Hold on one UDeCOTT-on-picking minute!

I just watched one of the most enlightening discussions on the concerns about UDeCOTT on C TV with Afra Raymond.  I wish C TV posted clips of its First Up breakfast show online.  Here were the key points from the interview.

All special purpose state bodies are supposed to publish annual financial accounts.  UDeCOTT's last published accounts were for 2006.

When determining whether to proceed with commercial property projects, developers usually do a feasibility study to examine, for e.g., what's the expected return on investment and break-even rents.  Raymond asked Calder Hart if this was done for any UDeCOTT projects and he replied it was done for only one commercial project - the International Waterfront Complex (IWC).  Note: Raymond didn't expect such benchmarks to apply for projects involving public goods, e.g. NAPA, schools, health centres.

When asked what was the IWC's break-even rent, Hart replied approx. TT$20 per sqft.  Break-even rent is calculated based on UDeCOTT's monthly bank loan repayments.  Raymond indicated that this raised questions immediately since at the time the market rental for commercial properties in Port of Spain was TT$15 per sqft, i.e. if you placed a property on the market you could not expect more than TT$15 per sqft.  In other words, the total earned from a fully-rented IWC would still be below the expected loan repayment figure - the gap would have to be funded from somewhere.  So how could UDeCOTT say the project was feasible when the break-even rent was above the expected market rental rates?

Further, when Raymond asked what was the value attributed to the land on which the IWC was built, as used for its feasibility study, Hart replied: "Nil." That can't be right, and if it was included, then the break-even rent would be higher than TT$20 per sqft.

Raymond stated that according to UDeCOTT's last published financial accounts for 2006, the land on which the IWC was built was valued at TT$120 million.  So when it makes the company look good, it includes the land value, e.g. under Assets in the balance sheet.  But when it won't look good, they omit it, e.g. IWC project feasibility study.

The IWC is not fully rented, months after it has been completed.  So the gap between actual rental earnings and loan repayment figures is even wider.  The IWC currently has only two tenants, both of them government ministries.  Together, they occupy only ten out of fifty-two floors of the complex.  No-one has stated what rates these ministries are paying for rent.

The financing for the IWC project is partly comprised from a UDeCOTT-obtained bank loan and subventions from the government, i.e. our tax revenue. In the absence of published accounts, no-one knows how UDeCOTT is paying back the loan, especially since it clearly can't get the break-even rental rates and the complex is not fully rented out.

It is interesting to note that the bank loan was obtained in 2006.  Hart praised UDeCOTT's ability to obtain the loan under brilliant terms (6.09%), which Raymond agreed is quite good.  However, no bank loans were obtained since then, which is to be expected: no sane lending institution would think an organisation that failed to publish its accounts for multiple successive years is a good risk.

When government embarked on this UDeCOTT-managed property expansion, the PM and responsible line minister, Camille Robinson-Regis, claimed that the rationale for it was to reduce government's rental bill for state offices.  This appeared to be a good thing.  Raymond asked one of his Cabinet contacts for an official figure of (a) the current total monthly rental bill and (b) the total sqft of rented space.  Raymond intended to use this to evaluate UDeCOTT's commercial projects.  The Cabinet contact directed Raymond to Hart - which is strange, since one would've expected the Minster of Public Administration to know these figures.  To date, Raymond has not received this information from Hart.

Further, Raymond did his own research based on publicly available information and determined that in actual fact, by building and occupying these properties, government is actually paying three times the cost of its rental bill.  In other words, it would've been cheaper for govenment to continue to rent rather than have UDeCOTT build comercial properties.  His research is published on his company's website, and was also published in his Property Matters column in the Trinidad Guardian.  To date, despite inviting government representatives to prove him wrong, no-one has stated his calculations are incorrect.

Raymond reminded us that the Prime Minister stated in the Senate that all UDeCOTT's projects are approved by Cabinet.

So it beggars several questions:

• Is Cabinet okay with a state company failing to (a) publish its accounts as expected, and (b) failed to submit feasibility studies for all commercial projects?
• How could Cabinet approve comercial projects when no feasibility studies were completed?
• How could Cabinet approve the only commercial project for which a feasibility study was done, when the break-even rent was greater than what the market can bear and the cost of the land was omitted?
• Why hasn't Cabinet rebutted Raymond's claim that the commercial building policy is actually more expensive than government's current rental policy?
• If Cabinet is approving spending on commercial property projects without feasibility studies, is it also doing this in other spheres that don't involve investments in public goods, e.g. aluminium smelter?
• Does Cabinet make any decisions based on measurable data?
• How could the directors of UDeCOTT, given what's highlighted above, be satisfied that UDeCOTT has done nothing wrong and they don't need to quit?
• Is UDeCOTT having difficulty in finding tenants for the IWC because it's asking for too high a rent - a rent that's based on its break-even rental value?
• Are the ministries who rent floors in the IWC adding insult to injury by paying above-market rental rates?
• How much of the loan repayment for the IWC is actually being serviced by tax revenues?