Within forty years, Tumas Group Chairman George Fenech moved on from being a furniture importer in the 1970s, to tourism mogul in the 1980s to business emperor today. His business interests are growing larger than what local banks can fund, leading to him becoming increasingly interested in public financing. Interview by DAVID DARMANIN
It is no big secret that George Fenech keeps a low profile, understandably. The environmental lobby had made a scathing public attack on the Portomaso development back in the 1990s, and although Fenech had gone ahead and built the high-rise against all odds, there were moments when it seemed as though he had lost the media battle.
“People thought I was over ambitious when I took on the Portomaso development, but in reality this was not done because we were very comfortable,” he says. “Portomaso was built because we thought of it as a reasonable investment, a project which would – as it has – attract foreign companies to Malta, in spite of it being fully financed by the Maltese.”
He admits to becoming “the biggest admirer of those I resented when the project was being developed.”
“I thought certain people were there just to make my life difficult, and it was a very difficult time,” he said. “But I think it was that resistance which set the standard for large-scale projects in Malta. MEPA for example, has really improved since then. It was a learning curve for us all. Now I just hope the impending MEPA reform makes processes more efficient.”
For someone who works in an office with a 21st floor view, George Fenech is strikingly grounded. He enjoys the simple pleasures in life, and notwithstanding the fact that he owns a 50-foot boat, he refuses to enlist yachting as one of his passions.
“Horses are my real passion. I was chairman of the Malta Racing Club for many years,” he says proudly. “I also relax when I cook. I like hosting friends at my stables, and I do everything on my own. I don’t bring in staff to help me with cooking – although not everyone believes me,” he smirks.
Fenech inherits the upfront approach of his late father, a man of humble origins whose entrepreneurial skills generated enough capital to build Portomaso.
“I don’t boast about my achievements, but I find no problem in boasting about my father’s capabilities. He had a nose for property like no other man. It was because of the land he purchased that we are where we are today. Most of our main developments are still on the land my father had bought.”
Fenech, 57, has been involved in business since he left school at age 17.
“But until the day my father passed away, we had an agreement that I would not interfere in his division within the group – which mainly focused on acquiring land. Anything else was pretty much left up to me.”
Fenech started importing furniture to Malta from Italy in his teens, filling up a small showroom which then grew into Qormi’s Easysell. “One thing then led to the other. In the 1970s, we were the first to build and market self-catering apartments to tourists. Then in 1978, we opened the Cartwheel Hotel – which is when I became involved in catering and hospitality. We were doing very well. By 1981 we bought the Topaz Hotel, and two years later we pioneered timeshare in Malta. In 1984 we went on to purchase the Halland Hotel, followed by the acquisition of the Dolmen in 1985, the Hilton in 1986 and Mġarr Hotel in 1989.”
The Fenechs were not alone in growing like there’s no tomorrow in the golden 80s when tourism in north of the island was at its peak. But nowadays, partly because of a dwindling British market but largely because tourists have become more discerning on product, the Buġibba area is not doing well at all. Is the northern harbour region becoming extinct?
“I wouldn’t say it is becoming extinct, but it needs investment. This recession will teach all of us players that unless we improve our product, we’ll suffer. I see this recession as a final warning – you either fix up or close down. St Paul’s Bay especially, has been neglected and needs investment badly. Unless we go down the investment route, operators will not see it worthwhile to continue. The value of buildings has depreciated so much in certain areas, that prices do not even represent the real value of the buildings themselves. This is why the government and the private sector must find a solution together.”
Occupancy at the Dolmen is not growing, but it is not showing significant slumps either. Last January, the hotel went only -1.8 per cent off the mark, but this was more than made up for in February – when occupancy rose by 11 per cent when compared to the same month of the previous year. Since then until this month, occupancy registered very slight month-to-month increases. But forecasts for the coming July look bleak, as reservations so far add up to 34 per cent less than those of last year.
“Everyone is booking at the last minute,” Fenech explained. “Prior to the start of every month, it always looks bleak, but when we see the result at the end of the month, occupancy tends to level out. Our issue however is not really with occupancy but rather with room rates. In May, our rates have decreased by more than €5.00 per room – when the Dolmen prices were quite low already.”
Tumas Group also owns the Hilton Hotel in Evian-les-Bains on Lake Geneva in France, but the Fenechs have various other interests apart from tourism. The group is involved in the development of first-class office space which they rent out to established local and foreign companies; it fully owns and rents out a private jet; it owns the Kia franchise in Malta; it has formed a partnership with Portech international to operate the Valletta Gateway Terminal; it owns two casinos; and is heavily involved in developing and selling off luxury dwellings. How is this business empire dealing with the recession?
“Very simple,” he said. “On a national scale - it is true that the recession has not affected us in Malta as it has in other countries, and it is hoped that things will take a better turn after this summer. However I cannot deny the possibility that the opposite could happen by end of summer. If we don’t do something effective about the situation, there will be casualties. I think we are now being more selective when it comes to new developments – and have stopped relying on instinct. We now do our homework better before embarking on new projects – which is the same as what we had done with Portomaso.”
Rightly so, Fenech is very proud of his achievements with Portomaso as “every aspect of the project turned out to be successful,” although at the same time he acknowledges that its development was a roller coaster ride.
“Every cloud has a silver lining,” he said. “The opposition against Portomaso was unprecedented, but that is also because the type of development was unprecedented. The issues around the development set the standard for MEPA, which has now become more discerning on projects, and this is healthy for the environment. It was a tough time for us though, but the outcome was positive at all levels – both on an environmental front as well as on a commercial one. One must consider the fact Portomaso was entirely financed by the Maltese, and that we were the first to supply foreign companies with office space coming with the specifications they require – so we must have surely participated in attracting foreign investment to Malta.”
Fenech’s most recent projects are the Tas-Sellum development in Mellieħa - of which 85 per cent is fully sold - and the Ta’ Monita development with the Gasan Group, whose launch is just round the corner. He is now planning to develop “a state of the art business centre” on 10 tumoli of land in Mrieħel, again in partnership with the Gasan Group. His commercial developments in Mrieħel and Qormi rent out space to big names – among which HSBC, PriceWaterhouseCoopers, British American Tobacco, Forestals and Deloitte & Touche.
“We wanted to have everything sorted before putting units on the market,” he said on Ta’ Monita – the luxury apartment complex in St Thomas Bay. “We did not want to sell apartments on plan, because to do so one would have to undercut prices on market value, and this does not help the sector – so we only take deposits on apartments in shell form.”
The Tumas Group is making final preparations before launching a bond issue, which we are informed, will be announced tomorrow. Fenech could not give out too many details as per MFSA regulations, but when he was asked directly he did not rule out that preparations for a new bond issue are well under way.
“We are seeing a slowdown in property development this year and we know that the situation is temporary,” he explained. “There will be an improvement by next year. But players in this industry need liquidity so they can take advantage of such new opportunities.”
He also seems to be interested in issuing an Initial Public Offering in the future.
“Why not? Why shouldn’t the public benefit with us? Besides, when it comes to large-scale developments, there is a limit as to how much Maltese banks can lend, so the other viable option would be to be financed by the public.”
Does he plan on developing another high-rise?
“With all due respect,” he said, “but everyone talks about high-rises as though these can sprout out of nowhere. One needs to look at an area holistically before deciding that it can take a high-rise. Another thing is that in Malta we don’t have enough experience in high-rises, and I was lucky enough to benefit from good prices here because my suppliers were trying this out for the first time. But the running cost is massive. I just had to change my lifts, which cost me €750,000.”
Tumas Group is also in partnership with Portech International in a consortium that has been short-listed as a preferred bidder for part of the Malta Shipyards sale, specifically the part that was formerly occupied by the Marsa Shipbuilding. How are they interested in this project? What do they have in store for it?
“We would like to acquire this section of the Malta Shipyards so we can extend our core container business as Valletta Gateway Terminal (VGT),” he replied. “The shipping industry has registered a drop in Asia, but it seems there are slight advances in the Mediterranean. With this extension, we are not aiming to take away business from others, but rather to attract new business to Malta. We have in fact increased staff and invested reasonable amounts of money since we started the operation of the VGT.”
Finally, Fenech was asked whether he intends floating public shares for the group in the remote future.
“We grew too much for us not to go down that route,” he said bluntly. “But I would like to keep Tumas Group within the family. It is with large-scale projects that I would be interested in going public.”