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Leasing property – a viable solution
for businessesa
by Ivan Brincat
The demand for leasing prop-erty is increasing since the value
of property has remained very high. Moreover, there is a growing
trend for companies to lease rather than buy property, the general
manager of The Property Leasing Company (PLC) David Aquilina
said.
“With the attraction of foreign investment companies through
the government’s push in the financial services sector
and the current investment situation whereby banks are becoming
tougher to work with, leasing property is ideal.”
Mr Aquilina told The Malta Business Weekly that the company
would be going for growth. Asked if the company will try to
acquire property abroad, he said they are considering all options.
“We are looking for continuous and steady growth. If this
means looking for projects abroad, we will do so,” he said.
PLC was set up in March to own, acquire and develop a unique
portfolio of prime commercial property, all of it rented to
blue chip tenants. The objective is that of targeting and acquiring
properties in excellent locations, finished to high standards
of design and architecture.
Mr Aquilina said businesses should invest their money in the
business and not in property. “Property is becoming expensive
and the value cannot be used. The idea of PLC is that of allowing
businesses to liquidate their
properties and get cash in return.” The company is conscious
of the market and in fact will be offering its clients various
options. In Malta there is a tendency for people to want to
retain their properties. “What we are doing is offering
50 per cent cash and 50 per cent shares in the company. This
can change depending on the property and the situation we have.
We are doing this because we know that Maltese do not have a
tendency to sell. However, this way, they would be getting money
and also investing in various prestigious properties. This would
mean that they would still have an investment in property,”
Mr Aquilina said.
PLC is therefore focusing on entering into partnerships with
clients. “We are conscious that businesses are finding
it difficult to raise cash and property does not add value to
the capital. There are companies which have properties in Valletta
for example which are worth Lm1m even though they might have
cost Lm10,000 some years back,” Mr Aquilina said.
The company is also giving companies a buy back option. “We
will value the property for every year between the fourth and
the 15th year. A company which opts to lease the property and
then buy it back in the 15th year might also end up making profits
because we are valuing property for the future at today’s
forecasted prices. The value of the property in 15 years’
time might be much higher,” he said.
One of the subsidiary companies of PLC is a development company
which will look into the possi-
bility of developing new blue-chip property.
“We do not want vacant properties but will be going for
an increasing asset base. The advantage of such properties which
will be in the PLC portfolio is that they will each guarantee
income and as the asset base grows, income grows,” Mr Aquilina
said.
The development company will be able to participate as a consortium
in any development deemed fit. “The fact that Midi consortium
announced that it is building around 12,000 square metres of
office spaces shows that there is a demand for such property.
Midi will be undertaking a huge expense. In my opinion this
shows we are on the right track and are a few years ahead.”
PLC wants to go for growth. “The positive side to this
company is that the value of property has always gone up. In
Malta, the property prices have never seen a downturn. The track
record of property in Malta defies any economic situation. No
negative economic situation in the country has affected the
value of property,” Mr Aquilina said.
He said the model being proposed by PLC was also tax efficient.
“Leasing is considered as an expense while when one is
paying a bank loan, it goes straight out of the cash flow. Our
idea is for companies to pay back their loans on property and
also be able to invest in the company.”
The company has an investment committee which is composed of
Architects Ray Demicoli, Edwin Mintoff, John Ellul Vincenti
and John Pace. These will work together with the executive directors
of the company George Zammit (the chairman), Chris Grech (deputy
chairman) and Christopher Pace.
The committee will assess the value of the property, its merits
and faults and then take the decision on whether to include
it in the portfolio or not.
The other directors of the company are Brian Mizzi, Richard
Cough and Ian Zammit.
The initial portfolio of property has an estimated market value
of Lm4.5m and comprises two properties on the Strand, Gzira.
One is leased to the Globe Organisation while two floors are
leased to HSBC Bank Malta plc.
Another three floors at the Portomaso Tower are currently leased
to a number of UK betting and e-commerce companies and to the
management and development subsidiaries of PLC.
PLC’s projections cater for an annual investment of Lm2.5m
in new properties.
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