Labour gave Vitals 'sole discretion' to hold on to hospitals for 99 years

At the stroke of a pen, Vitals Global Healthcare can unilaterally decide to extend a 30-year concession on three State hospitals to 99 years, MaltaToday has learnt.

This was never disclosed to the public prior to last Wednesday’s parliamentary sitting that discussed the Vitals hospitals deal. And even then, the government was scant on detail.

It now transpires that Vitals was given “sole discretion” to decide whether it wants the extension, which will come with a 30% increase in the ground rent due.

The information comes from the deed signed two years ago between Malta Industrial Parks, a government entity, and Vitals Global Healthcare Assets Ltd.

All it takes for Vitals to extend the concession on St Luke’s, Karin Grech and Gozo hospitals is a judicial letter to the government 12 months before the 30-year period is up.

The only condition is that the government can take back the title over Karin Grech and Gozo hospitals after the 30 years are up. To do so, the government would have to pay Vitals €80 million.

Tourism Minister Konrad Mizzi, who masterminded the concession agreement, admitted in Parliament last Wednesday that the 30-year concession could be extended to 99 years, describing this as “normal practice”.

Until then, everybody believed the three State hospitals were handed over to the private company on a 30-year lease.

However, Mizzi did not point out that government has absolutely no say in the matter if Vitals opt to extend the lease.

Although the temporary emphyteutical concession is for a period of 30 years, Vitals can, of its own accord, decide to extend the period for a “single additional term of 69 years”.

This applies to all three hospitals unless the government decides to take back two of them.

The deed governing the emphyteutical grant was signed on 22 March 2016, four months after the government and Vitals finalised the concession agreement on the three hospitals. A heavily redacted copy of the 30-year concession agreement, dated 30 November 2015, was only tabled in Parliament in October 2016.

Selling out

Vitals are currently in talks to sell the concession to American company Steward Healthcare after finding it difficult to raise the necessary finance for the €220 million project.

Vitals had to build a new general hospital in Gozo and refurbish St Luke’s and Karin Grech, however, works have fallen behind schedule.

Meanwhile, MaltaToday has learnt that last December, Vitals secured a loan of €908,000 from Agribank plc, using the hospitals buildings as hypothec.

The loan pales into insignificance when compared to the multi-million-euro investment the company was expected to make and is very likely to have been a form of bridge financing.

Vitals had been facing problems to pay off certain suppliers.

What Vitals will pay

The company will pay a global annual temporary ground rent of €525,000 sub-divided as follows:

St. Luke's hospital: €309,188

Karin Grech hospital: €59,062

Gozo general hospital: €156,750

If VGH opts to extend the lease to 99 years, the ground rent will increase by 30% and be revised upwards by 5% every 5 years. 

What the deed says 
The lease is for 30 years and lapses on 21 March 2046.

However, "upon expiration of the 30 years, this emphyteutical grant may be extended at the sole discretion of the grantee [Vitals] for a single and additional term of 69 years."

The deed continues: "Such extension may only be made by the grantee [Vitals] with respect to all the sites in their entirety not in part and under the same terms and conditions."

What was transferred to Vitals 

St Luke's Hospital - building and grounds, with free overlaying airspace and sub-terrain covering a superficial area of approximately 54,728 square metres

Karin Grech rehabilitation hospital - building and grounds with its free airspace and sub-terrain covering a superficial area of approximately 7,683 square metres

Gozo general hospital - building and grounds covering a superficial area of approximately 72,881 square metres