CM reveals £165m property deal on 50/50 homes

The Gibraltar Government has sold its 50% interests in the equity of the newest co-ownership estates for £165m, in a deal which it says has unlocked capital value in order to build new affordable homes.

The deal was revealed in Parliament yesterday by the Chief Minister, who reassured owners that their co-ownership terms cannot be altered and will be honoured by the company that has acquired these interests.
He said the deal represented "massive foreign investment" in Gibraltar even against the backdrop of Brexit uncertainty.

"The result of the success of the concept of the 50/50 schemes is that the capital value to the Government of the residual co-ownership interest across these developments is locked in until a sale crystalises or a co-owner buys out their remaining share," Fabian Picardo said.

"Put simply, the Government funds the entirety of the construction costs but only receives half of the sale proceeds when the flats are sold."

"In order to ensure that we can continue to build more co-ownership estates for future generations, we have rethought this model and the thinking of the brilliant Albert Mena and his team has smartly figured out how to put these assets to good use for future generations of Gibraltarians."

"Instead of co-owning people’s homes without having any access to that equity, or unfairly giving preference to 100% buyers ‘a la GSD’, we have sold the Government’s remaining 50% interest in the equity of the properties in the newest co-ownership estates for £165m in a manner that has unlocked the capital value of illiquid residual co-ownership equity interests and made it available to build new co-ownership estates."

The investment deal involves the sale of co-ownership interests by Gibraltar Residential Properties Limited [GRP] in Waterport Terraces, Cumberland Terraces, Bayview Terraces, Nelson’s View, Beach View Terraces and Mons Calpe Mews.

The interests have been acquired by GIC Limited, a Gibraltar-registered company that will act as the holding company for subsidiaries established for the construction and development of Hassans Centenary Terraces.

The Directors of GIC Limited are the Chief Secretary, Darren Grech; the acting Accountant General Charles Santos; and the Managing Director of Land Property Services Limited, Kevin De Los Santos.

GIC Limited has been funded through a subscription of shares by Eruca Investments Limited, another newly incorporated Gibraltar company.

Eruca also has a board of local directors including Jose Julio Pisharello, a senior and highly-respected accountant; Brian Francis, a veteran of the local property scene; and Chris Cavilla, whose banking experience Mr Picardo said "will ensure a smooth operation".

Eruca has in turn raised funds through the issue of notes to various institutional investors, all part of or managed by M&G or Barings, both leading international asset management companies.

The deal has allowed the government to fix the cost of financing for the construction period at a rate of 3.29%, Mr Picardo said.

"The deal is one that realises what would otherwise have been an illiquid residual interest into liquid cash for the development and construction of Hassans Centenary Terraces, as well as unlocking construction financing," Mr Picardo added.

"I reiterate that this sale of the Government’s 50% interest will have no practical impact whatsoever on homeowners."

"Co-owners will just deal with 'GIC Limited' instead of 'Gibraltar Residential Properties Limited' should they choose to sell their property, or to buy any or all of their remaining co-ownership share."

"The terms and valuation for these co-ownership shares will continue to be determined exactly in accordance with their underlease and trust deeds."

"Nothing will change."

Mr Picardo said there was no security or mortgage over any real estate interest in Gibraltar, adding that there were no Government guarantees provided in connection with this transaction.

The struicture of the deal, he added, was "flexible and iterative".

"It allows for a programme to ensure we can always afford to construct homes for our people on a 50:50 basis," he said.

"The 50% that is retained by Government on the older estates is used to develop the construction of new estates and in turn when this new 50% is added to the pool of assets, this will provide the foundation for constructing future estates and so it goes on."

Mr Picardo said the government would soon bring legislation to Parliament in order to transfer certain rights from GRP to GIC. He said he would offer a briefing for the Opposition and Independent MP Marlene Hassan-Nahon ahead of that.

Yesterday the Leader of the Opposition, Elliott Phillips, said the GSD would look into the detail of the deal before commenting on it.

But his initial reaction was lukewarm.

"The government seems to be selling off the precious assets of our community," he told Parliament.