Interview with George Zammit
Property a cut above the rest

SINCE IT WAS RECENTLY SET UP, THE PROPERTY LEASING CO. LTD, HAS HAD AN IMMENSE RESPONSE FROM THE LOCAL MARKET, PARTICULARLY FROM COMPANIES SEEKING A FEASIBLE MEANS TO LIQUEFY THEIR ASSETS. DAVID LINDSAY SPEAKS TO PLC CHAIRMAN, GEORGE ZAMMIT, ABOUT THE DRIVING FORCES BEHIND THE INNOVATIVE PRODUCT THE COMPANY OFFERS

The Property Leasing Company is bound to be most attractive to companies or organisations suffering from the all-too-common symptoms of having large amounts of funds tied up in their commercial premises. PLC proposes that, by exchanging such cumbersome premises for a combination of cash and shares in PLC, such afflicted organisations would be able to release funds for other business requirements, while at the same time investing in the company that takes on the property.

PLC was set up with the idea of acquiring and developing a unique portfolio of first rate commercial property to lease specifically to blue chip tenants – who require properties located in excellent locations and finished to high standards of design and architecture.

In targeting the local market PLC has identified Malta’s changing economic climate as leading businesses toward the concept of renting, as opposed to owning, the premises that they use. Moreover, Malta has seen significant changes in the lending market, leading several businesses to the need to release large capital sums for business purposes.

The Property Leasing Co. has taken this concept, which has already been tried and tested in many countries, and applied it to the local market. The reasoning is simply that the benefits of leasing a commercial premises far outweigh the more traditional idea of owning an expensive corporate facility.

According to Mr Zammit, "Some of the advantages of the scheme include cutting down on the interest on loan repayments, releasing precious liquid cash, and improved tax efficiency prospects that Mr Zammit explains are enticing to financially overextended companies.

PLC proposes to purchase properties currently owned by businesses in exchange for cash and shares in PLC.

George Zammit explains, "The Maltese businessman has begun to think in terms of leasing rather than owning the property he uses for his business. In most highly developed countries, businesses no longer buy property, as they find it more tax-friendly to lease, while leasing doesn’t tie up valuable capital, which could undoubtedly be put to better use for the business.

"The main point behind the exercise is that there has been a slow-down in the economy, coupled with a marked change in the mentality of the local banks.

"However, given the fact that many Maltese business owners are attached to their properties, we also offer a buy-back option, whereby one can sell a commercial premises to us with the option of buying back the property at a pre-determined price. Such an arrangement would greatly assist companies seeking capital with which to expand their operations. Companies can also choose to remain on as tenants, whether they decide to partake of the buy-back option or not.

"Many companies need to liquefy their assets in order to expand their companies – effectively transforming their brick and mortar assets into paper. Moreover, they can choose to stay on as tenants and even prescribe to the buy-back option.

"We have balanced the Maltese mentality into the equation with the buy-back option, which is unique to Malta, and has been designed specially for the Maltese market."

Mr Zammit explains the benefits of the offer, "A company, by selling its property to us, maximises on the value of the property by exchanging the value of his property for a cash sum and shares in PLC. Effectively, instead of investing in one property, that company would then be investing in all the properties owned by PLC – greatly reducing the company’s exposure to risk."

PLC specialises in commercial properties. In fact, its directors have put up many of their own properties for the initiative’s initial portfolio, worth an estimated market value of Lm4.5 million.

These include 120 The Strand, Gzira - currently leased to the Globe Organisation – the ground and first floor at 114 The Strand, Gzira - and the 12th, 13th and 14th floors at the Portomaso Tower.

PLC’s estimates provide for an annual investment of Lm2.5 million in new properties, which may already be rented out, or which will be available for immediate rental.

Mr Zammit comments, "These blue chip properties are scrutinised by our investment advisory committee, which was set up to advise the board of directors on any investment proposals. The members of this committee are the architects Edwin Mintoff and Ray Demicoli, John Ellul Vincenti, John Pace, and the executive directors of the company.

"The team considers all properties that would potentially fit the bill and then makes its recommendations to the board."

The company’s executive directors are made up of, apart from George Zammit, Dhalia’s Chris Grech as deputy chairman, the Globe Organisation’s Chris Pace as director and non-executive directors Brian Mizzi, Richard Clough and Ian Zammit.

Mr Zammit explains that the supply side of high quality office space is great at the moment – a supply that is expected to take many years to fill. However, once that point is reached, he explains that PLC will tweak its operations for a more niche market in order to meet demand with supply.

For the time being, PLC is definitely not lacking in interest from prospective clients. Mr Zammit explains, "There has been a good deal of interest from the local market, while there has also been a significant demand from regulated businesses, such as overseas betting companies looking to run their operations from Malta.

"With the MFSC looking to promote business generation from overseas, Malta is being placed on the map. Accordingly, more and more companies are becoming interested in what the country has to offer. This trend will create a large surge in the demand for the type of first class office space that we offer.

"Non-Maltese companies are choosing Malta as the location for their administrative offices, and this is creating a strong demand for prime, rented commercial property. The growth of regulated services in Malta - a trend expected to continue - is further contributing to this increased demand.

"This concept is in line with similar concepts that have been in successful operation in other countries for many years.

“On the other hand, property is a stable investment and it never goes down in value – particularly with Malta’s shortage of land.

"Our targeting of properties is very selective and the property market of the future certainly appears to include many more towers for purpose-built offices – the potential is enormous and many companies are just sitting on their capital, without capitalising on it.”

PLC is to be the parent of a group of companies, including companies set up to own, manage, and develop property. The property development company participates in developing office space with the help of the wide-ranging expertise that PLC’s directors and staff have in the field.

The subsidiary company will look after the developing of prime commercial property, which it will lease to blue chip organisations.

Mr Zammit comments, "The demand for blue chip commercial property is high. New companies coming in to Malta are looking to rent quality office space, but invariably have trouble finding their requirements. This subsidiary will see to meeting this demand."