THE MULTIMILLION euro deal signed by the Cyprus government last April with a state-owned Qatari company to build a luxury hotel, residential and commercial complex opposite the Hilton Hotel in Nicosia is still in the balance, due to a lack of agreement on a fair value for the project site.
A well-placed source has confirmed to the Mail reports earlier in the week that one of the crucial conditions precedent stated in the agreement – that each side should obtain an independent valuation of the 25,000 square metre project site and then agree on a fair value for the purposes of the project – had still not been met at the beginning of this week.
If any one of the conditions precedent of the agreement is not met, the agreement simply does not come into force.
The government had submitted a valuation of €134 million produced by Land Registry (LR) officials, but this was rejected last month by the Qataris as being unreliable, referring to their own valuation of €60 million.
The submission of a valuation by the LR rather than independent valuers appears to contradict a statement by Finance Minister Charilaos Stavrakis after a meeting in June with the three Cypriot members of the joint venture’s board. The Minister said then that, in line with the signed agreement, the LR had decided to hire three independent valuers from the UK, all members of the Royal Institute of Chartered Surveyors, to prepare the Cypriot valuation.
Under the agreement, the Cypriot state will contribute the land – currently the Andreas Panagides military camp, opposite the Nicosia Hilton – to the 50:50 venture, which will jointly agree how much it is worth. In turn, the Qataris, acting through state-owned Qatari Diar Real Estate Investment Company, will match that agreed value in cash for the project – which is slated to involve a 230-room luxury hotel, apartments and a commercial complex covering 53,000 square metres of built area – and any extra required funding would be sourced through loans.
It could be argued that the signs that the deal might not run smoothly were present when the agreement was signed in April. Qatari Diar CEO Mohammed bin Ali Hedfa told reporters at the time that the project would be completed in two phases, costing a total of around US$150 million (€112 million) – which is in line with the Qataris’ recent €60 million valuation. Stavrakis told reporters then that he expected the total investment to exceed €300 million.
Asked why the value of the land for the project was not agreed in advance, thereby allowing a specific figure for each side’s binding commitment to be included in the agreement, the well-placed source said that with all the fuss surrounding the deal, the government was in a hurry to sign before every detail was settled.
From a commercial point of view, the Qataris thus appear to have the stronger negotiating position over the land valuation, as the government’s need for the project to go ahead is clearly bigger, for political as well as economic reasons.
How the Qatar deal evolved
11 November 2008: The Cypriot government signs a preliminary agreement with the government of Qatar, providing for feasibility studies to be carried out on the project.
16 February 2009: Hotel project revealed through comments to the press by Finance Minister Stavrakis.
21 April 2010: After 14 months of high-level contact with the Qataris, fevered press speculation and political in-fighting, the agreement for the hotel project is signed.
29 April 2010: A bill ratifying the deal is tabled in the House of Representatives.
17 June 2010: Ratifying bill passed.
21 June 2010: Stavrakis hosts meeting of the three Cypriot members of the joint venture’s board, to push ahead and “make up for lost time”.
July 2010: Reports appear in the media that the Cypriot valuation of the site has been rejected by the Qataris. Government begins an emergency tendering process for an independent valuation.
2 August 2010: Deadline for receiving tenders from the five companies invited to bid.
3 August 2010: Company that made winning tender begins valuation work.