by Dionisia Tabureguci
THE Yaqara Studio City project has been called many things, among them, a ‘pie in the sky’ dream that some critics believe will never happen.
With the gestation of its genesis now going into its eighth year, an overhaul in management last year and perception in some quarters that project owner, Yaqara Group Ltd (YGL), may be a cash-strapped outfit that periodically resorts to the capital markets to raise funds to survive, it may seem likely that the benefit of whatever doubt there is would go in favour of the critics. YGL had been exploring ways within the markets to help it raise parcels of the funds that it needs, an exercise that led to the listing of the company’s B class shares on the South Pacific Stock Exchange in 2005 followed by another fundraising drive via the issuance of convertible notes to an Australian company Pooled Investments Pty Ltd in the same year, with conversion obligations, scheduled to be honoured in January this year, still under negotiation between the two parties.
Its annual report for the financial year ended March 31 2006 saw it reporting an operating loss of F$1.823 million taking the total loss accumulated by the company in its seven-year life to some F$6.696 million.
This was accompanied by a note from independent auditor G. Lal + Co. on the company’s “inherent uncertainty regarding continuation as a going concern”, where, in a nutshell, the accounting company reminded members of YGL that the company’s existence was dependent upon its ability to raise enough capital to bring to reality the range of products that make up the Studio City and further from this, its ability to generate income out of it and make a profit.
Stockholders were reminded that should YGL fail to reach this stage, “it may be required to realize its assets and extinguish its liabilities other than in the normal course of business and at amounts different from those stated in the financial statements”.
Some critics interpreted this extra service by the auditor as confirmation that the company was really in financial distress and that its announcement last month of yet another convertible notes issue – via a rights issue to shareholders including Pooled Investments Pty with the aim to raise up to $4.5 million and this time around, with the official support and partnership of local investment banker Kontiki Capital Ltd, which has agreed to underwrite the issue – was really to help the company keep its head above the water.
But behind the misty curtain of this project, the company’s management is unfazed and believes that with the right combination of management people, strategies, committed investors and partners plus focus and tenacity from all stakeholders, Yaqara Studio City will emerge not only to see the light of day but become a project that Fiji and the Pacific region can be proud of. And that the mere size of it – a value that the company put in today’s dollar terms to be in the vicinity of F$4-F$5 billion – would naturally mean that it would take a while for the project to be realised.
Last month (October), YGL executive chairman Mark Falzon and managing director Lyndon Driscoll held a meeting with representatives from Suva’s brokerage houses to inform them of the company’s developments and to disclose that this latest fundraising exercise is going to be the last in terms of equity input and that the money raised would be used not just to keep the company going but to help in marketing of the residential units under stage one of the project and to put together the final documents needed for stage one of the project to attract debt funding. The company said that Stage one, which is further broken down into three phases of development, consists of some 200 residential units, apartments and foreshore development as well as a Yaqara Yacht Club/Marina and Yaqara Gold Club facilities. The total cost of this stage, Falzon said, is tagged at around F$200 million, funds that the company hopes to take out as a loan from what may be a syndicate of international finance entities seeing that “I’ve got about 20 international investment groups lined up who are very excited about investing in this project”. Falzon said YGL would be using the pre-sale of its residential units as security for the loan.
But in order to secure the pre-sales, the project needs to be marketed and this is one of the areas that part of the F$4.5 million would be put into.
Mark Falzon...YGL executive chairman“We will put that money (F$4.5 million) into producing feasibility studies, lodgement of the site plans, schematics, the visuals and the contracts as well as marketing materials required to take the project to those clients for them to see and say: ‘gee, I want to buy this unit in that lot and I want it to look like this…a 2-bedroom’. Then we get them to sign a contract, which requires them to put up, say, 10 percent of the cost of that unit and gives them the option to purchase it when it is built. Once we get these pre-sales in place, it would allow us to bring in debt funding which will then allow us to take the first project forward.” Once the F$4.5 million is raised, it may take the company up to 14 months to market and fully sell out the residential units of stage one and get the debt funding, said Falzon, and although it would only need to secure 60 percent of this pre-sale, there has been some indication that the response from the market may be a favourable one.
YGL had tested the waters last year when it released, via its residential sales and marketing company Horizon Sales and Marketing (Fiji) Ltd, 60 purchase options of its Peninsula Apartments. The option contracts were all sold within 10 weeks, according to a company announcement in September last year. As well, some Yaqara Marina berths options had been sold.
But getting Stage One to the point where physical work actually begins would be a thing of certainty once the company is able to secure the debt funding.
Seen in its entirety, appraising such a mammoth project (by Fiji terms) as the Yaqara Studio City could be a daunting task for one not used to visualising projects that has a wide array of products and not limited to the tourist business theme.
The Yaqara Studio City ‘dream’ or ‘impossible dream’, depending upon whom one is talking to, is an attempt to build a city using methods that are guided by the world’s best practices that are environmentally friendly and ecologically sensitive, said Falzon. The aim is to create a community that will live in a setting that supports a vibrant lifestyle and is sustainable. The sugar coating would be what is considered by some as the ‘world’s best tax incentives for financing audio visual productions’ as well as the tax free opportunities associated with a Studio City Zone. Yaqara Studio City has been declared such a “zone”.
With over 5,500 acres of land and foreshore to be developed and turned into what would someday become a city equipped with audio visual production facilities, hotels and premier accommodation facilities, educational institutions, sports facilities and ancillary facilities and services like the yacht club and marina and the golf club, YGL’s management is prepared to be misunderstood by the general public and respect the opinions of critics but not necessarily endorse them.
“It is about strategically unfolding this huge project in a way that makes it sustainable, that makes it realistic, that makes it work,” said Falzon. “There will always be critics but I have complete faith in Fiji’s capacity to make this a reality. It has government support, it has enormous support locally, it has international support and what encourages me more than anything is, when I travel internationally and talk to other groups, the incredible optimism, support and encouragement from visionary organizations and groups that have materialised large-scale projects all around the world. I think we have a committed board and we have a number of committed investors behind it as well as a committed government. A big project like this only happens if you bring people together and stay focussed on the vision and the outcome and you deal with each issue or each problem as it arises along the way. And there will be all sorts of issues and problems along the way. But you don’t let that stop you. You just keep going.”
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NOTE: This article was published as a cover story in the Fiji Business Magazine (www.islandsbusiness.com) as: Yaqara Studio City: A pie in the sky? pp 3-5 November 2006 edition.
Fiji Business is a publication in the Islands Business International portfolio and sold only in the Fiji islands as an accompaniment to Islands Business Magazine.
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