Firm lays case for Amaryllis Hotel price tag

EMJ Advisory yesterday said it recommended to the Public Service Pension Trust Fund (PSPTF) that its investment into Amaryllis Hotel could be between K115 billion and K145 billion based on its financial analysis. Speaking when he appeared before Parliament’s Public Accounts Committee (PAC) in Lilongwe yesterday, EMJ Advisory director Emmanuel Chisale said the firm assessed the viability of the hotel business, reviewed financial performance, occupancy levels, economic factors and previous valuations, which informed its recommendation. Chisale’s testimony was part of the parliamentary inquiry into how PSPTF—which sits on K1.1 trillion in pension funds and has been seeking long-term investments, including in the hospitality sector— agreed to buy Amaryllis Hotel at K128.7 billion.

The committee also questioned the processes and timelines that led to the multi-billion kwacha transaction, including engaging consultants, conducting business analysis and signing a sale agreement, wondering why some processes were wrapped up within days last November. During the hearing, PAC chairperson Steven Malondera said the timeline presented to the committee raised issues that the inquiry intends to establish. He said: “The same November you got the opportunity, the same November they hired a consultant, the same November a report was generated and the same November the sale agreement was signed.

However, some experts have argued that the roughly two-year time lag between the initial valuation and the signing of the deal could account for an uptick in the final deal. In an interview with The Nation last month, property valuation expert Yeremiah Chihana of YMW Property Investment, famed for valuating the estate of former president Bingu wa Mutharika at K61 billion in 2012, said the cost escalations for Amaryllis Hotel were inevitable. He said this was due to the time lag between evaluation and final sale agreement during which devaluation, foreign currency shortages and general price accelerations markedly changed market conditions and the hospitality industry in particular.

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Said Chihana: “If it were me, presently, I would have valuated that [Amaryllis Hotel] between K156 billion and K167 billion. Look at inflation in 2023, how that changed over time, coupled with devaluation of the kwacha. At some point raw materials for hotels were exempted from VAT [value-added tax], but that changed, obviously that pushes the prices up.

“You look at the VAT on the building itself when paying city rates… Are you sure you can find a place and construct a similar structure as Amaryllis Hotel at the same cost people want? You import raw materials and where do you get forex?” In November 2023, three months after that valuation report, RBM devalued the kwacha by 44 percent, a development that sent shock waves in the economy, resulting in skyrocketing prices of goods and services. Later, following foreign exchange auctions that RBM conducted after devaluation, the kwacha lost value by around three percent to K1 751 against the dollar from K1 700.

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