By NEIL HARTNELL
Tribune Business Editor
Baha Mar’s receivers have launched a formal sales process for the stalled $3.5 billion project by hiring a Canadian-headquartered real estate firm to market it to potential purchasers.
Raymond Winder, Deloitte & Touche (Bahamas) managing partner, told Tribune Business that the move to engage Colliers International was “a very important step” towards resolving the problems plaguing the Cable Beach-based development.
And he expressed hope that the move would give Bahamians “the sense there’s light at the end of the tunnel” over Baha Mar, and the negative impact its failure has had on job creation, economic growth and business/investor confidence.
Confirming Colliers’ hiring when contacted by Tribune Business, Mr Winder said the Toronto-headquartered company was “just getting started” on marketing Baha Mar to potential buyers.
He added that the appointment, and sales process’s launch, had been approved by the Supreme Court, and said: “This is a very important step from the standpoint that, to the extent we could identify a potential buyer of the property, it solves a number of problems.
“It solves the ownership issue, and it also solves the construction issue, in terms of the completion of the project, so this is a very important step.”
Mr Winder, though, said the receivers and the China Export-Import Bank, have yet to decide who will be responsible for completing construction of the $3.5 billion resort campus.
“That hasn’t been decided,” he told Tribune Business, “but we have been exploring all avenues to begin the process of [construction] mobilisation.
“As to who’s responsible, that hasn’t been decided. That could be the purchaser or it could be an independent third party, depending on how long it takes to identify a purchaser.”
Baha Mar’s original developer said the project’s construction was “97 per cent complete” when it filed for Chapter 11 bankruptcy protection at end-June 2015.
However, Prime Minister Perry Christie said late last year that the construction completion cost had risen to $600 million- a figure double the $300 million that was being discussed between Sarkis Izmirlian and his Chinese partners
Resolving Baha Mar’s physical completion is significant, given that it has the potential to deter potential buyers - real estate developers, and hotel/casino operators and brands - who do not want to inherit a construction project.
The construction aspect, combined with marketing and other necessary pre-opening costs, could mean that any Baha Mar purchaser could incur expenditure approaching $1 billion prior to enjoying any return on their investment.
The outstanding construction work will also likely affect the purchase price offered by potential buyers, which in turn may impact the China Export-Import Bank’s willingness to sell.
Baha Mar’s $2.45 billion financier, which took control of the project after the Government successfully petitioned for the appointment of joint provisional liquidators, had made clear it wants to recover 100 per cent of its investment.
Numerous Tribune Business sources have estimated that the maximum the bank is likely to receive, based on Baha Mar’s current condition, is $0.50-$0.60 on the dollar - well short of the China Export-Import Bank’s ‘make me whole’ goal.
Prime Minister Perry Christie, in his mid-year Budget address, said Baha Mar’s lender was talking to the project contractor’s parent, China State Construction Engineering Corporation (CSCEC), about remobilising to complete the project. This indicates China Export-Import Bank is open to financing completion itself.
Mr Winder, meanwhile, expressed hope that Colliers’ appointment would show Bahamians that he and his fellow receivers were “not just sitting here”.
“At least it gives individuals a sense that we’re moving the process forward, and we’re not just sitting here,” he told Tribune Business.’
“It gives the sense that there’s light at the end of the tunnel, and we’re doing things to ultimately move the project forward.”
Mr Winder confirmed that Baha Mar was that largest, and “most complicated”, receivership/liquidation case he had handled in his career.
“There are many, many moving parts,” he said, adding that no definitive timelines had been set for either Colliers or the sales process’s completion.
Potential Baha Mar purchasers must sign a non-disclosure agreement (NDA), and pay a $50,000 nonrefundable deposit, before they can gain access to an electronic data room containing all information necessary for them to conduct due diligence on Baha Mar. The NDA is to be governed by Bahamian law.
Marketing materials distributed to potential buyers by Colliers, and which have been obtained by Tribune Business, describe Baha Mar as “substantially complete”.
A so-called ‘teaser’ document, designed to whet buyer appetites, says: “Baha Mar is the largest integrated resort under construction in the Caribbean, with total estimated investment of over $3 billion.
“Covering an area of approximately 1,000 acres (400 hectares), this substantially completed project includes four luxury hotels, one casino, a convention centre, and one TPC-class golf course, which are under construction, and a hotel [Melia] which is in operation.
“Receivers were appointed over the project, and have retained Colliers International Hotels to assist in the international marketing of the property in an effort to seek potential purchasers.”
Most of the project details are well-known to Bahamians, although the marketing documents largely gloss over Rosewood’s decision to exit as one of the hotel operator brands.
They simply refer to a 240-room ‘five-star luxury hotel’, but the Colliers document makes clear just how important Baha Mar is to the Bahamian economy and society.
“As the largest integrated resort in the Caribbean, this project will create thousands of permanent jobs for the local community, greatly contributing to the economic growth of the Bahamas,” potential buyers are told.
“The project has commanded the attention of the Government of the Bahamas, which is willing to provide special assistance for the opening of the resort.”
The nature of this ‘special assistance’ is not detailed, but the documents add that “good relationships between the Bahamian and Chinese governments, where an airline framework agreement and visa waiver agreement are in place, augurs well for future direct flights from China to the Bahamas”.
Colliers’ hiring confirms that the Baha Mar impasse is set for a ‘long workout’ that is likely to last at least several months.
Tribune Business understands that the China Export-Import Bank’s advisers have been urging it to launch a formal sales process for Baha Mar for some time, via a ‘beauty contest’ where all potential bidders are provided with the same information so they can determine their price.
Such a process will also address the concerns expressed by Sir Sol Kerzner’s partner, Andre Farkas, who told Tribune Business previously that they were unable to access the information essential to conduct proper due diligence on Baha Mar.
Tribune Business obtained the Colliers document from Bahamian real estate contacts. They questioned whether any local realtors were working with the Canadian firm on the sale, given that only by Bahamas Real Estate Association (BREA) licensed professionals can sell real estate in this nation.
Colliers International, which employs 16,000 people in 66 countries, has experience in marketing Bahamas-based resorts to prospective purchasers, having fulfilled the same role over the British Colonial Hilton’s recent sale.
The buyer then, ironically, was China Construction America (CCA), the main contractor for the Baha Mar project.