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Ubs House Deal Gives ‘Concern’ On Govt’S Spv Use

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The FNM’s deputy leader has expressed fears that the Government is “not being fully transparent with the Bahamian people” over its debt liabilities, after its multi-million dollar UBS House acquisition finally closed.

Tribune Business can reveal that the Christie administration has used another so-called special purpose vehicle (SPV), called Poinciana SPV Ltd, to purchase the high-end East Bay Street property from the Swiss bank of the same name.

K P Turnquest, the FNM’s deputy leader and finance spokesman, said there was “significant concern” surrounding the Government’s increased use of SPVs, and whether they were being used to keep liabilities off its balance sheet and the near-$7 billion national debt.

“It is obvious that they are using these SPVs to try and keep off balance sheet the true debt and liabilities of government,” Mr Turnquest told Tribune Business.

“To the extent these vehicles are being used, it does give concern that the Government is not being fully transparent with the Bahamian people on the true status of the debt, and the true status of the fiscal consolidation plan.

“If these are liabilities that are not being recognised, the long-term ramifications are clear and very serious,” he added.

“Again, we have had a downgrade attached to the debt situation, and to the extent there are liabilities not covered on the books, that should be a significant concern to us all.”

Other SPVs include Bahamas Resolve, the entity to which 13 ‘bad’ Bank of the Bahamas loans worth a net $45.2 million were transferred as part of the October 2014 ‘bail out’.

Those loans, and the responsibility for collecting them, are now the Bahamian taxpayer’s via the Government and Bahamas Resolve.

The latter also issued $100 million in government bonds to Bank of the Bahamas to cover the balance sheet ‘hole’ created by the loans’ removal, with the payments supposed to be made via recovered loan collateral. If Bahamas Resolve is unable to realise the loans, then payment has to be covered by the Government/taxpayer.

Another SPV is Coral Insurance Company, which has been created to assume the remaining CLICO (Bahamas) insurance policy portfolio, again leaving the Government and taxpayer with potential liabilities.

The same type of entity will also issue the $650 million in rate reduction bonds (RRBs) to refinance the Bahamas Electricity Corporation’s (BEC) debt.

Meanwhile, sources close to the UBS House SPV deal confirmed that it had closed, and this newspaper can also disclose that UBS House and its ‘Annex building’ at the rear will become the new home for all the non-Central Bank financial services regulators.

The details are contained in a tender document seeking a project manager for ‘the outfit of UBS House’, which has been issued on the Securities Commission’s website in the name of Poinciana SPV Ltd.

The ‘request for proposal’, which carries a bid submission deadline of Wednesday, January 11, confirms that the property - which stretches from East Bay Street all the way to Shirley Street - is under new ownership, and discloses the future planned usage.

“Upon a recent acquisition of UBS Corporate Centre, Poinciana SPV Ltd wishes to develop available space (comprised of the entire UBS House and vacant space in the UBS Annex Building) within a short timeframe to facilitate occupancy as soon as is possible,” the tender document said.

“The available space will house, at a minimum, four financial services regulatory bodies (Securities Commission of the Bahamas, Insurance Commission of the Bahamas, Compliance Commission of the Bahamas and the Financial Intelligence Unit) and possibly one other entity, space permitting.”

Morley Realty has been appointed as property manager by Poinciana SPV Ltd, with the successful bidder required to outfit space that will include the collective 172 persons employed by the four financial services regulators, plus “one to two additional tenants”.

The Securities Commission, Insurance Commission and Compliance Commission are currently all located in Charlotte House on Shirley Street, while the Financial Intelligence Unit is not far away at Norfolk House, also in downtown Nassau.

The tender document suggests that upon relocation, the financial services regulators do not intend to have a spartan lifestyle, as the project manager is being asked to “design special purpose areas on the ground floor of UBS House” to include facilities such as a gym, day care centre and library.

Mr Turnquest, though, said it would be “premature” to question whether Bahamian taxpayers had received ‘value for money’ on the UBS House purchase, as the full facts had yet to be divulged.

Tribune Business sources are also questioning how the Government has financed the UBS House purchase.

It was originally supposed to raise capital from a $20 million bond issue to Bahamian investors, placed by Providence Advisors, with the securities carrying a 5.5 per cent interest coupon and 15-year maturity.

However, Providence Advisors was ultimately told to “hold off”, and the Government financed the acquisition through alternative means.

The closing date for the UBS House deal was extended several times, having originally been scheduled for February 2016. One of the delays related to concerns that the parking lot for UBS House and its annex building had extended beyond the stipulated boundaries, a situation that was eventually resolved.

Tribune Business previously reported that Poinciana SPV Ltd will be owned by the Public Treasury, but have a Board of Directors that is independent from the Government.

John Rolle, the former financial secretary, confirmed both the Government’s interest in UBS House and the SPV structure to Tribune Business in 2015, adding that the latter might be used for other real estate purchases.

He said the acquisition of UBS House and affiliated properties was part of a wider strategy to reduce the Government’s costs associated with leasing property.

It typically rents, rather than owns, its real estate, and the UBS deal effectively indicates a change of plan with regard to the Government’s property management strategy as it seeks to save dollars wherever it can, due to the strained fiscal position.

However, the now-Central Bank governor added later: “It is more accurate to say that the Government is sponsoring a vehicle to purchase property.

“The assigned income from the leases will pay for the property...... Details will be published in due course.”

UBS (Bahamas) had been seeking more than $22 million for its three-storey, 33,000 square foot headquarters building and two other properties combined.

UBS House was initially marketed by Bahamas Realty as a three-storey trophy office building with a total rental area of 33,162 square feet, and a 240 space car park.

UBS Annex, which sits at the rear of the bank’s corporate office on East Bay Street, was marketed as a ‘two-storey, class A’ office building with 23,544 square feet of office space and 162 car parking spaces.

The total area consists of about 56,876 square feet or 1.31 acres, with 247.8 linear feet of frontage on to Shirley Street.

Comments

C2B 2 months, 2 weeks ago

These 4 Commissions are a waste of money.

  1. Securities Commission of the Bahamas - To regulate 20 stocks that never trade
  2. Insurance Commission of the Bahamas - They hide during Hurricanes and blame the policy holders
  3. Compliance Commission of the Bahamas - Compliance of what exactly? The disappearing financial sector?
  4. Financial Intelligence Unit - This one is a joke right? The loosest use of the word Intelligence I have read.

These 172 people and their $30MM facility probably costs taxpayers in excess 40MM annually in operating cost.

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