Government was planning to buy a building in the centre of Hamilton for almost $25 million from former Premier Sir John Swan, The Royal Gazette can reveal today.

A temporary gag preventing us from printing details of the secret deal to purchase the Swan Building on Victoria Street — which Finance Minister Paula Cox opposed — was lifted by a Supreme Court judge today.

The confidential Cabinet document was passed to this newspaper on Tuesday by a source who wanted the public to know about the negotiations, which have been ongoing for the past seven weeks.

The leak prompted Government to launch an immediate legal bid to suppress the information. But Mr. Justice Bell rejected its claim in the hearing today.

The proposal from Works and Engineering Minister Derrick Burgess to buy the Swan Building was put before Cabinet on Tuesday. It is not known if Ministers approved or rejected the deal.

The memo from Mr. Burgess is titled Government Office Accommodation Strategy, dated December 14 and marked ‘FOR DECISION’ at the top.

It sought Cabinet approval to proceed with the purchase of the Swan Building for $24.5 million.

The memo also reveals that Government is in negotiations to buy the Par-la-Ville building from HSBC Bank of Bermuda, though does not give details of the sale price.

On October 20, according to the memo, Cabinet authorised Mr. Burgess, along with Deputy Premier Ms Cox, to “engage in further negotiations with the owners of the Swan Building and the Par-la-Ville Building with respect to the purchase of these buildings, including the financial terms accompanying the purchases”.

It said the purchase of the Swan Building was due to be completed on April 1 next year, subject to the existing leases, which currently produce an annual rent of $1.98 million.

The plan, Mr. Burgess stated, was to relocate government departments there from July next year, giving the Government rental savings of about $2.4 million a year.

“The Ministry of Finance is currently sourcing which finance package is the most favourable to Government and will confirm in due course,” he wrote.

The memo shows that Cabinet was asked to consider whether to pay the asking price in full to owners Swanoco Holdings on completion or instead give a down payment of $4.5 million, followed by annual interest-only payments at a rate of seven percent.

The payments would have amounted to about $1.4 million annually, and then the final $20 million would need to have been paid off.

The third option was a finance package with HSBC, with annual interest-only payments, at a rate of 5.25 percent for fifteen years, of $1.286 million.

“In either scenario, the acquisition demonstrates considerable annual savings to Government,” wrote Mr. Burgess.

But he admitted in the memo: “The Minister of Finance has been consulted and does not support the purchase of Swan Building at this time.”

Court papers drafted by Government in its failed bid to suppress the story include an affidavit by Cabinet Secretary Marc Telemaque, in which he says: “Cabinet was divided on the issue proposed in the memorandum.”

The source told this newspaper that Premier Ewart Brown and Mr. Burgess wanted to force through the deal. “Paula Cox doesn’t support it,” said the source. “We have no business buying a building in this climate.

“The official reason why, they would say, would be that Government spends money renting properties and if they own buildings, they no longer have to pay rent.

“But we have buildings in Southside and Dockyard. We simply should not be buying any buildings and to pay seven percent interest... we shouldn’t be paying seven percent.

“I think it’s being done like this for a reason and I think it’s unacceptable. Finance said they don’t support it. If Finance doesn’t support it, it shouldn’t be happening.”

The source said that the interest payments on either deal would mean far more than $25 million was ultimately spent by taxpayers.

“To be paying interest on $25 million is just crazy,” the source said. “We just spent all this money on this new court building. Even if it does make sense to buy a building at some point, you don’t do it if you are in a recession.”

The source explained they leaked the memo because “the public need to know and they have a right to express their views on it. I’m doing it not because I want to spread Government information. It’s a sad story.”

This newspaper advised Mr. Telemaque that the memo had been leaked on Tuesday morning. He asked to be faxed the memo and, when the request was turned down, said: “Your refusal to provide me with the document makes any comment impossible.”

Later requests that day to Mr. Burgess, Dr. Brown and Ms Cox for comment elicited no response.

Former United Bermuda Party leader Sir John, whose real estate company Challenger Banks is based in the Swan Building, said: “Cabinet papers are, by law, confidential, therefore, it would be inappropriate for me to comment.”

The Swan Building, which also houses Ironshore insurance company, would give Government 36,000 square feet of office space. The rental leases for the building are due to expire in May 2010 and December 2013, according to the Cabinet memo.

Mr. Burgess told a press conference after last month’s Throne Speech that Government would be investing in the purchase of buildings so it could cut the $12 million it spends annually on rent.

“This important initiative will reduce costs through decentralisation of offices within the City of Hamilton,” he said.

“The reduction of the amount of rented space will be achieved by carefully matching the termination of existing office leases with space becoming available through the purchase of buildings by Government.”