Malta Business Registry’s €31m rent for bathroom showroom ‘prohibitive’ – Auditor General

The premises the Malta Business Registry (MBR) chose for the location of its offices has caused concern, according to the Auditor General’s latest report describing the €2 million per year being paid by taxpayers for a showroom in Zejtun as “prohibitive”.

The audit found that through a 15-year agreement, signed in 2018 under the guidance of Economy Minister Silvio Schembri, the government will be paying a total of €31,264,126 to use the premises at Alex Mercieca’s Bathroom Centre.

In addition, the lease agreement, which was concluded following an expression of interest instead of a proper public tender, did not include expenses amounting to more than €5 million, also funded by taxpayers, for the shell form floors to be transformed into offices.

All these publicly funded improvements will be passed back to the owner of the private building at the end of the lease in 2033.

The NAO’s audit found these costs “prohibitive” and warned that this contract “raises questions on value for money”.

Just a few weeks ago, Minister Silvio Schembri refused to publish the lease agreement for the MBR premises but insisted that the lease was costing the government less than half a million a year.

A scandalous deal

Until a few years ago, the Malta Business Registry formed part of the MFSA and produced substantial revenue for the Authority.

When the since-disgraced Joseph Cuschieri was appointed to lead the MFSA, he decided that the registry should become a different government entity with its own premises and administration, significantly increasing its operating costs.

MBR new offices inauguration – now-disgraced former Prime Minister Joseph Muscat, CEO Joseph Farrugi and Minister Silvio Schembri addressing employees

The MBR moved to a bathroom showroom in Zejtun and signed a contract while the site was still under construction.

Through this 15-year agreement, the MBR agreed to lease several floors and car parking spaces in shell form.

Instead of obliging the owner to finish the building to its required standards, the MBR decided to conduct this massive infrastructural work itself, paid by taxpayers.

The lease agreement was amended a year later, allowing the government to rent more space in the same building, paying the owner much more than his original bid.

This government deal will eventually mean that at the end of the lease Alex Mercieca will get back a fully finished building paid by taxpayers.

The NAO found that the MBR spent as much as €5.1 million on “building improvements” including almost €1 million for heating, ventilation and air conditioning.

The MBR also agreed that the annual lease was to increase by 3% every year for the 15-year period, independently from actual inflation costs.

In its report, the NAO noted that while “the evaluation process for the award of this contract was properly documented and backed up by a lease agreement, “payment of over €26 million in rent for premises, which at the end of the lease term will still be property of the lessor, raises questions from a value for money perspective.”

MBR paying company for canteen business

The lucrative rent contract was not the only area found to be lacking by the NAO.

The Auditor  found that part of the newly leased premises is now being used by a caterer to provide a canteen service to the MBR’s 130 members of staff.

However, through a three-year contract, the caterer is not paying any rent for conducting his business and instead is getting paid €40,000 a year from public funds to provide daily meals for the MBR’s staff “at a fixed subsidised process”.

All profit made from this business venture is retained by the caterer, who doesn’t pay any rent at all for using the fully equipped kitchen paid for by the MBR.

In its investigation, the NAO also found several other irregularities in procurement including the expenditure of hundreds of thousands of euros on security and cleaning tenders.