€11 million spent outfitting MBR Zejtun offices on top of €26 million lease

The Economy Ministry has spent more than €11 million on refurbishing the Malta Business Registry’s offices in Żejtun –  a former showroom leased for €26 million in a deal the Auditor General described as “prohibitive”.

In a recently published preliminary report into the government’s private property lease contracts, the National Audit Office (NAO) has once again highlighted the property’s exorbitant costs. The report’s preliminary findings described “a range of issues” in such leases.

In a section of the report that analysed significant capital expenditure on government leases, the costs for refurbishing the MBR offices stood head and shoulders above the rest.

“Up to 2022, the Malta Business Registry had the highest total capital expenditure on leased property, amounting to €11.6 million,” the NAO said, excluding maintenance costs from their audit.

The office considered refurbishment costs above €1 million “a substantial financial commitment,” raising questions on whether this expenditure was “taken into account when negotiating the annual leasing rate and contract duration.”

The 9,500 square metre Żejtun offices had been leased out in shell form, with the government financing their refurbishment into offices through taxpayer funds. Almost €2 million a year is paid in rent alone.

They concluded that such refurbishments “raise questions concerning value for money” and underscore the need for a cost-benefit analysis ahead of time.

When the MBR offices moved to Żejtun in 2019, employees had raised doubts, feeling that they should have been located in a more central area.

Inaugurating its opening, both disgraced former prime minister Joseph Muscat and Minister Silvio Schembri, then-parliamentary secretary for financial services, claimed the building would help the MBR operate better, describing it as a milestone for the financial services industry.

In the months and years following the deal,  Schembri kept details hidden on several occasions, ignoring and dodging both parliamentary questions and The Shift’s freedom of information requests.

In an earlier audit from 2021, the NAO had concluded that the costs were “prohibitive”.

In its recently published preliminary report, the office highlighted five other leased private properties with refurbishment costs of over €1 million.

These included €2.6 million spent on leased offices for the Financial Intelligence Analysis Unit, €1.9 million on Transport Malta offices, €1.9 million for Malta Digital Innovation Authority Offices, €3.8 million on the Malta Gaming Authority’s premises, and €1.3 million on offices for the Foundation for Social Welfare Services.

The NAO also found the government has some 4,000 properties that are underutilised due to mismanagement or because they need investment to upgrade and update. Instead, the government rents private properties and pays millions of euro to refurbish and maintain them.