Lido’s $45M Pavilion Purchase and Lease Plan Under Financial Strain
The essence of the operation involves the decision to purchase the two pavilions B and C in Baltera for 45 billion 750 million lira, and to lease them to Palacongressi for 2.8 billion lira per year, which will become 2.5 billion in 2002-2003 and 2 billion from 2004 onward.
To finance the investment — detailed the other evening by Cesare Malossini, Mauro Malfer, and Gianni Zontini, respectively mayor of the city, president of Lido spa, and president of Palacongressi srl — Lido uses 3 billion from the municipality, 5 billion from Tecnofin, an additional 10 billion borrowed from Tecnofin, about twenty billion to be paid in 15 years at a rate of 1.5 billion annually, and has taken out a 20 billion mortgage with Caritro, hoping to repay 15 billion in one lump sum in June 2001 when it will receive the contribution already included in the provincial budget.
Since Lido’s revenues are almost exclusively derived from the rent paid by Palacongressi, the company’s financial statements will begin to show heavy losses starting in 2005, when, in addition to paying interest, it will need to repay the annual portions of the capital on the 10 billion loan from Tecnofin.
Therefore, Lido will need to seek additional public funding. Opinions on this maneuver vary. Pier Giorgio Zambotti considers Lido’s indebtedness to be excessively burdensome and risky.
If, by any chance, the province’s billions do not arrive, it would become very difficult to find the money to pay the annual installments of the lease and mortgage. The dependency level of Lido on provincial allocations is considered excessive by the councilor: Trento would truly be capable of strangulating the municipal company.
Opposing Opinions on the Maneuver
Antonio Miorelli, president of the entrepreneurs’ coordination present through Gts (the private company established for tourism management), which is involved in Palacongressi, holds a diametrically opposite view.
The municipality of Riva paid out 3 billion through a capital increase in Lido di Riva, a company in which it will always retain the majority; and in fifteen years, it will own real estate assets valued at 45 billion lira.
“If this isn’t a good deal. Moreover, Palacongressi (where private shareholders hold the majority, editor’s note) would have done very well to continue paying lease installments and, in a few years, to own the exhibition pavilion outright.
The municipality decided on the separation of responsibilities and indicated Lido, which remains majority public, as the owner of the properties. The rent paid by Palacongressi to Lido, although lower than what it paid to Rosmini, remains around 6% of the capital and is thus in line with market values. Palacongressi needs funds for promotion,” he stated.