PM’s consultant on capital projects suggests City Gate will cost over €80m

Labour MP Charles Buhagiar has declared that Renzo Piano's design for the City Gate project and new parliament will cost over €80 million than originally projected.

Buhagiar, an architect who is now serving as a consultant to the Prime Minister on capital projects, said on his Facebook wall that in a meeting this week with the Renzo Piano partners and members of the Grand Harbour Regeneration Corporation, there were outstanding issues to be resolved.

The GHRC is the government corporation responsible for capital projects around the Grand Harbour, while Bovis Land Lease are site managers for the City Gate project, which includes the new Valletta entrance and the parliament as well as the open-air Royal Theatre.

"We were given a detailed description of the project and we visited the works' site. There are some outstanding issues that have to be addressed. The project will cost over €80 million and must be finalised by the end of this year."

When asked to comment on his statement, Buhagiar said that the GHRC could not quantify the exact amount by which the budget would be overrun. "They said it would overrun by a small amount, and as an architect I understand that that could mean a variance of 5%, but I don't know the real figure. I asked them but I did not get an answer."

The project has €80 million budgeted for by the company Malita Investments plc. "The project is no longer government-funded since there is the special purpose vehicle Malita that finances its construction."

Malita Investments chairman Kenneth Farrugia told MaltaToday that the agreement between government and the investment holding company funding the City Gate project was set at a premium of €82 million.

"Malita has no form of liability over any overruns the project might incur," Farrugia said, adding that any overruns would be managed by the government.
He pointed out that the company had decided against taking any risks in terms of the project costs.

However, Farrugia also explained that certain overruns could be caused by the contractors' defaults which in turn could be covered by insurance or penalties imposed by the contract.

The company, 70% owned by the Maltese government, manages a property portfolio of strategic national importance.

It receives the rents from leases of the Valletta cruise liner terminal, and Malta International Airport. MIA will pay €905,000 in rent this year, and €4 million between 2013 and 2016. By the end of its 65-year lease, it will have paid €120 million.

Once the City Gate project is completed, the properties will be leased out at a rental yield commensurate with that generated in the commercial property market in Malta.

Last October, €44 million worth of work had already been done, 19 months into the project. Nationalist minister Austin Gatt had claimed the project was on budget.

The new square behind parliament on the site of the former police station has already been completed. Originally the deadline for the project was set for July 2013.