Update 2 | Cardona says White Rocks value ‘much higher’ than €22 million

The value of the White Rocks complex concession is much higher than the €22 million reported in the media, the government said yesterday. 

The Malta Independent yesterday quoted “well informed sources” that White Rocks Development Company, a consortium made up of a number of local and foreign companies, would be paying €22 million for the land involved – a price tag considered cheap by property experts when considering the prime location of the land, and its area, for a project which is set to attract the top end of the market.

In reaction, the economy ministry said that “the capital investment proposed is much higher than that mentioned in media reports and reflects the proper value and economic potential of the designated area.”

The concession was discussed at yesterday’s Cabinet meeting.

In a statement, Economy Minister Chris Cardona confirmed that the ministry was presented with a report from the Evaluation and Adjudication Committee, that was appointed with the task of evaluating the submissions of International Trade Holdings Company K.S.C and White Rocks Development Company and subsequently both bidders were informed of the outcome.

The government is now expected to deliberate on the report before appointing a negotiating team to negotiate the concession with the preferred bidder.

While noting that it is premature to comment on the value of the concession, Cardona reiterated the government’s commitment to maximise the economic potential “of this long abandoned and dilapidated site and turn it into an upmarket tourism project.”

The Request for Proposals includes the obligation to design and develop a touristic project and the right to manage and operate it. It was mandatory for eligible submissions to include an upmarket hotel.

The large tract of land makes up a total of 449,885 square metres. The call for EOI was for under 40% of the total area – 135,600 square metres – to be developed. 

The project, which aims at the top end of the real estate market, could include a five-star de luxe hotel, retail outlets as well as real estate.

According to the Independent the consortium is made up of: London & Regional Holdings; Alpine Group, which includes MHRA president Tony Zahra as one of its directors; Bonnici Brothers, a construction company owned by Emanuel Bonnici, John Bonnici and Mario Bonnici; Mizzi Holdings Ltd, owned by Maurice Mizzi, Brian Mizzi and Kenneth Mizzi; Michael Bianchi; Sea Estate Ltd, whose sole director is Joseph Eucharist Vella who also owns Karkanja Ltd; and Elma Ltd, whose directors are Dennis Baldacchino, who owns Tal-Maghtab Construction Ltd, and Charles Ellul, director of Elbros Construction Ltd.

The White Rocks saga

The call for ‘Expression of Interest’ was launched by Economy Minister Chris Cardona in June 2014. The government’s idea was for a project involving the construction of a number of 5 star hotels as well as luxurious housing units.  This represented the third attempt by different administrations to re-develop the site.

Back in 1999 a public tender was issued for the development of the White Rocks based on the parameters set by a stringent development brief that restricted development to the site occupied by the abandoned complex of British forces married quarters. The development brief issued in 1995 excluded any real estate development in the area. 

The brief, which has never been withdrawn states that “the existing complex is considered to be a good example of 1960’s development and the future owners will be encouraged to retain some, if not all of the existing buildings”. 

Costa San Andrea Ltd, a consortium made up of Maltese businessmen and Spanish hotel operator Sol Melia, was chosen as the preferred bidder by the government before the 2003 election. 

The consortium was also in possession of a sanction letter from Bank of Valletta to cover the investment of about €40 million. 

A planning application was presented to the Malta Environment and Planning Authority (MEPA). 

But the project was put on the backburner until the 2003 election. In an article penned in July 2010, Paul Abela, one of the directors, wrote that the consortium’s attempt to include real estate on this site was resisted by both Eddie Fenech Adami and Lawrance Gonzi. 

“When we were insisting on real estate to be part of the project, Fenech Adami had told us he preferred to issue another public call for tenders but giving us the right of first refusal. After Dr Gonzi succeeded him, the new Prime Minister told us he did not agree with the right of first refusal and insisted he was against real estate development at White Rocks.” 

But in 2010 Gonzi changed tack, accepting the idea of real estate as a way of financing the development of a sports complex. Moreover negotiations were carried out with a UK consortium in the absence of any public tender or call for expressions of interest. 

At a ceremony in Castille, UK investors presented their plans to build a sports complex and 300 apartments. 

The investment was quantified at €200 million and was hyped as one benefiting sports organisations.  

Similarly to the SmartCity model, the real estate component was to finance the project’s added value to the country. While SmartCity was hyped for its job creating potential, the White Rocks project was hyped for its advantages to local sports. 

MEPA also started changing the 1995 development brief to accommodate the new project, but these changes were never approved. However in the subsequent years, talks between the government and the investors failed to yield any tangible results. On his part former Prime Minister Lawrence Gonzi insisted that the government was not prepared to go ahead with the agreement at all costs. 

Unlike the 1999 public tender the call for expressions of interest issued in 2014 did not exclude real estate development. Moreover the real estate component is not even seen as a means to an end as was the case with the sports complex proposal, but an end in itself.  

The government was targeting “a village of luxury units” that will be fully developed and funded by the private sector. “We want a lifestyle community village where White Rocks is transformed into a luxurious facility, complemented with services and recreational programmes for all ages,” Economy Minister Chris Cardona said in 2014. 

One obstacle for the Gonzi plan to turn White Rocks into a sports village was how to fit in 300 units and the promised sports facilities without encroaching on the surrounding garigue and agricultural land. 

One major complication was the inclusion of a tract of karstland between the AFM shooting range and the abandoned White Rocks complex.  

The area is part of a Special Area of Conservation (SAC), which enjoys grade 3 protection. This level of conservation excludes residential and commercial development but allows minor interventions aimed at protecting the SAC. Just days after the project was launched in 2010 the government was faced with questions.

The 1995 development brief remains the only valid planning document regulating development in this area. The site area of the current project amounts to 449,885 square metres (45 hectares) of which only 135,660 square metres are built up. 

Chris Cardona has acknowledged that the 65-year-concession includes a Natura 2000 site. While any development will need to adhere to rules governing the management of Natura 2000 sites, a spokesperson for Minister Cardona insisted that this designation does not preclude all sorts of development. 

“It should be remembered that Natura 2000 is not a system of strict nature reserves where all human activities are excluded. The emphasis will be on ensuring that future management is sustainable, both ecologically and economically.” 

The architectural value of the existing buildings is recognised by the White Rocks Development brief issued in 1995, which still governs development in the area.  

The brief, which has never been withdrawn states that “the existing complex is considered to be a good example of 1960’s development and the future owners will be encouraged to retain some, if not all of the existing buildings”. 

11 proposals had been submitted in the call for expressions of interest in the project but only two formal bids were submitted for the development of the new luxury village.

How public land was disposed of on other projects

With some notable exceptions, offering cheap ground rents and premiums in return for the economic benefits of projects, has been an undeclared policy by different governments over the past decades.

For example the entire area of Portomaso was leased by the state to the developers for a ground rent of Lm191,000 (€444,910) until 2014, and eventually sold to the developers for Lm800,000 in 2006. 

Yet the €22 million tag for a prime site like White Rocks following a competitive tender is considerably lower than that offered for other projects in the past.

MIDI had to pay a premium of €91,707,431 for land in Tigne of which €32,145,353 had to be paid in kind (infrastructural works). 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.  

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 from 1 April, 2025 until 31 March, 2050, and again to €2,236,198  from 1 April, 2050 onwards. 

In 2007 Fort Cambridge was leased to GAP Limited for 99 years, following a competitive tender, for Lm23.3 million (€54.274 million). The development was guided by a development brief issued in 2006 and included a 16 storey tower. 

In 2007 the Maltese government  transferred  358,000 square metres of land in Ricasoli to Tecom for an annual ground rent of just Lm65,000. The government was given shares in the project instead of a premium of $20 million for the land. No tender was issued.

In 2014 parliament approved the transfer of public land to Jordanian-owned Sadeen Group for 99 years to develop a university in Marsaskala and Cospicua. The company which was directly chosen in the absence of any tender, will not pay a premium for the land.

Sadeen Education Investment will pay a ground rent that starts at €40,000 in the first year, increasing gradually every year for the duration of the lease agreement. Sadeen’s title will be of a temporary nature and may not be converted to a perpetual emphyteusis. The company will be granted free and vacant possession over the designated land.

The company, owned by construction magnate Hani Hasan Naji Salah, will be bound to make an initial investment of €104 million and have both campuses running to full capacity after six years.