CYPRUS: Huge EUR 1.5 bln Larnaca project gets the kiss of life

In a bid to strike a better deal the government has ditched its stalled tender procedure for the redevelopment of Larnaca port and marina to enter new negotiations with the lone bidder to reshape the town.

Despite cancelling the tender process for legal reasons the Ministry of Transport and Communications said the Euros 1.5 bln project was too big to shelve.

Recognising the great importance of this project, both for the town of Larnaca and the state in general, the Ministry will proceed with negotiations in the framework and flexibility provided by the legislation on public concessions to conclude a Concession Contract, with the only venture that did not withdraw from the process, said the ministry.

It seems the complex tender procedure hit a brick wall which delayed the project for several months, now the consortium � with UK and Israeli interests – hopes to get a deal across the line in a matter of weeks.

The government decided to cancel the procedure and go into direct negotiations on exclusive bases as we were the only bidders left in the race, we’ve met the minimum requirements now it’s down to the percentage of revenue the state wants, a source close to the project told the Financial Mirror.

A billion-euro plus bid to develop Larnaca marina and build a green port, which also includes mixed real estate development, is already on the table, it’s now about assessing the financial aspects.

We will revise the offer over the next two weeks and aim to close the deal within the next six weekswe are going to find a solution, said the project source.

It’s all about the financial model and evaluation, with guarantees and minimum payments and percentage of revenue from the operation, I think we can make the numbers work.

The proposal regards the restructuring of the marina into a 600-berth multi-purpose facility, expanding the port and surrounding land development projects over an area of 220,000 m� which is expected to see the consortium invest around EUR 1.5 bln in the project.

The build-operate-transfer project involves UK-based Prosperity Group, a company with extensive experience in international large-scale mixed-use developments and Israel’s REM International which is part of the group that owns and manages the port and marina of Eilat in Israel.

Initial investors AMPA Ltd and Israel Shipyards Ltd pulled out of the final bid.

This venture also includes Cypriot companies forming a larger consortium under the name Kition Ocean Holding, which will be the legal entity undertaking the project.

Under the proposed venture, it is estimated that the state will receive in excess of Euros 13 bln during the lifetime of the project which includes the 125-year lease on the real estate.

Larnaca Mayor Andreas Vyras said the town expected a swift positive outcome in the direct negotiations the state has launched with the consortium for unified development of the port and marina.

“The positive thing is that the process continues via direct negotiation with the only bidderwe expect this new procedure with the bidder to be a short one, Vyras told reporters.

As Larnaca municipality, we expect that both the state and the investor will take all the necessary actions and solve the various problems that have arisen so that this very important project is realised, he added.

Vyras said that in a phone conversation he had with Transport Minister Vassiliki Anastassiadou, he was assured that negotiations would run smoother but there was no time frame given.

Apart from the development of the marina with the latest technological infrastructure and plans to turn the port it into one capable of serving large vessels, with the expansion of piers and docks and the construction of a modern passenger terminal, the consortium is also planning residential and commercial development with innovative architecture, cycle lanes and parks.

Knowledgeable sources told the Finance Mirror that the complete project will span over 10 years as it includes building two hotels (lifestyle/business), nine office buildings (mixed use) of up to 15 floors each and six luxury apartment blocks up to 13 floors each.

There will be large residential and commercial real estate development to support the marina and port, with affordable housing so people can live, work and set up business in the area.

Larnaca’s rundown marina will get a totally new facelift with modern amenities and facilities including a dry repair dock and a place where yachts can actually be built.

Good for business

Other sources close to the deal also pointed out that Larnaca port needs a new lease of life after being ignored for so long.

To make it a modern productive port it needs to have lights, there’s no passenger terminal, plus new cranes are also required. There are also ideas for a tax-free shopping centre as a connecting point to the port.

Our intentions are to substantially upgrade port operations, invest a lot to improve the existing infrastructure and invest in new equipment which will make it work faster, more efficiently, quicker and easier, said a source.

By doing that, we will be able to bring to the port twice the amount of business it has today, more revenue for everyone and more business for Larnaca.

Everyone involved in the development says they are focused on making Larnaca a place that people want to visit and do business in.

Larnaca has supported us, we have zero issues with the mayor or the business community, everybody is pushing for this regeneration, said the project source.

The Mayor, as well as, the Larnaca chamber of commerce understands our plan and the positive impact this project will have for Larnaca and its people. They are keen for this project to go ahead.

The BOT project will see the government receiving a fixed rent and a percentage of the revenue generated through a concession agreement with the port/marina operated on a 40-year lease and the real estate is acquired on a 125-year lease.

After 40 years the port and marina can be handed back to the government who will then decide on their management.

Local authorities, businesses and other stakeholders are keen to see the project take off as Larnaca will benefit significantly from the development.

The venture will upgrade Larnaca to the standard other towns have reached over recent years, and not be considered the poor neighbour anymore.

Plans also foresee the construction of luxury homes along the Larnaca marina which will more than double in size.

Source: The Financial Mirror