18th January 1998

Contents

Wellawatte mill property sale: BOI seeks foreign deal

By Mel Gunasekera

The Board of Investment (BOI) is poised to take over the prime land belonging to the now defunct Government Owned Business Undertaking (GOBU) Wellawatte Spinning Mills and sell it to a foreign investor for development, The Sunday Times Business learns.

The BOI is currently negotiating with a foreign investor and a local development bank has been commissioned to conduct a due diligence study, sources said. This comes in the wake of failed attempts by the UDA to attract a developer.

The mill was closed 10 years ago and the property is still costing the state Rs. 1 mn to maintain each year. At the time of closure, the mill was saddled with a debt of Rs. 525 mn. The debt has been reduced to around Rs.450 mn by selling off machinery and other assets, an official said.

About 12.5 acres of prime commercial land are up for grabs, excluding the road reservation.

"This is the largest parcel of unoccupied prime land available in Colombo, at present, and the government is keen to develop it into a model town," the official said.

A cabinet appointed tender board had evaluated bids responding to UDA tenders, from interested parties on many occasions. The present regime too had called for fresh tenders.

The tender called in October last year attracted around 30 applications. Four were considered. Two applicants wanted the whole property, and two wanted only a part of it. "But, the price was not right, and we did not want to break the property and sell it. The government would lose out because we have to provide a roads to two separate properties," an Industries Ministry official said.

BOI officials argue otherwise. They say that the property may have to be broken up, if suitable bids are not received. "It is important that developers should recuperate their investment, so we may break it up and sell it," a BOI official said.

However, The Sunday Times Business learns that none of the bidders offered a reasonable amount for the property. Property developers estimate the land would fetch around Rs. 500,000 or more for a perch.

Observers say the biggest mistake the government made, was not setting a floor price for the property.

However, the highest bid received so far did not amount to even Rs. 200,000. "Because the offers were not attractive, we advised the President against accepting it. After all, you can't sell the family silver for a song," the official said.

"The President is keen that the land is not sold for industrial purpose. She would like a low cost housing scheme or a town centre to come up instead," a UDA official said. "However, we don't rule out the property being sold for an office complex," the official added.

Central Bank to rise from ashes

By Ruvini Jayasinghe

Building and reconstruction work on the Central Bank's twin buildings is scheduled to be completed by the end of the year.

E. D. Zublin A.G. which won both building contracts, was in the process of constructing the new 12 storey structure when the January 31, 1996, terrorist bomb destroyed the Central Bank's premises next door.

The Rs. 2.34 billion, 12 storey new building is scheduled to be completed by June this year. "We are planning to move in as soon as its ready," Central Bank Governor A. S Jayawardena told The Sunday Times Business.

Reconstruction of the damaged building will be completed by December or January 1999. By early next year we will operate fully from our two buildings, he added.

Structural damage to the destroyed building had been fortunately minimal. The left column of the centre block of the three block building is dented and has to be replaced, Mr. Jayawardena said. This is the only major structural damage to the building. The other repairs are to the interior.

The reconstruction undertaken at a cost of Rs. 1.1 billion will retain its front facade, a land mark in Colombo city but improvements and changes will be made to the interiors, windows, floors.

The most noteworthy change will be the new state-of-the-art security systems installed in both buildings.

Improvements will also be made to the old buildings' windows which will be replaced with modern glass, flushed with the walls. Windows in each of the nine storey and two basement building will be reduced from four to three. A new type of flooring will replace some of the damaged floors.

E.D. Zublin which specialises bank structures and was already mobilised on the construction of the new building, was the obvious and best choice for the reconstruction work on the damaged building, Mr. Jayawardena said.

Calling for international tenders, evaluating and awarding them would have taken a minimum of two years, Mr. Jayawardena said. By which time sea damage to the destroyed building would have worsened. "We would have also had to continue paying a heavy rent for leased out buildings for another two years. It was enormously profitable for us to mobilise the same people for these reasons, also considering the fact that Zublin had agreed to rebuild at the 1991 prices quoted for the new building," Mr. Jayawardena said.

He added that Zublin has reconstructed the bombed out buildings of Beirut in Lebanon.

The bank is not using any insurance cover to fund the rebuilding. Central Bank reserves are being used for the reconstruction, Mr. Jayawardena added.

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