Gentlemen prefer bonds

Ahead of tomorrow’s opening of subscriptions for the Tumas Investments bond issue, Mario Schembri Wismayer speaks to Ray Sladden, Tumas Group Financial Director. Mr Sladden exuded confidence, enthusiasm and professionalism and was very happy to explain the intricacies of the bond issue, as well as share the company’s vision for the future.

The premises of Tumas Group are on the 20th floor of the impressive Portomaso Tower. I am invited to wait in the airy foyer of the Tower. Presently, I am asked to go up to the suite of offices, which involved the longest lift ride I have ever taken.

Ray Sladden meets me at reception and leads me into a well-appointed boardroom, with breathtaking views of a large section of the island.

We exchange some pleasantries until the chilled water arrives and then the interview begins in earnest.

What will the proceeds of the bond issue be used for? "We’ve issued a bond for Lm4 million with an over allotment option of Lm3 million, and the proceeds will be used for general financing purposes of Portomaso. Any proceeds from the over allotment will go to refinance part of the current bank facilities that we have."

Could you describe the bond’s structure? "Basically we’ve got a bond for Lm4 million. Each bond is of Lm100. So we are talking about 40,000 bonds of Lm100 each. The minimum subscription is of Lm500, which can be increased in multiples of Lm100. The interest on the bonds is 6.7 per cent and is payable semi-annually. The first payment is due next January. The bond is guaranteed by Spinola Development Company, which is a subsidiary of Tumas Group and is the owner of Portomaso. The bond is underwritten by Bank of Valletta."

What is the Group’s expected performance over the short and long term? "The bonds are being issued by Tumas Investments plc, a subsidiary of the Tumas Group. Talking about Spinola Development Company Limited specifically, the project has reached a mature stage where it is practically fully developed; in fact by the end of summer all the construction will be ready. What will be left will be the internal finishing of the apartments that we are selling. We finish the apartments as we sell them. The time came when we said ‘Now is the time to go to the public." We didn’t want to dig a deep hole in the ground and invite the public to buy into something that still had to materialise. We had already taken secured notes to the tune of Lm4.2 million from institutional investors which was intended for the financing of the Tower itself. This in addition to previous bank funding.

"You can now see the progressive manner in which we were building up towards this bond issue and diversifying Portomaso’s source of finance. As regards to the future, we plan to sell and deliver all the units up to 2005. The strategy is to sell the apartments to get their worth. We have been selling apartments from mid-2000 and have to date sold more than 60 per cent, which I think is something to be proud of. When you compare the first six months of last year to those of this year, we did even better this year than last. This is no mean achievement."

"We are placing the apartments on the market in a very structured manner. We could have dumped them all on the market but this would not have been in our interests or in the interest of our clients and future investors. What we are doing is putting a number of units on the market every year, block by block in a sequential manner.

"This structured approach ensures that standards are maintained and the intrinsic value of these apartments is respected. In fact of all those that bought an apartment, 41 bought a second one. This shows that people are aware of the increasing value of the units. We are not only setting standards here, but we are also selling an experience in lifestyle. The fact that we are administering the place ourselves ensures that standards are kept and will continue to be maintained. We own part of the tower, the hotel, the car park, the marina, commercial areas and other parts of the project, so we have a vested interest in ensuring a seamless property management service."

The Hilton Hotel has been in operation now for two and a half years. What occupancy rates does the hotel expect for the rest of the summer and next year? "We are looking at around 75 per cent occupancy. The Hilton is the premier hotel in the five-star category which prides itself on generating a higher level of income from F&B and other services relative to other hotels in its category. This is a result of a number of popular restaurants, the beach club, health centre and other amenities."

What about the conference and incentive business; has it been hit by the slump in the tourism industry? "If there was one area which was influenced by 11 September, it was this area. Having said that, a few weeks ago we sealed a deal with Hilton to extend the management agreement we have for the hotel to include our convention centre. This will be run by the Hilton as part of their worldwide convention facilities. The convention centre should be ready by early 2003 with state of the art facilities. It will be Malta’s premier business value attracting new business for Portomaso and Malta in general.

What other areas is the Tumas Group active in? "The Group is active in three principle areas. The main areas of commercial activity include property and real estate, turnkey projects, hospitality and leisure where the Group has five hotels with a total of 3000 beds; about 15 percent of the total market. Other entities include the Oracle Casino, an incoming tourist handling agency, and offices in London and Germany where specialist Tour Operating companies provide a level of vertical integration. We operate an air taxi jet service and time share facilities, where we were the pioneers. In the retail area our main business is the distribution of Kia cars. This is a brand we have managed to build into the local market with a degree of success."

Back to the bond issue. In view of the other recently issued bonds, to what extent was market timing considered when choosing tomorrow’s opening date? "In such matters, to have good timing is essential. We wanted to come to the market as soon as possible after the World Cup, but before the thick of summer, so mid July seemed optimal. The pre-placement facility launched last Friday has done extremely well and we now look forward with optimism towards tomorrow’s opening of subscription lists, welcoming investors to share in the success of Portomaso."

After the interview Mr Sladden shows me to a large office from where, I can see the sleek yachts bobbing gently at their moorings in the private marina hundreds of feet below me. I am accompanied to the lifts and descend to the ground floor, out of the superbly managed grounds and into the chaotic world outside its portals.