Finance Minister Colm Imbert has asked the Central Bank to investigate the alleged undervaluation and sale of Mausica Estate lands owned by Clico which had been in the works from May 2015.
Imbert confirmed this last Friday morning.
This followed queries raised about the sale of the 514 acres of land located north off the Arima Old Road to Kall Properties Ltd. The company is headed by Arvin Kalloo.
Documents received by the T&T Guardian show the price negotiated by Clico’s senior property manager and agreed on was $76 million, or $3.39 per square foot.
The Clico Policyholders Group has raised concerns about the transaction and questioned if the property was being sold at an undervalued rate “at the expense of Clico’s statutory fund and by extension the assenting policyholders.”
The group’s chairman Peter Permell questioned, “Was an up-to-date valuation prepared and by whom since the last one was done in 2012, four years ago? Was there a competitive and transparent auction process undertaken by Clico for the sale of the land? Did the sale receive Clico Board and Central Bank approval?
“The sale price of $3.39 per square foot for the Mausica Estate land is too low even if it appears that the land was valued as agricultural lands and not commercial/residential initially,” Permell said.
Imbert, whose ministry liaises with the Central Bank, said: “This matter was only drawn to my attention last week and I have asked the Central Bank to investigate it to see if there is any truth in the allegations.”
Queries have also been raised as to whether the sale was approved by Clico’s board—or only a Clico sub-committee—and whether Clico’s policies and procedures for disposal of real estate assets were followed.
The sale started from mid-2015 under the previous government and Central Bank leadership, and was in train up to late last year. It was delayed up to last month. A squatter issue was in play up to then.
The new PNM administration assumed office on September 7, 2015, and new Central Bank leadership was subsequently appointed in December 2015.
Clico directors have declined to speak on the matter since they noted Clico has been under the oversight of the Central Bank since the 2009 collapse of the former financial giant.
Queries were sent to Central Bank last week on the matter. There was no reply.
Offer approved by Clico team
It was confirmed that Town and Country Planning outline permission was granted in January 2013 to develop a portion for residential purposes. It was, however, noted that for this approval no “built development would be permitted on land on a gradient which exceeds 1:4, and/or which lies above the 91 m (300 foot) contour.”
It was noted that given the planning permission, only 73 acres or 15 per cent of the total acreage could be developed.
Acquisition cost was estimated in August 2001 as $17.5 million.
The property valuation at February 2013 was $46 million and outline approval was granted to develop an area below the 90m (300 ft) contour—approximately only 73 acres of the 514 parcel.
In July 2012, the valuation was put at $66 million. But this was assuming outline approval was granted for the entire (514 acres) estate.
According to a letter of offer, on July 8, 2014, Angel Lites Green Technology Development put in a bid to Clico of $75 million. But according to information, that company failed to provide information for Clico to proceed with the sale.
The following year, on May 25, 2015, Kall Properties Ltd (KPL) put in a written offer to Clico of $76 million.
The letter signed by KPL director Arvin Kalloo formally offered $76 million for acquisition.
Kalloo also heads Kall Co Ltd which received the $120 million Maracas Bay upgrade contract under the last administration. That is now being examined by the Attorney General.
Documents confirm the price was negotiated by Clico’s senior property manager.
A document from Clico’s Asset Recovery, Properties and Investment Committee indicates that “Factors to be noted” included that the $76 million offer was “approximately 65 per cent above the valuation amount.”
It was also stated that if the transaction failed to materialise and “in light of the current economic circumstances facing the country, it would be difficult to negotiate a higher price.”
It was also stated that if the property is kept by Clico for equity or debt swap, any future consideration would be at the valuation amount which is $30 million below the current selling price.
The offer was described as being approved by Clico’s Asset Recovery, Properties and Investment Committee on June 3, 2015, and accepted.
In-house debate on selling
A document headed “Minutes” of the committee’s meeting bore no signatures. Several members of that committee, including Gerald Yetming, were subsequently dismissed and also resigned within days after the meeting.
The minutes state that the managing director then said based on projected cash flow, it would not be necessary to sell the Mausica Estate in order to settle the Government debt owed by Clico.
However, it was noted the committee considered whether there “would be any benefit to selling the property in any event.”
The committee noted that “an offer of $30 million in excess of the statutory fund valuation had been received” and the $30 million “represents profits Clico would not be able to realise in settlement.”
The committee’s senior property manager told the committee that approximately 400 acres of the land is “unusable.”
The committee approved the sale “as is” and urged the manager to advise prospective buyers that Clico would not be able to provide “vacant possession.”
On July 13, 2015, a sale agreement was executed by Clico. On July 29, 2015, a downpayment of $7.6 million was received.
On July 29, Clico executive chairman Wendy Ho Sing wrote Central Bank seeking permission to sell the Mausica Estate asset, noting the downpayment made and pledging proceeds from the sale to be reinvested in assets for the Statutory Fund.
On August 10, Central Bank’s Financial Institutions Supervision Unit (FISU) granted approval.
KPL, on November 19, requested that the deed of conveyance be made in favour of a new company, Mausica Estate Developers Ltd (MEDL).
The company cited a sale agreement clause that the transaction be completed in favour of the purchaser or “whomsoever the purchasers shall appoint.”
Companies Registrar records show MEDL was formed on August 11, 2015. Records were updated in January 2016.
Clico Board approval required
Clico board approval was said to be required for the name change.
In a December 9, 2015, internal e-mail from a Clico official (alleged to be in-house counsel) to Clico directors, it was stated that while a November 25, 2015, meeting of Clico’s asset committee had agreed to the sale, in the absence of (Clico director Raymond) Bachoo at an adjourned November 30, 2015, board meeting,” the matter was not placed before the Board for its approval.”
It was noted the purchaser was awaiting board approval and “hereby sought” sale of the land to Mausica Developers Ltd (MEDL) for the price of $76 million.
The directors were subsequently warned that considerable attention had been paid to “binding” Clico and Clico could face action for “specific performance “as there was a duly executed agreement in place. The official said the sale “could be considered a fait accompli,” but the change of name request (from KPL to MEDL) shoud be noted.
She said the agreement could be enforced against Clico which could face a lawsuit since $7.7 million had already been paid down towards the transaction.
A December 11, 2015, e-mail from Clico director Krishna Boodhai to directors, however, noted that while Clico’s asset committee had agreed on November 25 to the sale, in the absence of Bachoo from the adjourned meeting, the matter had not been placed before the board for approval.
Clico subsequently sought legal advice on the issue from Lex Caribbean Ltd which replied in December 2015.
While Lex Caribbean couldn’t confirm board approval was needed for the purchasers’ name change issue (from KPL to MEDL) its legal advisor saw no problem with the change if the stipulation for a nominee was in the agreement.
But the advisor also noted the minutes of the sub-committee meeting regarding authorisation of the transaction were never confirmed.
Nor did the legal advisor see evidence the matter had ever proceeded to the Board for approval, though this was described as “explainable” since the company “was in transition in June 2015.”
The legal advisor concluded the matter should come formally to the Board for its approval.
Clico chairman Wendy Ho Sing did not reply to calls. Former finance minister Larry Howai and former Central Bank governor Jwala Rambarran did not immediately respond.
Purchaser puzzled
The Mausica sale was delayed up to last month.
A female squatter had occupied 469 square metres of land and agreement was reached last month for her to vacate, it was confirmed.
Clico’s Mausica property, according to documents, had been occupied by “various illegal squatters” over time. In May 2013, Clico paid $128,600 to execute an enforcement order to demolish eight unauthorised structures. A security firm and the Defence Force also patrolled to prevent illegal occupations and cultivations.
KPL’s Arvin Kalloo declined comment on the sale and delay.
A KPL source yesterday confirmed the matter was not “going through” at the moment and KPL’s lawyers have been trying to talk to the vendor to ascertain the status of the issue following KPL’s downpayment.
Kalloo is also managing director of Kall Co Ltd, a St Helena construction sector services company formed in 2006, whose clients—according to its website—have included WASA, Nidco, T&TEC, EMBDC, Ministry of Works and Infrastructure and the Housing Development Corporation.
Policyholders group supports probe
Permell who in response to the Sunday Guardian called for the Finance Minister and Central Bank to immediately halt sale of the Mausica land and probe the matter, has cited various issues.
He said the proposed sale raises the question, ‘“Who’s guarding the guards?’ Is the Central Bank-appointed Clico board selling the ailing insurer’s assets, pledged to the statutory fund to protect policyholders, at an undervalue and if so, why so? Could this perhaps have anything to do with the fact that the new Government-approved 2016 Clico Resolution Plan doesn’t include payment of the balance due to assenting EFPA policyholders?”
“Also, are adequate checks/balances in place to ensure Central Bank can carry out the dual role/function of regulator/manager since the collapse of Clico, or should such inherent conflict of interest situations simply be avoided?
“This issue also reopens similar questions about previous Clico real estate asset sales. And, if this fresh set of questions is allowed to go unanswered, there could be serious implications for future asset sales such as No Man’s Land in Tobago, the proposed Sandals Hotel site.”