Yaqara Studio City developers seek F$4.5 million

Stage one of studio city to cost F$200 million. YGL seeks F$4.5 million for documentation, marketing of stage one.

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.

CIDA’s coconut plans

Fiji’s Coconut Industry Development Authority looks at reviving the local coconut industry
Words and Pictures by Dionisia Tabureguci

AFTER being pushed to the edge of oblivion and almost falling over, Fiji’s coconut industry is ready for a comeback.
And those who are moulding the cast for this revival are doing so with big plans in mind, a sympathetic ear for critics but with a forceful resolve that the industry, far from being a sunset one, is on its way to a brighter future.
The steam that is left, it seems, is about new opportunities, a total makeover by shifting the focus to propel the industry away from traditional copra production to one where coconut farmers are involved in value added products, more specifically health foods and cosmetics.
The outfit behind this revival is the industry regulator CIDA (Coconut Industry Development Authority), an entity set up in 1998 to regulate and bring back to life what by then had become a faded economic icon.
CIDA’s chief executive officer John Teiwa, not often one to call for media attention upon the affairs of the entity, was nevertheless a little more accommodative when approached by Fiji Business to discuss the direction, if there was such a thing, of Fiji’s coconut industry.
A week before the approach, Fiji Business had been told by former politician and long time coconut planter Leo Smith, that the coco-peat factory project mooted by him and endorsed by CIDA late last year had been shelved “for reasons that are not clear to us”.

JOHN TEIWA...industry plans to be more than just copra


Smith had called for CIDA to get off what he called “its civil service mentality” and start doing something about the industry. For if nothing was done quickly, he feared for the survival of what had once been the cornerstone of the economy and the hundreds of small farmers in the outer islands who send their children to school from copra money.
Having been in the coconut business ever since he was a child, Smith was familiar and still experiences first hand the gradual decline of the coconut industry. He had raised his concern to this magazine over decision made by a growing number of plantation owners in Vanua Levu to either diversify into other crops or worse, subdivide their properties and sell them off.
Vanua Levu supplies most of the country’s copra and also hosts the milling factory. Chances were, said Smith, the new owners “don’t give a damn about coconuts”.
What followed was a significant drop in production when the trees are cut down to make way for property development.
“It’s a sunset industry if nothing is done about it,” Smith predicted.

His prognosis on this dim future is based on his argument that CIDA is not doing enough or moving fast enough to turn anything around. He himself had been a victim of this ‘inaction’ when he took his proposal to CIDA for a Fiji-first coco peat factory. Based on a “whole nut” philosophy, the plan required that CIDA gather whole nuts from farmers for 10 cents or 15 cents a nut, sell the husks to Smith and his Australian/Sri Lankan partners (coconut peat is a form of organic fertilizer derived from coconut husk fibre), then re-sell the nuts for both domestic consumption and copra production.
“After a series of meetings with them (CIDA), we are still waiting from them to get back to us on the proposal,” Smith said.
But seen against the laid out plans of CIDA, Smith’s proposal may be honourable and logical but not up to the mathematics of the regulatory authority.
Teiwa argues that Smith’s plan “just won’t work” because of the logistic and financial constraints that CIDA already faces and will face when gathering coconuts simply to sell back to Smith and his outfit for two cents a nut.
It would heavily tax an entity already burdened by lack of funds and resources. But that is not to say that nothing has been done, Teiwa argues.
At CIDA’s estimate that some 100,000 people - mostly in the rural areas - still depend on income derived from the copra industry, it would be unfair to say that nothing has been done.
A more reasonable way of looking at the coconut industry would be to look at the challenges pitched against it, which makes any effort to advance its interest equivalent to moving about in a pool of glue.

At field level according to CIDA, the greatest threat is the depleting coconut plantation as real estate booms in Vanua Levu, making it more attractive for plantation owners to sell a piece of land rather than do something about the coconuts. When in the 1950s coconut was a thriving industry capable of producing over 40,000 tonnes of copra a year, estate owners were responsible for the production of up to 60 percent of that figure, Teiwa points out.
Now, we are lucky if we can do 20,000 tonnes a year and in fact, after Cyclone Ami in 2003, CIDA’s Copra Millers of Fiji (sole producer of copra and coconut oil, the two main coconut products in Fiji) recorded a depressed output of just 9000 tonnes of copra at the end of that year.
Out of the figures of production nowadays, smallholder farmers are the ones who are producing the most.
Another weighty challenge was the lack of coordination between Fiji’s Agriculture ministry and CIDA, which made it difficult to ascertain the number of coconut trees there were on the ground, their age, their per-tree-production and whether the owners were serious about planting coconut for commercial purposes. And if they were, did they follow proper crop husbandry practices.
This challenge was partly overcome last year when all coconut related matters handled by the ministry were officially handed over to CIDA.
CIDA is now in the process of putting in place two enabling arms to help charter its course – a farm extension division to gather all relevant field information and a research and development arm to help realise the new goals that have been set in regards to developing value added products.
At field level therefore, CIDA’s retraced steps into the coconut groves now involves the careful documentation of farmers, the type of planting that they do, the areas taken up by coconut palms as well as a comprehensive replanting programme to supply seed-nuts to these farms.
Another infamous challenge faced by this industry is the decline in the prices of copra and coconut oil, an adversity now worsened by the rise in freight costs brought on by the global fuel price hike. Needless to say, this has lent credence to critics who call copra production a “sunset industry” on account of farmers moving away from it due to low returns.

Rearing nut seeds at Wainigata in Vanua Levu...THIS PHOTO WAS SUPPLIED BY CIDA.

To CIDA however, the industry is a long way away from its last breath. While copra may not be the most attractive commodity right now but there is a plan, which, in its entirety, is to shift away from that very notion that coconut planting in Fiji is all about producing copra and coconut oil.
“The industry is getting nowhere agriculturally but we do have a vision, although it will take a while to achieve it,” says Teiwa with firm resolve. “Our vision is to reinstate the coconut industry as one big business in the country and I can assure you that we will all live long enough to see the fruit of that vision.”
This optimism has its roots in the entity’s grand design. First, the CIDA of 2005 is really a reformed entity, quite unlike its 1998 self in terms of size, structure and defined goals. Second and more importantly, global development in coconut based commodities have already made a u-turn into newer products like virgin coconut oil and coconut timber and these are two commodities that a greater part of CIDA’s plan now revolve around.
Virgin coconut oil, in particular, is something of a fetish for health food lovers in more developed countries and CIDA hopes to construct a comprehensive infrastructure in place to link itself and its registered coconut farmers in time for both to ride on the bandwagon of this development and reap similar benefits that countries like Philippines and Sri Lanka are already gaining from this craze. Virgin coconut oil, sold at retail for about A$12 per 300 grams bottle, has also been put forward by some authorities as a natural wonder-drug, with a wide range of capabilities that include the prevention of heart disease, diabetes, cancer and skin protection among a host of others.
This, says Teiwa, makes virgin oil an attractive alternative right now and should be reason enough for farmers to want to get back into coconut planting.

For those that do, CIDA aims to equip them with portable virgin coconut oil mills so that they produce the oil without having to go far. “The farmers will husk the coconuts and they will end up having access to water, husk and shell. Copra Millers will eventually have no copra (its fate is yet to be decided) and CIDA will instead go to these small mills and take all the shells, water, oil and husks and then we will do the downstream processing with them and our own marketing.” Teiwa explains.
“In the end, we want to change copra trading into whole nut trading where people will talk about the industry in terms of whole nuts. Once we have the small mills established, it would then be the right time for people like Leo Smith and the kind of venture that he is proposing, to come in because the infrastructure would have been in place already. Right now, it is premature and too costly.”
LEO SMITH...sought CIDA help in establishing a coco peat factory

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NOTE: This article was published in the Fiji Business Magazine (www.islandsbusiness.com) as Cover Story. COVER title: Coconut Revival? CIDA takes industry to new level; Cover article title: PUTTING LIFE BACK INTO COCONUTS. CIDA has big plans to revive the industry; 3-5, July 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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Fiji: An economy in decline

Fuel bill hit F$1 billion in 2006, export sector dismal, central bank worries

By Dionisia Tabureguci

FIJI obviously needs a miracle if it wants to get out of an impending economic tailspin that some believe will get worse before things get anywhere near better.
Latest national economic data is showing a troubled state of affairs for a nation still entangled in internal political difficulties and facing an economic recession on the back of an expected two percent contraction this year.

Figures from the Fiji Islands Bureau of Statistics (FIBOS) released in February has shown that for the first time in seven years, possibly in Fiji’s recorded history, fuel bill has passed the F$1 billion mark within a year last year, with the surge driven by steep increases in aviation turbine fuel and industrial distillate fuel. Despite generally good performances by fuel re-exports, other economic signs like the perceived lack of activities to stimulate exportable commodities, the fast-depleting foreign exchange reserves weathered by declining export earnings against escalating import costs, have posed worrying implications, adding more strain to the country’s ability to sustain investment needs and remain competitive in the global
market.

FIBOS 2006 provisional trade statistics on overseas merchandise shows Fiji’s total import bill was F$3.1199 billion, of which mineral products contributed 33.4 percent, or F$1.042 billion. Domestic exports put together was only F$807.9 million, not enough to pay for fuel bill alone, and total exports at F$1.1752 billion implies a national spending of 88 percent of export earnings – or 88 cents in an export dollar earned – only to pay for fuel bill.

FIBOS data over the last seven years have shown Fiji’s balance of payment increasing as a result of the country’s mineral fuel costs and overall increases in other costs, made worse by the dismal export performance.
The state of urgency - pushed closer to the edge as donor agencies suspend aid to pressure the interim regime to return the country back to democratic elections within the next two years – has prompted Fiji’s central bank to again ring warning bells.
“The rise in the price of oil has come at the worst possible time,” said Reserve Bank of Fiji governor Savenaca Narube in a social event early this year.
“Our oil imports are four times what we used to pay some six years ago. The balance of payment therefore continues to come under pressure. Reviving export is the key.”
Last month, RBF’s plea for lasting solution came with a more sombre overtone, with Narube urging the nation that “tinkering at the margin will not work for us any longer.”
“To me, the key economic challenge that we face is to correct our widening trade imbalance. Our exports continue to be dismal. Sugar is earning $100 million less than its peak year. Garment has lost even more than that. Gold production has now disappeared and that’s another $60 million. Tourism numbers and yields have now dropped. Oil price remains at around US$60 a barrel. The trade deficit continues to widen.”

Obviously running out of short-term policy measures within its mandate to hold the fort in a crumbling national economy, the Reserve Bank has flatly admitted that export performance has not responded and this, it added, is now putting undue strain on Fiji’s external financial position, the protection of which comes under the bank’s supervisory role.
“In December last year, we had to introduce a ceiling on private sector credit. We also reduced the delegated limits given to foreign exchange dealers on selected overseas transactions. Recently, we announced changes to borrowing guidelines for non-residents individuals and companies. There have been some concerns on higher interest rates particularly from individual borrowers and investors. We understand these concerns. But again we ask that you appreciate the seriousness of our financial situation. When things are tough, we must safeguard the bigger picture. We cannot be reactionary. If we do not take care of the bigger picture, the small picture will suffer even a lot more than what we are facing now,” Narube
said.

Donor agencies have also noted Fiji’s dismal economic outlook in their recently released flagship publications.
The Asian Development Bank identified in its ADO 2007 that Fiji’s broader challenge now “is to encourage private investment and export development that, together, generates faster, sustained economic expansion that is compatible with external balance.” The challenges were also noted by the United Nations Economic and Social Commission for Asia and the Pacific(UNESCAP) in its annual survey report, titled” Surging Ahead in Uncertain Times”.

While Fiji’s economic challenges as such are now widely acknowledged, the country is now faced with a choice of either actively invigorating its export sectors or go down the road to an economic and social meltdown. For its part, the interim government has modified a few national blueprints from the Laisenia Qarase–led government, including the 2007 national budget. For the short term, it has put in place measures to stabilize government finances by cutting down on operational costs while offshore borrowing is on the cards as a short-term measure to address the balance of payment crisis.
For the medium term, it has revised the focus areas in the Qarase government’s National Export Strategy from 13 to six, where the focus now is on stimulating Forestry, Agro-business, Marine Products, Audio-Visual, Information and Communications Technology and Mineral Water.
Getting things started however has been Fiji’s weak point ever since RBFbegan tolling the warning bells over seven years ago.

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NOTE: This article was published in the Fiji Business Magazine (www.islandsbusiness.com) as: "Economic tailspin? Miracle needed to halt impending decline", pp 7,8, May 2007 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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