The National Insurance Board (NIB) has spent $37 million to acquire the property housing Apsara and Thamnak Thai restaurants in Port of Spain and has promptly leased it back to the owners at $96,000 a month for ten years.
After five years, owners Sharif Mohammed and Marie Kavanagh have the option of repurchasing the property or leasing it again for another five years.
NIB is spending $5 million on repairs to the building.
Adrian Bharath, chairman of NIB, said yesterday the lease was broken into two rent periods.
“The lease is separated into two lease rent periods. For the first five years—$96,000 (plus taxes) monthly. At the end, there is an option to purchase or re-lease for a ten-year period. The second rent period— $125,000 monthly for the next five years, with the option to purchase at the end.”
A financial source yesterday likened the transaction, in substance, to a loan of $37 million at a fixed rate for ten years, punctuated by an option to purchase at the end of five years.
The Sunday Express understands the property was valued at $16.5 million in January by a named company (on behalf of NIB). This compared unfavourably to a valuation by the property owners, which had it pegged at $29 million.
NIB paid $37 million, more than twice the amount the property was valued at, to R&M Property Holdings
(owned by Mohammed and Kavan-agh) for the property, exclusive of taxes, which amounted to about $3 million.
The sale was finalised in October and $3.7 million (ten per cent) was paid to WM Investments Ltd.
The final sum was paid to R&M Holdings in March.
The Sunday Express was told the investment had been originally presented to the previous board but was rejected for a number of reasons, among them the fact that R&M Property Holdings had no audited financials and the risk was considered too high compared to the return.
The Sunday Express understands the present board decided to take back up this investment and made a counter-proposal.
In August 2013, the decision was taken to purchase the property.
“No independent valuation was done...and this investment was not recommended by the manager in charge of investments. They took everything from R&M Holdings at face value. Also, part of that payment was a $5 million to be paid for repairs,” an informed source explained.
When the Sunday Express contacted NIB, it answered questions through public relations agency representative Roxanne Colthrust.
NIB confirmed it recently acquired Lot no 13 Queen’s Park East, Port of Spain, for $37 million “with a condition that prescribed enhancement and upgrade works be carried out at cost of $5 million”.
“This is considered prime property on one of the most valuable strips in the country. This move has been a strategic one, to provide the company with a corporate head office and build valuable business investments,” it said.
NIB said it has been working over the last ten years to secure parcels of land at Queen’s Park East “which is part of a long-term plan to own valuable real estate”.
It said feasibility studies have been completed and are currently being “revisited and reviewed to determine what mix of commercial activities would afford the highest rate of return on these parcels”.
Asked why $5 million was being spent to repair a property, the NIB responded: “The property is not being repaired. The building is being enhanced and upgraded, in accordance with a scope of works which was determined by an independent quantity surveyor. The NIBTT’s desire is to ensure the property stays in a well-maintained condition, thereby maintaining the value.”
NIB said it considered several valuations before acquiring this property and all necessary due diligence was conducted for the project.
“The NIBTT’s investment committee, which has representation from Government, business and labour, presided over the review and decision-making process of this transaction as the acquisition cost was within their purview. The NIBTT confirms that this is a bonafide commercial transaction,” it said.
Questioned on how the acquisition of the restaurant property dovetails with NIB’s business, it clarified: “The NIBTT is interested in the property, not the restaurant. The property was acquired and leased back to the owners for a fixed period.”
The NIB said it has no plans to demolish the property.
Return on investment
NIB said: “Financial projections have been conducted and the return on investment includes a capital appreciation of seven per cent per annum, as well as the annual lease rental is expected to provide a return of approximately nine per cent.
“The strategy of the NIBTT is to seek investment properties with a potential return of approximately nine per cent, including rental income and capital appreciation. This allows us to provide our customers with more assured, sustained benefits and payments,” it said.