Switzerland-based petrochemical company, Proman, has purchased the property that once housed fine dining restaurants Apsara, Tamnak Thai and the Siam nightclub- located at Queen’s Park Savannah from the National Insurance Board (NIB).
The Business Guardian understands that Proman paid $20.5 million for the property, situated at 13 Queen’s Park East, next to NIB’s head offices.
The property has been vacant for over two and a half years.
IN 2021, the NIB took possession of the property as owner and landlord, after the lessor R&M Property Holdings, failed repeatedly to meet its rental obligations.
It went on the market last year.
For the NIB, the sale of the property is the disposal of an asset that was controversially acquired and was not generating revenue.
As a real estate investment, it lost value over the years earning just 50 per cent of what the NIB spent to acquire it.
In 2014, the NIB paid $37 million for the buildings- $32 million for the property and $5 million for renovation.
Controversial investment
The NIB then entered into a ten-year lease back arrangement with the owners of R&M Ltd, which is owned by Sharif Mohammed and Marie Kavanagh.
Mohammed, who had occupied the premises for 20 years before, said he purchased the 19,000 square foot property at 13 Queen’s Park East from CIBC for $1.9 million in 1991.
The terms of the sales agreement did not favour the NIB-for the first four years, the tenant R&M would pay the NIB a monthly rental of $96,000 and $125,000 for the remaining six years and after ten years, R&M had the option to repurchase the property.
By April 2018, the rent increased but R&M complained to the NIB that they were unable to pay the new rent because of challenges the business faced with inadequate parking.
The NIB had made an offer to R&M to rent car park space from its adjacent offices at $29,000 a month but the company refused as it would have raised the monthly rent of the restaurants to $154,000.
On March 3, 2021, the NIB secured the property after R&M had failed to pay the NIB its monthly rent of $125,000.
On March 8, attorneys for R&M offered to make a payment of $4,021,996.44 to settle his indebtedness.
That sum comprised:
• $1,687,500, which represented rental arrears on 13 Queen’s Park East from April 2020 to March 2021 (12 months at $125,000 per month plus VAT)
• $1,265,625, which represented rental arrears for the period July 2019 to March 2020 (nine months at $125,000 per month plus VAT)
• $1,068,496.44, representing an order NIB received in December 2020 from Justice Frank Seepersad, following a claim brought by the NIB in 2018 for rental arrears.
In the March 8 letter, R&M requested of NIB that it be permitted to re-enter the property, on payment of the $4,021996.44, and on terms contained in the original lease, so that operation of the business could resume.
However, the NIB rejected this offer.
The Apsara restaurant reopened at Movietowne last year.
NIB did not get value for money
A 2017 audit conducted by the Ministry of Finance’s Central Audit Committee on May 10, 2017 noted that the NIB did not do a valuation for the property for which it spent $37 million.
The audit determined that the NIB did not get value for money.
Instead, at the time the company relied on two valuations submitted by R&M which had the property priced at $32 million. Four months after the sale was executed, on January 7, 2014, the NIB commissioned its own valuation by Linden Scott & Associates Ltd which placed the open market value of the property at $16.5 million.
“The valuator placed no value on the buildings, stating that the buildings on the property were over 60 years old and had outlived their useful economic lives,” the audit revealed.
Furthermore, the NIB paid a premium price of $2,014 per square feet for the Queen’s Park East property, a rate higher than other properties bought around the Savannah at that time.
The Audit concluded that based on the documents reviewed and the events leading up to the NIB’s Investment Committee agreeing to the counter proposal, “it appeared that the NIB did not conduct a proper due diligence exercise prior to entering into this purchase and lease-back agreement.
“It also appeared that NIB was either unaware or failed to acknowledge the negotiating strength it possessed at the time,” it said.
“Going forward it is recorded that whenever monies from the National Insurance (NI) Fund are to be invested, for whatever reason, that NIB carry out proper due diligence exercises, as a necessity, before entering into any agreement.
"It is also recorded that the NIB needs to be more vigilant in identifying when it is in a position of negotiating strength and make every effort to exercise such strength to ensure that the best value for money is attained in such a situation,” the audit said.
The auditors expressed concern that in “the event that R&M does not exercise the options to repurchase the property, which is very likely if it is unfavourable to R&=, then according to Linden Scott & Associates Limited, the buildings would have no value, not even to NIB.”
“This was a transaction not approved by the NIB board. It was approved by the investment committee who, at that time, had delegated authority to purchase or dispose of assets under $100 million. Since then, that authority was removed from the investment committee by order of the board, leaving disposals and acquisitions of property, the sole prerogative of the board alone, so this type of high-risk investment is never repeated,” an informed source explained to the Business Guardian.
“This was no doubt a very high-risk investment because the revenue to support the rental payments was extremely volatile in nature. Restaurants and bars have sporadic moments of popularity. Patrons of bars especially are not loyal. They move where people go, and once a new place opens, they move patronage,” the source explained.
