There’s confusion in the Lowenbrau saga. But somebody is lying

A National Audit Office investigation into the sale of the former Lowenbrau brewery in Qormi has dragged out both justice minister Owen Bonnici and Nationalist MP Jason Azzopardi into a feud as to whether political pressure was brought to bear on the process.

At the heart of the matter is a 2009 decision by the Government Property Department (GPD) to redeem the perpetual emphyteusis held by winemaker Marsovin, which had held the land since 1990 on condition that it build a brewery. In 2009, Marsovin entered into an agreement to sell the land for €8 million to Vassallo Builders Group (VBGL), but the sale was conditional on the removal of the brewery condition.

Controversially, the GPD’s chief notary, Keith German – with approval from GPD director Fred Bezzina – processed the redemption of Marsovin’s emphyteusis over a 48-hour period. The onerous brewery condition was removed, and the emphyteusis redeemed for €465,875 – the sum of the annual rent multiplied by 20.

Jason Azzopardi has insisted he had nothing to do with the Marsovin deal

Owen Bonnici yesterday insisted that magnate Nazzareno Vassallo had already testified in court against the GPD, that it was a “minister” who had mooted that a compromise was possible when in 2011 the GPD demanded VBGL to put up more cash, specifically to pay for the removal of the brewery condition.

However, both former finance minister Tonio Fenech and former parliamentary secretary for lands (later minister) Jason Azzopardi, are denying having been that minister. Azzopardi insists he was unaware in 2009 that the ground rent had been redeemed.

On his part, in comments to The Malta Independent on Sunday, Tonio Fenech too denied meeting Zaren Vassallo on the matter. “If Zaren Vassallo had come to speak to me I would have sent him to Jason. If his file had been brought to me, I would have sent it to Jason. But none of those things happened.”

Tonio Fenech: Jason Azzopardi dealt with lands

In court, Vassallo is contesting the GPD’s decision to value the direct dominium at €700,000. That value was reached by a three-man committee of architects appointed jointly by the GPD and VBGL, which in 2012 valued the perpetual emphyteusis as of 1990 – that is, the value of the brewery condition when it was laid down the year the land was granted.

The architects have insisted their task was not to value the freehold value of the land, because by then it had had already been sold freehold to VGBL, by the very own hasty hand of the GPD.

So who gave the GPD notary the instruction to waive the brewery condition?

Keith German told the NAO that he received no instruction from either the GPD director or the Commissioner of Lands, nor from Fenech or Azzopardi. “He alleged an element of pressure by the company secretary of [Marsovin’s] LBM Breweries,” – the lawyer Joseph Chetcuti, famed presenter of makeover show Arani Issa; the latter denied exerting any pressure, but admitted seeking information from German on any progress registered and that “he had earlier informed the PS Revenues and Land [Azzopardi] of the company’s intention to redeem the ground rent.”

Azzopardi denies this too, leaving the NAO unable to determine with any degree of certainty the sequence of events and whether political pressure was applied.

Azzopardi says he entered into the picture in 2011, after Labour raised the controversy in parliament. The Commissioner of Lands informed him of the irregular removal of the condition, and Azzopardi asked the Attorney General to take action, and the latter informed VBGL it would have to pay up for the removal of the condition.

Owen Bonnici is today saying there was no doubt that Azzopardi – or maybe Fenech – offered a ‘compromise’ when the committee of architects appointed in 2012 were tasked with the valuation of the brewery condition. “What was the compromise? It was the appointment of the three architects by Azzopardi who based themselves on the original value of the land as it was granted back in 1990, and not on the value of the land as it stood in 2012,” Bonnici said yesterday.

The National Audit Office, in its own investigation on the sale of the land, has said that the land in 2012 was valued at over €8.4 million, and that the valuation of the direct dominium did not reflect fair value.

Jason Azzopardi has insisted that the redemption could only be carried out on the basis of the rent that Marsovin was paying, Lm10,000 (€23,293) a year since 1990.

Again, the question left unanswered is why the GPD waived the direct dominium condition.

Bonnici has milked the situation, saying that Azzopardi is being unclear as to who could have blessed this decision. “On one hand Azzopardi has told the NAO that he assumed responsibility for the appointment of the architects [in 2012], but now Azzopardi claims the minister being referred to by Vassallo is Tonio Fenech (then finance minister). If Fenech offered the compromise, then Azzopardi sealed it,” Bonnici said.

While Azzopardi has fought back by suing Bonnici for libel, he has also filed a judicial protest demanding that the government repeal an irregular contract with the General Workers Union on its Valletta headquarters. “Owen Bonnici has been saying for two weeks that I met Zaren Vassallo to reach a compromise. I immediately filed libel proceedings and this assertion has now been confirmed as a complete lie.”

Lowenbrau land: back story

In 1990, economic affairs minister John Dalli granted a 22,000 square metre tract of land at Qormi to Marsovin company Agrico, to set up the Lowenbrau brewery, for an annual ground rent (under perpetual emphyteusis) of Lm5,000 for two years and for Lm10,000 (€23,000) a year thereafter, and on condition that it is used only as a brewery. Agrico had to erect proper and solid buildings on the land, costing not less than Lm450,000 (€1,048,218).

In 2009, Marsovin sought to sell the land – now developed at the company’s own cost, into a brewery – to Vassallo Builders Group Ltd (VBGL). Since it held the land under perpetual emphyteusis, it was empowered to acquire it by redeeming the ground rent. Once Marsovin redeemed the rent, it would be able to sell the land to VBGL as it wished.

Since the emphyteusis carried the onerous condition that it be used only as a brewery, Marsovin had to obtain the government’s waiver on that condition. Vassallo entered into a preliminary agreement on 30 November, 2009 to buy the land for €8 million, only if the condition were removed.

Vassallo also said, in an affidavit to the NAO investigation, that Marsovin’s representatives told him they had an agreement with the minister and the GPD for the cancellation of all the conditions. The NAO said that there was a degree of pressure exerted by a Marsovin rep with the chief notary at the GPD. Both Tonio Fenech and Marsovin’s CEO have denied these claims with the NAO.

On 1 December, Agrico’s LBM Breweries requested the Lands Department that it redeem the ground rent; the next day on 2 December, the chief notary at the Government Property Division, Keith German, requested authorisation to redeem the ground rent for €465,875, which was granted that same day, together with the removal of the brewery condition. On 3 December, LBM Breweries became owner of the land.

At the start of 2011, the Labour Opposition raised the matter in parliament, calling into question the fact that the ground rent had been redeemed and the land transferred without a parliamentary resolution.

Jason Azzopardi, as parliamentary secretary and later minister responsible for lands, tasked the Lands Commissioner, Albert Mamo, to discuss the matter with the Attorney General. The AG issued a judicial letter to VBGL requesting the annulment of the 2009 contract.

Azzopardi set up a committee of architects to assess the freehold value of the land as at 1990, that is, the value of the land had it been unencumbered by the brewery condition the year it was granted under emphyteusis. The figure arrived at was €706,400 – which left €240,525 to be paid over and above what had been paid during the 2009 redemption.

Since the government owed VBGL €291,660 on a property expropriation, it was agreed that Vassallo transfers the rights of that claim to Catergroup (the company now owning the Qormi land), cancelling out the €240,525 that was now payable to the Lands Department

In 2012, VBGL sued Marsovin and the Commissioner of Lands for damages. A NAO investigation was launched at the request of the government, and in 2016 the Auditor General found that – although it could not find “direct evidence of political pressure” – the manner by which the GPF concluded the 2009 contract was “highly suspect”, and that by its own calculation, the freehold value of the land in 2012 was €7.8 million, or €8.4 million together with the direct dominium in 2009. The NAO said the application of 1990 rates to the direct dominium was “fundamentally flawed” and that the architects’ valuation “grossly understated” the true value of the land.