The sale of a hotel for bread and butter?

RIGA - The outcome of a secret ballot at Riga City Council has made plum property Riga Hotel available for privatization. The Council decided by one vote, 13-12, not to continue court action to secure the hotel from government ownership. Twenty-five members abstained.

"The vote for not continuing civil proceedings has placed the hotel on a platter ready to be served," said Juris Subacs, the general director of Hotel Riga.

The reason Subacs is so displeased, he said, is because the 243-room hotel, which sits on a prime plot in the heart of Old Riga, now can be bought by the land owners of the hotel for the laughable price of $169,491 in Latvian privatization certificates. According to Subacs, hotel chains, including Marriott, have indicated an interest in the range of $15 million to $20 million.

The cadastre value of the building is set at $4.2 million. In Latvia, cadastre value is the registered value of the building for taxation purposes. The three parties that own the land beneath the hotel, according to Latvian land deed laws, have first right of refusal concerning who can buy the hotel.

The three are the University of Latvia with 73 percent, the Evangelical Lutheran Church, 26 percent and the investment company Privatais Investiciju Fonds owns 1 percent of the land. PIF could have the opportunity to themselves purchase the hotel with privatization certificates.

The University of Latvia and the Evangelical Lutheran Church do not have the financial resources to buy the buildings of Hotel Riga.

The price of Latvian privatization certificates is set at $44, but a person can buy these certificates for a price ranging from $1.70 to $2.55 each through financial institutions who have bought them cheaply from people who need money or have no use for the vouchers. With their right of first refusal, Subacs is afraid that PIF can buy the minimum number of certificates required for $1.70 each and buy the buildings of Hotel Riga for the price of $169,491.

"Pick me up off the floor, the thought of a building that has the cadastre value of $4.24 million being bought for $169,491 is an absolute joke," said Subacs. "There should be a law stating the money from privatization goes to the state and not for the benefit of private people [business].

"Privatization should be put in the hands of international experts so people can not exploit the loop holes in the law, to ensure the state benefits from the sale of government assets," he said.

PIF has the chance, when the government officially submits Hotel Riga for privatization, to buy the hotel and then to either keep it for themselves or sell it to an investor, Subacs said.

"If PIF decides to sell Hotel Riga then they will be making the profit themselves, and not the government," said Subacs.

The LPA admits that it has received Hotel Riga's buildings, but the actual privatization submission has not been lodged by the government. The laws governing its privatization have not been decided upon.

"The company PIF has the opportunity to buy the hotel, but I cannot really comment until the government has submitted Hotel Riga for privatization," said Andrejs Tiknuss, spokesman from the LPA.

Purchase of the hotel by PIF could hit a snag, said Tiknus.

"A company formed as PIF, having only 1 percent land ownership, does not give them the power of attorney. To buy a building situated on land, one party must have 50 percent land ownership," he said.

Controversy over the right of purchase is complicated by drawn-out haggling over ownership stemming from the first days of the privatization process after Latvia's independence. After 1991, the ownership of buildings in Riga were assigned either to Riga City Council or to the Latvian government. Hotel Riga went to Riga City Council

In 1994, the Latvian land deeds registry was introduced, but Hotel Riga was never registered. In January the Finance Ministry took the Riga City Council to court so it could put Hotel Riga in government hands and then privatize the hotel, using edict MK138 which allows the national government to claim buildings in the national interest.

After the court decision in January to put one of the buildings on hotel property into government ownership, Riga City Council obtained a restraining order blocking the transfer until the civil court decided the fate of the second building containing the actual hotel.

The civil court decided at the end of March that the buildings that make up Hotel Riga are the property of the government. Subacs said that the Finance Ministry exploited edict MK138 to take Hotel Riga from the Council.

"The use of the edict MK138 to take the hotel for the use of the government is illegal," said Subacs. "The edict is for the government to keep the buildings for national interests, not hand it over to the LPA."

The company PIF is now waiting on court rulings to see if they have the right to purchase Hotel Riga at its the cadastre value from the LPA.

Why the City Council decided not to pursue ownership is not clear.

"There was no debate before the vote, and it was a straight forward secret ballot," said Marite Brite, spokeswoman for Riga Mayor Andris Berzins. "Council members had their own reasons, and as a result, the members decided not to continue the court process of keeping Hotel Riga."

The University of Latvia and the Evangelical Lutheran Church, when contacted, said that any questions concerning the land under Hotel Riga should be directed to the company PIF who could have an interest in the hotel.

PIF's attorney, Edgars Zakrizevskis, said their company is not trying to hide the fact they have the land ownership rights upon which Hotel Riga is situated.

"We do not want to comment any further on the possibilities the company has concerning the hotel and do not want to be seen as blabber mouths," said Zakrizevskis. "The government is a nihilistic one and until the government adopts an appropriate law [concerning land ownership],we cannot plan a business project for the future."

"PIF is in cahoots with the law and now have utilized the law for their own benefit," Subacs said.

"The state is following the law with their decision to take the hotel from the City Council and handing it to the LPA, but the twist is the cadastre value of privatization," said Subacs. "PIF has the first right of refusal as land owners and therefore, by law, the first right to buy it for not $15 million but for 100,000 lats in certificates and pocket the profits."