By NEIL HARTNELL
Tribune Business Editor
China’s ‘freezing out’ of Sarkis Izmirlian was confirmed last night, after Baha Mar’s prospective purchaser was identified as a multi-billion dollar Hong Kong conglomerate with extremely close ties to the Beijing government.
Chow Tai Fook Enterprises (CFTE), the conglomerate formed by the late billionaire, Cheng Yu Tung, and now controlled by his family, confirmed in a statement the long-held expectation that Baha Mar would be sold to a Chinese purchaser.
The group, which has interests in the property development, hotel, casino, transportation, jewellery, port and telecommunications industries, said it had “entered into negotiations” to acquire Baha Mar.
It added that had submitted the necessary permit and approval applications to the Bahamian Government for the acquisition of Perfect Luck Holdings, the special purpose vehicle (SPV) established by China Export-Import Bank, Baha Mar’s secured creditor.
The Rosewood hotel brand, which had withdrawn from the Baha Mar project, but is owned by Chow Tai Fook Enterprises, is now in line to return to the Cable Beach project, the statement confirmed.
“Chow Tai Fook Enterprises intends to re-engage its subsidiary, Rosewood Hotel Group, as a luxury hotel operator at Baha Mar,” it said.
It added that the Hong Kong-based conglomerate was also in talks with the two other resort brands, Hyatt and SLS Hotels, in a bid to ensure they remain committed to the project.
Chow Tai Fook Enterprises’ statement contained the standard investment and jobs pledges, and corporate history. However, ‘reading between the lines’, it is possible to draw out several key insights.
- The group’s statement that it has “entered into negotiations” to acquire Baha Mar, and has applied for the necessary permits and approvals, indicates no purchase has been agreed yet.
However, the language used strongly suggests it is a ‘done deal’. Chow Tai Fook Enterprises says pre-opening activities and hiring “has already commenced”, with the group investing “millions ahead of the official deal completion”.
The negotiations with the hotel brands, too, would only have begun if the purchaser was confident that its deal is going through, and that it will receive all the necessary approvals from the Christie administration.
- The release also effectively confirms Mr Izmirlian’s removal, and his family’s loss of an $800-$900 million investment in a project he spent some 13 years on.
The confident language in Chow Tai Fook Enterprises’ statement affirms that the China Export-Import Bank, and the Beijing government, have no interest in entertaining further Baha Mar’s original developer despits his repeated offers to beat any rival bidder on price.
The Hong Kong conglomerate, which arrived outside the formal Baha Mar sales process run by the Deloitte & Touche receivers, said the standard non-disclosure agreement (NDA) prevented it from revealing any details about the negotiations and transaction terms.
Therefore, it is impossible to compare its offer to Mr Izmirlian’s, and determine which is better.
- The Chow Tai Fook Enterprises release goes into great detail abouts its real estate development and hotel background, but there is no mention of a casino history.
This is despite the late Cheng Yu Tung’s gaming partnership with Macau gambling king, Stanley Ho, and the Government’s insistence that a “world class hotel and casino” group acquire Baha Mar.
Nor is there any mention of a potential casino brand for the Cable Beach project, although the Hong Kong-based conglomerate can always go out and acquire the necessary expertise.
- The Chow Tai Fook Enterprises release promises “a phased opening” of Baha Mar, something that the Chinese prevented Mr Izmirlian from doing.
This ties into the Christie administration’s plans, and will likely involve trying to complete Baha Mar’s casino and casino hotel, plus convention centre and convention hotel, in time for the end of the early 2017 April winter season and the general election. How many floors will be completed is also uncertain.
Chow Tai Fook Enterprises issuance of such a press release is news in itself, given that normal corporate protocol is for acquisition talks - certainly those of Baha Mar’s scale - to remain secret until the deal is concluded and formally announced.
Its statement appears designed, and timed, to relieve the public pressure that has been building on the Christie administration over Baha Mar, especially in relation to the ‘sealing’ and lack of transparency surrounding the Goverment’s agreement with the Chinese; the uncertainty surrounding the Perfect Luck deal and ownership; whether taxes were paid on that sale or not; and the latest PR offensive mounted by Mr Izmirlian over his ‘purchase offer’.
The statement’s headline: ‘Opening Baha Mar: Another Step Closer’ could have been written by the Government itself, and is a further indication that the release was intended to ‘dampen down’ Bahamian public disquiet.
Tribune Business previously predicted that Baha Mar’s purchaser would be a Chinese group or conglomerate with close ties to the Beijing government, and that is exactly what Chow Tai Fook Enterprises has.
Articles in the New York Times and other publications have previously exposed these links, including the broad business dealings that the Cheng family has enjoyed with the family of Wen Jibao, China’s premier from 2002 to 2012.
Dr Henry Cheng, Chow Tai Fook Enterprises’ chairman and the late billionaire’s son, is a standing committee member for the Chinese People’s Political Consultative Conference.
The group has also joint ventured with the Abu Dhabi Investment Authority, and invested in a failed hotel venture with US presidential candidate, Donald Trump.
“CTFE is looking forward to having Baha Mar join its portfolio of world-class integrated resort development projects,” said Dr Cheng in the statement.
“We are fully committed to this project, and plan to hire as many Bahamians as possible to work at the property.”
Graeme Davis, the president of CTFE’s Bahamas subsidiary, added: “CTFE is a company that embraces and champions the culture and values of the communities where it does business around the globe.
“We are excited to create an experience in the Bahamas that showcases what we collectively have to offer the world. We are confident that Baha Mar will be a property that Bahamians can be proud of.”
Chow Tai Fook Enterprises touted Rosewood’s management of 55 hotels in 18 countries, and under three different brands. In particular, it pointed to properties in Antigua, Bermuda and the British Virgin Islands, and others in New York, LA and Hong Kong.
On the real estate development side, it flagged the $10 billion Greenwich Peninsula project and $2.3 billion investment in Queen’s Wharf, Brisbane.
However, Chow Tai Fook Enterprises’ pending acquisition of Baha Mar, coupled with China Construction America’s (CCA) ownership of The Pointe, is again likely to raise concerns about whether too large a slice of the Bahamian economy, and its tourism product, will be owned by entities that themselves are controlled, or have close ties, with Beijing.
Listed companies controlled by CTFE and the Cheng Family include New World Development Company, a property developer with a market capitalisation of over US$11 billion; NWS Holdings, an infrastructure and transportation company with a market capitalisation of over $6 billion; and Chow Tai Fook Jewellery Group, one of the largest jewellery retailers in the world with a market capitalisation of over $7 billion.