Shangri La and Hilton contrasting deals

Despite claims by the UNP and the JVP that valuable land was undervalued and sold to the Shangri La hotel chain by the Government, the Daily News understands that the company will make a total investment of US $ 125 million on land alone. It recently signed an agreement to purchase six acres of land opposite Galle Face Green for US $ 75 million. Another four acres are to be sold for US $ 50 million.

This is in contrast to the Hilton Hotel deal signed by the Urban Development Authority (UDA) during the UNP regime in 1984. Then six acres of land at Echelon Square, Colombo 1 where the Hilton hotel stands today was leased to Cornel & Company Ltd for Rs 136 million.

This was done by the UDA whose Minister in-charge was Prime Minister Ranasinghe Premadasa. Therefore, Cornel and Company Ltd subleased the land to Hotel Developers (Lanka) PLC at an enhanced value of Rs 250 million thereby making a windfall profit of Rs 114 million almost overnight.

Thereafter Cornel & Co Ltd was issued 51 percent shares of Hotel Developers (Lanka) PLC for the total lease premium of Rs 250 million. Even though the land was leased to Cornel & Company Ltd for Rs 136 million by the UDA and Cornel & Company Ltd subleased the land to HDL for Rs 250 million, in actual fact Cornel & Company Ltd paid only Rs 27 million to UDA which was only 20 percent of the value of the lease rental payable to UDA i.e 20 percent of Rs 136 million. The balance was to be paid in 33 interest free instalments.

However, this was never ever paid. As the lease rental has not been paid the land has now reverted back to the State.

The Government of Sri Lanka is now taking steps to take over the land in which Hilton Colombo is situated as lease rentals were not paid.

Hotel Developers (Lanka) PLC has been in continuous occupation of the State land, without making any payment to the Government. As at today, Hotel Developers (Lanka) PLC owes a large sum of money to the Treasury.

In addition to this the Government of Sri Lanka gave an unconditional demand sovereign Guarantee to Mitsui & Co Ltd and Taisei Corporation for the Loan of Yen 12,300 million equivalent to Rs 16,600 million for the construction of the hotel. Mitsui & Company Ltd (Taisei Corporation) constructed the Hilton Hotel. The Hilton hotel building has been valued at Rs 5,600 million by the Chief Valuer in October 2010.

It is evident, that under the UNP regime, Colombo’s prime land had been given without little or no consideration allotted to economic or national development. Instead, the plan seemed to have been devised keeping individual cronies interest in mind. The Hilton land has also been undervalued, and moreover, the investor had failed, neglected and refused to pay the balance instalments. The benefit of these investment on the public and the country had not been adequately considered or addressed, although the Opposition has now alleged the Government of undervaluing land in giving it to foreign investors.

The land to Shangri La is not on lease but outright sale for cash and no Government of Sri Lanka Guarantees were given to Construction Companies who would build the Shangri La hotel.