEPA permits
Although MIDI has already been issued with an outline permit on 75% of the land, it is still awaiting permits for a 14-storey high tower block known as T14 and another 12-storey high block known as T17.
The prospectus in fact warns that recent planning decisions saw MEPA overturning decisions taken at a preliminary stage as a “risk factor” for those buying the bonds.
It warns that “delays or refusals in the issuance of full development permits would have an adverse effect on the business, financial condition and profitability of the Issuer.”
MIDI is in the final stages of negotiating two syndicated bank loan facilities for a total amount of €35 million for the construction of T14 commercial offices and T17 blocks which are still to be approved by MEPA.
The new facilities, which will be made available by HSBC Malta and bank of Valletta, will be secured on and will be secured on T14 and T17 Blocks which still lack a full development permit.
In the outline development permit issued ten years ago, MEPA had only approved heights ranging between five and 12 floors for the tower blocks.
The PN-led Sliema council has already objected to the scale of the two new towers.
The prospectus warns investors that “recent events” indicate “a potential risk” that MEPA could re-assess developments already approved at outline stage.
Referring directly to the Fort Cambridge development, “whereby an outline development permit for a project with 23 floors was subsequently re-assessed,” the prospectus warns of similar risks.
However these risks are deemed immaterial “to the overall volume of the project and are anticipated to have a minimum consequence on its commercial outcome.”
It points out that in the case of the nearby Fort Cambridge development although the number of floors was reduced, the overall volume of the project was not.

Any comments?
If you wish your comments to be published in our Letters pages please click button below.
Please write a contact number and a postal address where you may be contacted.