The reforming effort of State-Owned Enterprises and assets is identified as a key endeavor in the manifesto of the Government of Sri Lanka – Vistas of Prosperity and Splendor.
The National Policy Framework spells out the importance of restructuring underperforming and underutilized assets owned by the State so that such are converted into highly productive, optimally performing, and high profit yielding ventures.
The effort to transform these assets into productive entities is also to provide substantial returns to the Government
Selendiva is fully owned by the Government Treasury. It will continue to remain as a fully government-owned entity with 100 percent shares being held with the Secretary to the Treasury.
The decision to set up Selendiva Investments was taken by the Cabinet of Ministers on 4 March 2020. While the entity was validated as the real estate and property development arm of the Government through a Cabinet Memorandum on 8 July 2020, the responsibilities and scope of work of Selendiva Investments were firmed up with a Cabinet Memorandum dated 25 May 2021.
It is incorporated under the Company’s Act No 7 of 2007.
Selendiva Investments Limited has been established as a company fully owned by the Government of Sri Lanka and has been incorporated with the objective of developing and/or restructuring several prime state-owned Portfolios including; Canwill Holdings (Pvt) Ltd – the parent company of Sinolanka Hotels & Spa (Pvt) Ltd and project company of Grand Hyatt Hotel Colombo, Hotel Developers (Lanka) Ltd. – owners of Hilton Colombo, and Hotels Colombo (1963) Ltd – owners of Grand Orient Hotel.
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Selendiva Investments will transform the underperforming/underutilized assets falling under its umbrella by attracting investments to uplift the properties. The aim is to reel investments to Holding Special Purpose Vehicles (SPVs) of the asset portfolios in each asset cluster or any individual asset of the aforementioned SPV. This effort will be facilitated and achieved by divesting up to 49 percent of the share ownership.
The rationale behind the setting up of Selendiva Investments as the real estate and property development arm of the Government is to iron out numerous inefficiencies, including resources, absence of expertise, and weak capital structure, that resulted in the complete neglect of these high potential assets. The lack of attention prevented these prime properties from reaching their full potential and competing with the private sector.
It has been understood and acknowledged that the bulk of the resources of these assets have been underutilized due to financial constraints. It is also the failure of successive governments to take the necessary steps and provide the required financial assistance.
Lack of good corporate governance and financial discipline in the SOEs added to the existing woes, thus the establishment of Selendiva Investments.
When deciding to establish Selendiva Investments, the government needed an investment arm to carry out this important restructuring exercise as significant expertise was required to achieve the said objective.
The Government is of the firm belief the incorporation of the company will make certain that the best fit model of investment will be adopted to allow the company to reap the maximum benefits with its resource expertise and competency in the field.
It is acknowledged that the requirement to address suitable capital restructuring should be addressed by a professional entity rather than the Government.
The capital restructuring will take place by bringing in foreign investments which will be restricted to a maximum of 49 percent with the balance of 51 percent being held by the Government.
Thus, the restructuring effort will typically invite private investments on a Public-Private Partnership (PPP) model for a maximum of 49 percent shares.
The capital restructuring of the assets and entities under the Selendiva umbrella is to raise capital to develop the underutilized resources which did not have any value addition to the Government investment.
Another requirement for the restructuring is to complete the construction work that was halted during the 2015 – 2019 period and to further improve the operational efficiencies of the said entities so that their true potential is unleashed.
Furthermore, a key objective is to also avoid the entities from becoming bankrupt and to develop the portfolios well enough to pay dividends to the Government.
Hilton Colombo, has not been able to pay dividends to the government for nearly 30 years despite it being fully operational.
The construction of Grand Hyatt witnessed no significant progress towards completion for five years, till 2019.
Furthermore, the popular Grand Oriental Hotel was unable to realise its immense potential and compete in the market as a world-class boutique heritage hotel due to neglect.
These are only some of the scenarios.
Selendiva Investments will carry out the operational and financial restructuring of the entities under its purview whilst also providing the necessary expertise and advisory to achieve the optimum performance of the assets, which in turn will benefit the Government.
The investment model of Selendiva is as follows:
The creation of the proposed ‘Heritage Square’ requires the development of the General Post Office Building, the Republic Building (Ministry of Foreign Affairs building), Gaffoor Building, and the Grand Oriental Hotel.
Considering that these assets carry the potential of profitable hospitality investments, Selendiva will focus on the development and establishment of this area, all while ensuring that the cultural value of the properties is reserved for the enjoyment of tourists and the general public.