[posted 3 Oct 2012,1630]
Fiji Labour Party has written to the Fiji National Provident Fund seeking information on its decision last year to expend a further $12 million on the failed Momi Bay resort development project.
The FNPF Board spent $12m in July 2011 to buy additional land for residential lots for sale at the Momi Bay complex, work on which stopped in October 2006 after the developer defaulted on loan repayments to FNPF and was unable to pay the contractors and suppliers.
FLP wrote to FNPF last October seeking details on the purchase of the $12m residential lots. The Fund sent a perfunctory response without disclosing any details on the purchase of these lots.
One year later, with little visible activity at the resort, we are pushing for answers again. Obviously, something is not quite right here. Why is the FNPF management being so secretive about the $12m land deal? If all is above board, why are the questions not being answered?
Why tell us in November 2011 that a hotel operator will be appointed soon? But almost a year later, there is still no sign of a hotel operator!
FNPF had invested $99.7m in the Momi Bay development. In 2009, as the first mortgagee, it tried to auction the property, but failed to realize anything near its true value. Following this, the Board decided to write off $55m reducing the value of the property to $44.7m.
In its 2011 Annual Report, it disclosed that it had expended $12m in July 2011 to buy additional land at Momi Bay and this was to be part of the Momi Bay Development.
On 27 October 2011, FLP wrote to chief executive FNPF questioning the absurdity of the Board’s decision to “throw good money after bad”: “To put it bluntly, the purchase of the additional land to complete an incomplete development which did not attract any worthwhile offers when put to auction seems not only absurd but highly questionable as to its actual intent.
“It is a well known fact that over the years the Fund has made investments in projects which have resulted in accumulated losses of around $700m. A number of these projects were government/regime driven such as ATH, GPH, Momi Bay, Natadola Bay etc.
“As a consequence of these ego projects the long term sustainability of the Fund is now at risk and the Board has decided that it must bring in “Reforms” which, in short, means a substantial reduction in pension benefits of the existing and future pensioners…”
In the case of the additional $12m being spent on Momi Bay, FLP reminded the Fund that it had a duty to fully disclose to the public, FNPF members in particular, details of this highly questionable deal.
We sought the following information on the matter:
- the total area of land acquired
- the previous owners/lessees of the subject land
- the land area and price paid for each allotment if more than one property or parcel of land was acquired
- on whose advice/recommendation was the land acquired
- was a due diligence report prepared
- the agents, if any, through whom the deal was negotiated and the commission/fees paid to them
FNPF replied on 2nd November 2011 to say that after considering various options, the Fund had decided that the best alternative for it was to complete the hotel and “to immediately sell the residential lots to recover investment. Work has commenced in this regard including the appointment of the Hotel Operator soon.”
It did not provide the additional details sought. Members of the Fund are still in the dark as to how much land was purchased with $12m of their money, who was the land bought from and how much was paid for each lot purchased?
Nor do we know the name of the agent, if any, that negotiated the deal and what commission or fees was paid for it.
It is well known that the Bayleys real estate company had been involved with the sale of the initial residential lots. It had also handled the failed auction of the property in 2009 which had realized a mere $41m bid for the partially completed luxury resort valued, at the time, at about $80m but later written down to $44.7m.
It is now more than a year since the additional land was purchased. Our information is that there is no visible sign of any activity at the resort site.
This week we wrote again to FNPF and its auditors, Pricewaterhouse Coopers seeking further information on the $12m expended and details surrounding the purchase of the land.
FNPF’s silence on the deal is highly suspect considering that the Fund has already frittered away massive sums of members’ money, some $700m, in bad investments.
Fund members are paying the price for such imprudence. In March this year, pension annuity rates were virtually halved for existing pensioners, down from 15-25% while a rate of 8.7% was set for future retirees.
It has left more than 90% of existing pensioners with an income of less than $400 a month – sentencing these seniors to a life of poverty in their old age! Nor will future pensioners be able to retire with dignity on an annuity of 8.7% considering that more than 60% of our workers receive below poverty level wages.
Yet the FNPF board and management feel they can continue to whittle away members’ hard earned contributions without being held accountable for their Ill-conceived investment decisions.
But this is not all. December last year, the Fund signed a partnership deal with Tokatoka Tahau, the Momi Bay landowning Unit (Fiji Sun 25/12/2011). The landowners were jubilant to receive $1.2m in premium from FNPF for a 99-year tourism lease for the resort site. They were also promised education and community development funds, training, business and job opportunities at the “new” resort…
Work on the site was to resume at the end of the second quarter this year. All very well ... but one wonders whether these promises will ever be fulfilled!