Baha Mar has told several expatriate hires to leave the Bahamas because construction delays mean there are no jobs for them to step into, amid suggestions it is seeking additional financing to complete the $3.5 billion project.
These developments broke amid suggestions last night that the “Mexican stand-off” between the Baha Mar and its main contractor and equity partner, China Construction America, might be resolved within the next “48 hours”.
But real estate industry sources, speaking on condition of anonymity, said they were aware of several instances where expatriates hired by Baha Mar had within the last several days informed landlords and property management companies they would no longer need their rental accommodation.
“I know of a few non-Bahamians that moved down here, gave up their jobs and everything, and rented places,” the source said.
“Several people have had calls from these expatriates saying they have to leave.
“They’ve been told by Baha Mar they have to go. They’re saying there is nothing they can do at this time, and hopefully they’ll be back in touch in the future.”
The source added that Baha Mar had informed its expatriate hires that it needed to put in place “more financing” to finish the project’s construction phase.
This suggests that Baha Mar has used up the $2 billion-plus construction loan it received from the China Export-Import Bank, and that it needs to obtain more financing from its lender or another source.
This adds another dimension to the disputes and delays that have mired the $3.5 billion project, which is central to the Bahamian economy’s revival and cutting the 15.7 per cent unemployment rate, in a mixture of uncertainty and controversy.
Robert Sands, Baha Mar’s senior vice-president of external and government affairs, could not be reached for comment yesterday, but contacts close to the developer said they were unaware of any among its expatriate hires being told to leave.
Yet their departures suggest that Baha Mar will not be operational any time soon, and that efforts to complete the project’s construction may drag on late into 2015.
Those expatriates will likely have been hired for high-level management jobs in the four hotels and casinos, so it is possible the development may not be ready until early 2016.
Meanwhile, other sources intimately familiar with developments told Tribune Business they believed there was no truth to either the suggestion that Genting was seeking to buyout Baha Mar’s principals, the Izmirlian family, nor that China Construction America was seeking to ‘walk away’ from the project.
They suggested that Baha Mar and its contractor/equity partner were “trying to work it out” with the Bahamian and Chinese governments’ assistance, given that it was in the interests of all parties to complete the development.
One source, speaking on condition of anonymity, suggested the problems stemmed from China Construction America seeking funds for work it had either not done or completed properly.
“One has to ask what is causing this disagreement, and clearly China Construction America are requesting funds that they haven’t done work for,” the source said. “They’re trying to draw down funds they think they’ve earned, but haven’t.”
It is normal on construction projects, especially large ones, for contractor’s payment requests to be verified by project managers or engineers on the lender’s behalf.
This acts as a ‘check and balance’ to ensure contractors only receive funds that they are entitled to for work completed. This is especially important during the latter stages of major projects, such as Baha Mar’s, when the majority of available financing has already been drawn down, so as to prevent the credit running out.
Tribune Business revealed last month that China Construction America slowed down its work rate in the run-up to the planned March 27 opening due to a payment dispute over the sum it believed was due for February 2015 work.
This newspaper was yesterday given more details about that revelation, with Prime Minster Perry Christie asking senior China Construction America executive, Tiger Wu, to repeat his remarks to make sure he had heard them correctly.
The payment dispute surfaced during a meeting at the Prime Minister’s Office, which was also attended by deputy prime minister Philip Davis; minister of state for investments, Khaalis Rolle; Baha Mar chairman Sarkis Izmirlian; China Construction America representatives; the Chinese Ambassador to the Bahamas; and a host of Ministry of Works personnel.
Mr Christie is understood to have told China Construction America’s representatives that the issue went beyond a simple payment dispute, given the high stakes involved for all parties involved, not least the Bahamian economy and people, and Chinese-Bahamian relations.
“China Construction America think they need to be paid, and are slowing down the project until they get paid,” a Tribune Business source said yesterday, adding that this had resulted in “a Mexican stand-off” between the two parties unless they could compromise.
Daniel Liu, China Construction’s Bahamas-based senior vice-president, did not return Tribune Business’s e-mail seeking comment yesterday.
However, the parties involved in the dispute all have much to lose. The Izmirlian family is ‘on the hook’ to fulfill its promises to finish Baha Mar and get it open before the development becomes too heavy a financial burden.
As for China Construction America, its reputation, too, is on the line given that Baha Mar is intended to be the ‘showcase project’ that will win it similar jobs in the Western Hemisphere.
As for the Christie administration, while the British Colonial Hilton project may give it some leverage over China Construction America, it cannot afford to push too aggressively and alienate Beijing, given that it is relying on the Chinese to finance much of its economic plans and, possibly, its re-election prospects in 2017.
Mr Christie, speaking at yesterday’s opening of The Island House hotel, suggested he had made some progress in mediating a solution to the dispute.
Those who are potentially most impacted by the situation, especially if it drags on, are Baha Mar’s several thousand existing and future hires, plus this nation’s tourism brand.
While it is likely that the Prime Minister discussed Baha Mar with Genting last week, and may have encouraged it to look at the project again, any deal is likely some way off.