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‘Gratified’ By Grand Lucayan Bid Quality

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Hutchison Whampoa’s property arm should “soon” announce the Grand Lucayan’s fate, its advisers saying they were “gratified’ by the quality of bids submitted to purchase the resort.

Mike Sullivan, a director of HVS Capital Corporation, which is advising on and managing the sales process for the 1,271-room complex, told Tribune Business the company was now finalising and clarifying with bidders the details of their respective offers.

While prevented by ‘confidentiality clauses’ from identifying the bidders, or how many offers had been received, Mr Sullivan expressed optimism that the auction process would produce a new owner for Grand Bahama’s ‘flagship’ resort property.

Bids to purchase the Grand Lucayan had to be submitted by June 10, 2016, and HVS Capital is now completing its assessment of the various offers before making a recommendation to Cheung Kong Property Holdings on the way forward.

“Bids were received, and we’ve been using that time since the bid date to understand the offers,” Mr Sullivan told Tribune Business. “We’re evaluating the bids we have in hand, and making some final clarifications.

“The bidding process went very well, and the seller should be in a position to make some sort of announcement soon. They’re being briefed about what’s happening, but we’re driving the ship in terms of finalising the details of the various bids.”

Mr Sullivan said HVS Capital and its client had been “gratified” by the quality of offers received, and expressed optimism that the process would result in a new Grand Lucayan owner.

“We’re very certain it will, and it will be good news for the island when it happens,” he added.

The Grand Lucayan sales process thus appears to have reached a similar stage as the one for Baha Mar, where financial and legal advisers are assessing bids before making final recommendations to the owners/decision-makers.

The focus on Baha Mar has allowed the Grand Lucayan sales process to almost ‘slip under the radar’, but it is no less important, especially given the economic and tourism implications for Grand Bahama.

For if the ‘right buyer’ can be found for the 409 acre property, the Grand Lucayan’s sale could spark the rebirth of Grand Bahama’s hotel and tourism industry. This sector has been struggling for many years, despite strong performances by some smaller resorts and the recent arrival of Memories/Sunwing.

Mr Sullivan, in a previous interview with Tribune Business, said Cheung Kong Property Holdings would entertain the ‘break-up’ of the Grand Lucayan into different parts, as this could unlock greater value for all parties.

Its preference, though, is to sell the Grand Lucayan complex as a single transaction. It will also provide financing to “appropriate bidders” to assist any purchase.

Mr Sullivan emphasised that HVS would seek “top flight, world class operators for all components” of the Grand Lucayan, including its casino and various resort assets.

Hutchison Whampoa/Cheung Kong Properties have endured sustained losses of $10-$20 million per year since the Grand Lucayan’s 2001 opening, and their patience appears to have finally run out.

Graham Torode, a Hutchison Lucaya director, told the Government’s Hawksbill Creek Agreement Review Committee last June that the Grand Lucayan would be closed unless a buyer can be found “within a reasonable period of time”.

Hutchison has kept the Grand Lucayan’s doors open via millions of dollars in annual subsidies to-date. The 522-room Memories Beach Resort has already been leased to Sunwing as an all-inclusive model, while Hutchison has just invested $6 million to do the same at the 198-room Lighthouse Pointe.

Tribune Business previously revealed that Memories has been interested in acquiring the Grand Lucayan, but the gulf on price between itself and Cheung Kong is thought to be considerable.

This newspaper understands that Memories had offered around $95 million, while Hutchison Whampoa/ Cheung Kong is seeking somewhere close to $220 million.

There have also been suggestions that Mediterranean Shipping Company (MSC) is interested in acquiring the Grand Lucayan as part of a cruise home port strategy, although the company is thought reluctant to entertain any new ventures until the uncertainty surrounding the Hawksbill Creek Agreement and its expiring incentives is removed.

Among the 12 recommendations of the Hawksbill Creek Agreement Review Committee was for the Government and Grand Bahama Port Authority (GBPA) “to secure suitable partners and arrangements which would secure the economic viability of Hutchison’s hotels, casino and tourism assets, and curtail unsustainable losses and large Government subsidies”.

McKinsey, in its late 2014 report on the options for Freeport’s growth, said the Government was seeking a “better owner” for the Grand Lucayan resort. It suggested Hutchison Whampoa may be prepared to sell for less than $180 million.

The report added that Grand Bahama’s hotel product might improve if the Hong Kong conglomerate sold the property to an entity with Caribbean tourism experience.

Pointing out that the Grand Lucayan’s occupancies (pre-Memories at least) averaged around 49 per cent, compared to an industry average of 75 per cent, McKinsey said: “The owner’s interest appears limited.

“Interviews suggest a lack of operational expertise and insufficient maintenance. Hutchison owns other hotels in Asia, but they are high-end business properties, not resorts. It did not come to Grand Bahama for the hotel.”

The Grand Lucayan Resort complex has a total of 1,271 guest rooms. The resort complex includes four hotel elements: the 10-storey, 528-room Breaker’s Cay tower; 198-room Lighthouse Pointe, newly renovated as all-inclusive; 23 Lanai Suites - all with 12 food and beverage outlets and three swimming pools; plus the 522-room Memories Beach Resort (presently leased to a third-party operator).

Other amenities include a 40,000 square feet conference centre, including a 15,000 square feet ballroom; 16 breakout rooms; 50,000 square feet of outdoor function space; a 23,375 square feet casino with 25 gaming tables and 195 slot machines; a 25,000 square foot destination spa and fitness centre; two golf courses; four multi-surfaced tennis courts and 15,000 square feet of retail space.

Comments

proudloudandfnm 2 years, 4 months ago

God I hope it sells. That would really help Freeport right now....

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killemwitdakno 2 years, 4 months ago

There were actually bids? Good news.

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