Stop $320M deal
By Andre Bagoo Saturday, October 13 2012
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THE PROJECT Specialist Limited (PSL) review of the Tobago House of Assembly’s memorandum of understanding with a company tied to the family of former PNM Minister John Rahael specifically warned the THA to not proceed with the Shirvan Road $320 million project in the absence of an open and competitive tender process.
While the THA, in a press release issued last month, cited remarks made by PSL managing director Peter Forde in order to defend and justify its agreement to the signing of an unprecedented 199-year lease arrangement linked to a build-own-lease-transfer (BOLT) financing mechanism by the Rahael family companies, in truth the PSL’s own review of the memorandum of understanding proposing the deal warned the project should have been openly tendered and not handed to the Rahael firms.
Further, the PSL review did not involve an actual review of the documents executed by the parties but was limited to the signed memorandum of understanding. There was no mention in that memorandum that instead of being given a 20-year lease, the Rahael companies would gain title of the property in question at the corner of Claude Noel Highway and Shirvan Road for 199 years.
Newsday understands from sources aware of the transaction that the entire deal was first proposed to the THA by Amera Caribbean Development, the company which was mentioned in passing in a statement issued on Thursday by Joseph Rahael on behalf of the Rahael Holdings Limited (RHL).
John Rahael was a director of Amera up to August 2001.
The company which eventually got title was Milshirv Properties Limited, after Dankett Limited sold its three-acre land parcel to the THA and the THA sold it back on a 199-year lease. Both companies are tied to the Rahaels.
PSL was asked by the THA to comment on a memorandum of understanding signed with Amera, but was not made aware of plans to lease the property for 199 years.
However, PSL specifically recommended that the project be subject to open tender.
In the Budget debate on Tuesday, Minister of Tobago Affairs Delmon Baker said the THA breached the THA Act which stipulates the Assembly is to be subject to the Central Tenders Board.
Section 28 of the THA Act reads, “The Assembly, in pursuance of its functions, shall be subject to the Central Tenders Board Act until such time as there is in effect alternative provision therefore made by the Assembly.”
Sources said lease arrangements of this kind, associated with BOLT financing, would normally be for around 20 years. They questioned why the terms of the lease moved to 199 years in the negotiations for the deal. The lease of the land, dated November 21, 2011, to Milshriv Properties Limited, states that, “on completion of the said office facility, the lessee will lease to the lessor the office facility for a term of 20 years.”
This is to be subject to terms and conditions in a draft deed of lease which was to be attached to the document.
However, the lease notes that, “in consideration of the rent hereby reserved the lessor hereby demises unto the lessee the said lands to hold the said lands unto the lessee for the term of one hundred and ninety nine years.” This was to commence on December 1, 2011, for an annual peppercorn rent of $10.
In Thursday’s statement, Joseph Rahael said, “the rent to be paid by the THA, once it occupies the building, is set at today’s market rate for a period of 20 years.
At the end of the 20 years office lease period, ownership of the building is transferred to the THA and the lease of the land to the developer comes to an end, all at no additional cost to the THA.”
The building would serve as the administrative complex of the THA’s Division of Agriculture, Marine Affairs, Marketing and the Environment.
In its press release of September 6, 2012, the THA said it was quoting Forde from comments he made at a press conference in Scarborough and said the land would return to it after 20 years.
The THA said, “At the end of every three-year period the Assembly could capitalise the rent to the end of the lease period and pay off for the building; and at the end of the 20-year period the property would automatically be owned by the Assembly.”
The press release did not explain why the lands were leased for 199 years. In relation to a separate project proposal that has come into the spotlight this week, the Zoit Developers Limited $233 million aquatic centre at Bacolet, PSL also conducted a review and concluded the project raised problems.
Prime Minister Kamla Persad-Bissessar referred to this review, dated May 3. The report into Zoit expressed concerns over the pricing of the project.
Additionally, Newsday understands, that report found that the company had no track record in development and appeared to have limited resources.