Bawag Bank calls in €42 million loan on Montebello brothers' Mistra projects

The developers who reportedly were currying favour with finance minister Tonio Fenech to broker the sale of their property, JPM Brothers Ltd, have been served with a court notice to pay up €42.2 million and €1.3 million in interest, on a defaulting loan taken out with Austrian-owned Bawag bank.

Unprecedented in Maltese banking history for the value involved, the €42 million loan was signed between Bawag and Gemxija Crown Ltd, the developers of Mistra Heights: 868 residential units in tower blocks of up to 11 storeys high on the site of the former Corinthia Mistra Village, in Xemxija.

Gemxija is jointly owned by a subsidiary of Kuwaiti real estate giant Al Massaleh, and JPM Brothers.

Works at Mistra were already at a standstill in 2009, when JPM owners Jeffrey and Peter Montebello were carrying out a renovation on finance minister Tonio Fenech’s villa in Balzan. But when their sub-contractor complained about not being paid for works, he revealed to MaltaToday how Peter Montebello had told him the works were “a favour” for brokering the sale – that never materialised – of the Jerma hotel to entrepreneurs George Fenech and Joe Gasan.

Najeeb al Saleh – the chairman of Al Massaleh and also Fimbank Group – told this newspaper last week that Massaleh “is in discussions with JPM regarding their share in Mistra Heightsbut I cannot elaborate further due to confidentiality undertakings… as for Fimbank, it has no relation whatsoever with the issues mentioned.”

The developers who reportedly were currying favour with finance minister Tonio Fenech to broker the sale of their property, JPM Brothers Ltd, have been served with a court notice to pay up €42.2 million and €1.3 million in interest, on a defaulting loan taken out with Austrian-owned Bawag bank.

Unprecedented in Maltese banking history for the value involved, the €42 million loan was signed between Bawag and Gemxija Crown Ltd, the developers of Mistra Heights: 868 residential units in tower blocks of up to 11 storeys high on the site of the former Corinthia Mistra Village, in Xemxija.

Gemxija is jointly owned by a subsidiary of Kuwaiti real estate giant Al Massaleh, and JPM Brothers.

Works at Mistra were already at a standstill in 2009, when JPM owners Jeffrey and Peter Montebello were carrying out a renovation on finance minister Tonio Fenech’s villa in Balzan. But when their sub-contractor complained about not being paid for works, he revealed to MaltaToday how Peter Montebello had told him the works were “a favour” for brokering the sale – that never materialised – of the Jerma hotel to entrepreneurs George Fenech and Joe Gasan.

Najeeb al Saleh – the chairman of Al Massaleh and also Fimbank Group – told this newspaper last week that Massaleh “is in discussions with JPM regarding their share in Mistra Heightsbut I cannot elaborate further due to confidentiality undertakings… as for Fimbank, it has no relation whatsoever with the issues mentioned.”

Sources said that negotiations had previously stalled between the Montebellos and Al Saleh on the price to liquidate their share. In May 2009, Fimbank had to disassociate itself from the Mistra Heights project, when Jeffrey Montebello denied to the press having problems financing the project, because “Fimbank is one of our partners”.

Bawag’s call-in imperils the collateral tied to Mistra Heights, reportedly the very land on which it was to be developed, and inevitably strengthens the hand of Al Saleh to proceed with the development without the Montebellos.

But the Montebellos now appear stuck in their tracks on their signature mega-projects: the A3 Towers in Paola, the unfinished Belmonte Heights (former Galaxy Hotel) in Sliema, and the Jerma Palace Hotel in Marsaskala.

The latter was purchased from Libyan-owned Lafico, for eventual conversion into high-end apartments. But a change in planning policy at MEPA prohibited the conversion of hotels into real estate, denting the Montebellos’ prospects of developing the property.

MaltaToday then revealed how in summer 2009 the Prime Minister had discussed plans by magnates George Fenech and Joe Gasan, together with their architectural consultant Ray Demicoli, to transform the Jerma into a potential ‘Portomaso of the south’.

While the Montebellos hoped for an urgent sale, at the same time they were carrying out renovation works at Tonio Fenech’s residence, allegedly as a favour for his intervention to secure the hotel deal. But the deal would never materialise, after Lawrence Gonzi realised the political and ethical implications – as the minister responsible for MEPA – to bless the conversion of a hotel into real estate.

In both the Jerma and the Mistra sales, Labour MP Charles Mangion was the notary for JPM Brothers. Stephen McCarthy, chairman of Union Print, had acted as the Montebello’s representative in the sale and was formerly a director of Gemxija Crown.

Also in distress is the unfinished Belmonte Heights in Sliema, on the site of the former Galaxy Hotel, where its second phase was abandoned, ostensibly due to cash flow problems.

Over 215 of these apartments are believed to have been sold, on plan, for cash. Questions to Peter Montebello on the fate of these apartments remained unanswered until going to print.

Sources told this newspaper that an interested buyer, who already owns a number of apartments in plan, was in advanced negotiations to but the unfinished land at a reduced rate, given the Montebellos a much needed cash injection.