The Malta Developers’ Association has come out strongly against the recent Corinthia six-star hotel deal, warning the government is distorting the property market by selling public land on the cheap.
“We have already put on record that we disagree completely with the estimated cost of the land concerned made by Deloitte since we consider that value as being far below the market prices prevalent when Deloitte carried out their valuation exercise,” the MDA said in a statement yesterday. “Since then, market prices have gone up further.”
“When government sells public land to be used for residential purposes at below current market prices, it distorts the property market and abandons the concept of a level playing field for all the players in the market.”
IHI, which owns Corinthia, has agreed to pay €51.4 million in compensation to the government in return for the lifting of a waiver which forbids them from building residences on the land at the ‘Golden Mile’ at St George’s Bay.
It is a major step forwards in the business group’s ambitious plan to replace the Corinthia and Marina Hotels and the adjacent Radisson Blu Hotel with a six-star hotel targeted at luxury-seeking tourists and a five-star hotel targeted at business travellers, as well as residences, underground parking and luxurious leisure, entertainment and retail outlets.
The compensation fee was calculated by audit firm Deloitte, using the same land valuation formula it had used to determine the land value of the adjacent Institute of Tourism Studies prior to its sale to the db Group.
The db Group, which also plans to build a luxury development, has argued that the formula resulted in it paying a historically high price per square metre of public land for a major project.
In IHI’s case, Deloitte valued the land at €1,250 per square metre and a total gross value of €121.7 million. A number of deductions were then made from this gross value to cover infrastructure costs, compensation for foregone assets and rights concerning the to-be-demolished Marina Hotel, IHI’s recent acquisition of the Radisson Blue Resort and future tourist related development that will take place on the site.
The compensation fee was therefore calculated as €50.3 million, which was bumped up to €51.4 million after IHI agreed to pay €1 million over the next ten years to the Pembroke and St Julian’s local councils in an act of social corporate responsibility.
The proposed revision of the deed will be discussed in parliament ahead of a potential parliamentary resolution, after which IHI will be expected to seek a permit from the Planning Authority.