$84 million valuation for Natadola Resort absurd

[posted 11 May 2010,1345]

Why is the luxurious 5-star Natadola Bay Resort being under-valued at $84 million by the Fiji National Provident Fund?

In its shocking disclosure of a $301million write off on the Natadola Resort project last week, the Fund’s Chief Executive Aisake Taito and Chairman Ajith Kodagoda revealed that international valuers had put the market value of the resort at $84 million.

This seems an absurd valuation for a luxury five-star 300-plus room hotel of Natadola’s reputation. It has not been said whether the valuation includes the internationally rated golf course and the residential lots.

Even without, the figure is questionable considering that experts put the current construction cost (post devaluation) for a five-star hotel room at about $0.5million per room.

No details were released on who carried out the valuation and the credentials of the firm involved. We were simply told that an “international valuation” put the value at $84 million.

The FLP has written to the CEO of the Fund, Mr Aisake Taito, expressing its concerns at what appears to be a gross under-valuation of the resort.

We have asked for a copy of the valuation report and for the credentials of the valuers.

The full text of our letter to FNPF is given below:

7 May 2010

Mr Aisake Taito
Chief Executive
Fiji National Provident Fund
Private Mail Bag
Suva

Dear Sir

re: the Natadola Bay Resorts Ltd

I notice from statements made to the media by yourself and the Chairman of FNPF Mr Ajith Kodagoda that international valuers had put the market value of the Natadola Resort at $84 million.

This seems an absurd valuation for a luxury five-star 300-plus room hotel of Natadola’s reputation. Does the valuation include the internationally rated golf course and the residential lots or is the valuation just for the hotel itself?

I shall be grateful if the valuation report can be made public in view of the questions that are now being raised regarding the credibility of this valuation report. My information is that a valuation of the hotel commissioned by the FNPF in 2008, at a time when the hotel complex was only 60% complete, had put its value in excess of $230 million.

How does one explain such a huge discrepancy in the two valuation reports? I am also curious about the value of the Momi Bay development (or whatever is left of it) in the books of FNPF. Was this property also valued by the same firm of international valuers?

There is a great deal of anxiety about the $84 million valuation. Who are these valuers? What method of valuation did they use? These are same of the questions being asked.

We ourselves have been informed by experts in the tourism industry that present day construction costs, taking account of the devaluation, for a five star hotel room average around $0.5million.

On that basis, the Natadola Resort should be worth no less than $170 million, excluding the golf course and the residential lots.

We cannot let this matter go unchallenged as it has huge implications on the future safety and security of FNPF funds. It also calls to question whether the business of the Fund is conducted in a transparent manner.

There is speculation in some circles, albeit unsubstantiated, that the resort has been deliberately grossly undervalued so as to facilitate its sale at a later date to a favoured buyer.

The value of the resort having been substantially written down, the impropriety of the sale at well-below the actual market value of the property cannot then be questioned. What is alleged is that the ground is being prepared for that to materialise.

Members of the fund do not appear to be satisfied with the official explanation given by the Attorney General and the management of the Fund. There appears to be a lot more to it than has so far surfaced.

In the circumstances, I shall be grateful if you will forward me a copy of the valuation report of the Natadola development, with the credentials of the valuers.

I shall also be grateful to be informed of the value of the Momi Bay Resort development in the books of the FNPF.

I would appreciate an early response from you, in view of the importance of this matter to the general public of Fiji.

Yours faithfully

Mahendra P. Chaudhry
General Secretary
Member FNPF