The Malta Independent 18 July 2024, Thursday
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Five Pre-conditions led to Fort Chambray agreement

Malta Independent Sunday, 18 July 2004, 00:00 Last update: about 11 years ago

At a briefing for the media it was emphasised that it was the current developers who approached Dr Caruana and negotiated with him. The government did not hold any discussions with the present developers.

Dr Caruana, a lawyer, is a well-known Gozitan businessman and together with his brothers runs a long established firm (Joseph Caruana Company Limited) which has long been involved in general trading activities both in Malta and in Gozo. Dr Caruana has also recently taken over the presidency of the Gozo Business Chamber and is currently the president of the Leone Band Club of Rabat.

The development at Fort Chambray has been stalled since July 2002 when all current development permits lapsed and were not renewed by the present developers. Moreover, there are currently six stop notices issued by MEPA over the development. It is also understood that the development seems to have stopped altogether because of serious financing difficulties, with the present developers unable or unwilling to invest more money in this high-profile development.

The present state of development of Fort Chambray is that work on the larger part of the 246 apartments that had to be constructed has started and they are in various stages of completion while the building of the projected hotel has not started.

Whie the buildings Dar it-Tabib and the Polverista have been restored, the restoration on the building known as the Knights Barracks has not started yet and little has also been done as far as common infrastructure for the whole area is concerned.

MEPA has also raised various issues with the present developers holding that development methods used have inflicted damage to historical sites and is not in line with permits issued. In 1993, Fort Chambray was given on temporary emphyteusis for 99 years to Fort Chambray Co. Ltd, a company owned 51 per cent by Antimen srl and 49 per cent by Malta Government Investments Ltd. Antimen is a company registered in Monaco and controlled by Avv. Roberto Memmo, an Italian businessman. Fort Chambray Co. Ltd in turn granted the sub-emphyteusis to two companies, Forti Developments Ltd and Forti Resort Hotels Co. Ltd who took upon them the obligation to effect the development in Fort Chambray. In return, the government received a ground-rent of Lm12,000 per annum while when the development is completed Fort Chambray Co. Ltdwould be entitled to 24 apartments.

In May 2003, with the development at a complete standstill ten years after the land was granted in emphyteusis, the ministry was faced with two options – either to seek the termination of the contract through legal means or else seek resolution through an agreement with present or new developers that ensures completion of the project.

The former, after consultations with the Attorney General, presented a number of legal difficulties, apart from the inevitable time that such a court case would have involved as well as the possibility of the lending bank foreclosing on the development.

Moreover, a long drawn-out litigation on this matter, would have augmented the negative aesthetic impact of Fort Chambray remaining in its current state. Consequently, the government opted for the latter option which meant negotiations with the present developers since through their shareholding and attached pre-emption rights, they held the key to the development.

It should be pointed out that the major stumbling block was that since Avv. Memmo still held the original emphyteusis over the development, any new agreement had to seek his consensus. In June 2003, Dr Gatt initiated discussions with the developers on the basis of the following pre-conditions:

1. All the present contracts had to be rescinded and a new contract entered into between the government and developers, present or new;

2. The developers, present or new, had to act only through companies registered in Malta and the beneficial shareholders thereof had to be known to the government;

3. The developers, present or new, were to bind themselves by new time limits to finish the development the non-observance of which would lead to the termination of the emphyteusis;

4. The developers, present or new, would be prohibited from transferring their shares before the completion of each stage of development in order to guarantee the completion of the full development; and

5. The government would no longer remain a shareholder through MGI Ltd or through any other commercial vehicle and therefore expects to be compensated both for its shares in Fort Chambray Ltd. as well as for granting the new contract. These pre-conditions were considered by government to be absolutely necessary for any further discussions and negotiations to take place. Negotiations were long drawn-out principally because before negotiations could start with the government, negotiations had to be concluded between the present developers and Avv. Memmo (who still held the original emphyteusis over the development) to determine who would take forward the development of Fort Chambray on the basis of the pre-conditions set by the government. It should be made clear that the government was never involved in these negotiations.

Eventually, all the present developers and Antimen slr presented Dr Michael Caruana to the government as the person to whom they were willing to transfer their shareholding in the three companies (Fort Chambray Ltd., Forti Development Ltd and Forti Resort Hotels Ltd). Following an intensive process of negotiations with Dr Caruana, the minister signed Heads of Agreement with Dr Caruana, the principal points of which are the following:

1. Dr. Caruana and his brothers, through their family company, will become the sole shareholders in the development and will buy out all the present developers, including Avv. Memmo;

2. The new developers have agreed that they will not transfer the development to any third person until the development is completed (save for the sale of completed apartments) and they will similarly not transfer shares in the companies which will be the shareholders of the development; 3. All present contracts will be rescinded and a new contract will be entered into between the government and the new developers (i.e. Dr Caruana and his brothers);

4. The new contract will transfer the land on emphyteusis to the new developers for the remaining period of the original grant but under totally new conditions;

5. The government will net the sum of Lm3,700,000 from the sale of shares, one-time payment for the new contract, ground-rent redemption, taxes and duties;

6. The government will have a first-ranking hypothec of Lm3,900,000 to secure its rights over the development;

7. The new developers are obliged to finish the development in three stages with the last stage date-lined at three years from the issue of the relative permits. The new developers have also agreed that should they not observe the time limits for each stage, the government will have the right to take back all the development and not pay any compensation to the new developers;

8. The new developers have obliged themselves to deposit the sum of Lm100,000 with MEPA within seven days of the new contract in order to address the issue of the existing stop notices and to apply to MEPA within 30 days to re-activate the existing permits with no variations from the permits as originally approved;

9. With respect to the hotel site, the new developers have been granted an option – exercisable within one year – whether to retain this site for use as a hotel or to change its use to apartments and should they opt for the latter option such option shall be subject to approval from MEPA; and

10. While on completion of the development the individual units may be transferred to third parties, the new developers shall always remain responsible for the fortifications, the Knights Barracks, the Polverista and the common parts and they shall have the obligation to conserve the same, ensuring that no damage is caused thereto and to restore them in accordance with applicable local heritage requirements.

These Heads of Agreement will now be translated into a contract between the Government Property Division and the Caruana family which contract will require approval by Parliament.

Dr Gatt said he is satisfied that notwithstanding the very real legal and financial difficulties of this development, a solution has been found which, while guaranteeing the rights of the general public as represented by government, makes it possible for the development to be completed within a determinate time schedule. The completion of the development is an important added value for the Gozitan economy since it should attract to the island people wishing to have up-market accommodation in Gozo with the resultant residual beneficial effect that is well known to all Gozo.

It is recognised today that a substantial part of the Gozitan economy - both financial and in employment terms – is driven by non-Gozitans owning property in Gozo and the Chambray development aims at augumenting and stimulating this economic sector.

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