RE: Government buys Gold Star Building
Why is the government buying prime commercial buildings? It’s not the government’s job to play landlord. A government should provide the infrastructure for the private sector, not compete with it.
A lot has been said by Lautafi Fio Purcell about how they drove down the market price to get such a good deal but he’s confusing the market price with the asking price.
The market price is what the private sector is willing to pay to get a good return on their investment (ROI).
Since the property has been on the market for several months and no one in the private sector has been willing to pay $7m it stands to reason that $7m is actually above the market price.
Think of this scenario.
Business is down and stores are closing because they can’t afford the rent.
The CEO of the Accident Compensation Corporation being a smart man knows it’s better to reduce rent by 10% rather than having an empty store.
His ROI is down but that doesn’t matter because it wasn’t his money and anyway he still gets his government pay to feed his family.
How can a business person using money borrowed from the bank compete with this? The answer is that they can’t.
They will either go bankrupt or more likely not invest in Samoa in the first place.