By NEIL HARTNELL
Tribune Business Editor
Sebas Bastian’s property development and construction group boasted $83 million in assets under management at year-end 2015, having made an extremely fast transition from start-up to profitability.
The 2015 financial statements for Brickell Management Group (BMG), which were only signed-off in mid-November 2016, show year-over-year net income jumped by 1,113 per cent or over $3 million - from $277,196 to $3.363 million.
BMG’s annual report, which has never been reported on publicly before, boasts of “extraordinary growth” for the vertically-integrated property development, management, financing and construction group - primarily due to sales at its Venetian West development.
Mr Bastian, who is best known as chief executive of the Island Luck web shop operator, wrote that top-line sales revenue had grown by $8.9 million or 1,159 per cent year-over-year as BMG began to monetise the value of its real estate projects.
“Our ROI (return on investment) came in at 7 per cent or $673 per share, compared with 1 per cent and $55 in 2014,”Mr Bastian wrote in the annual report. “As at the end of 2015, assets under management amounted to over $83 million, which represented a significant growth year-over-year.”
Mr Bastian said BMG’s “innovative system of construction” had reduced building timelines, with 87 units at Venetian West sold in the 12 months to end-December 2015 - 33 on a cash basis, and the remaining 54 via a rent-to own scheme.
The sales data reflects the struggles of BMG and its affiliates, and Venetian West buyers, to obtain mortgage financing from commercial banks - a reluctance partly due to perceived connections to Mr Bastian’s Island Luck business and web shop money.
However, the web shop sector was then in the final throes of its legalisation process, a factor that likely eased some commercial bank fees.
“We are thankful to the banks for finally mortgage underwriting our properties,” Mr Bastian wrote. “This has allowed us to liquidate many of our lease-to-own receivables, thereby allowing us to self-fund many of our investments.
“Our commercial real estate portfolio grew by $19 million or 14 per cent year-over-year, while our residential real estate portfolio grew by $6.6 million or 23 per cent over the same period.”
Island Luck’s web shop profits have likely enabled Mr Bastian to enter other sectors of the Bahamian economy, for apart from BMG his companies also include Investar Securities, the investment and brokerage house, plus an insurance agency.
He earlier this week confirmed that Island Luck still planned an initial public offering (IPO) of shares to the Bahamian public, with the operator’s completed ‘unqualified’ audit enabling it to make the necessary submissions to the Securities Commission as early as next week.
Other highlights of BMG’s 2015 financial statements included:
- Despite not having a formal overdraft facility, BMG’s account at the financially-stricken Bank of the Bahamas was still overdrawn by a gross $176,029, or net $149,225.
“At the reporting date, although the company was overdrawn on the books by $176,029, it did not have an overdraft facility with Bank of the Bahamas,” read the financial statements, audited by the Baker Tilly Gomez accounting firm.
- BMG had obtained a $5 million construction loan from Bank of the Bahamas on March 11, 2015, to assist with the Venetian West condominium complex’s construction. The interest rate attached to the loan was 6.75 per cent.
The construction loan appears to have been part of a wider package involving Mr Bastian’s own finances, as it also included “two corporate credit card facilities totalling $250,000 to assist with corporate and personal expenses of the chairman of the Board of Directors [Mr Bastian]”.
The interest rates on the cards were 7.75 per cent, which a financial services contact to Tribune Business described as “amazing”. Most credit card rates in the Bahamas are upwards of 16 per cent, they said, with the lowest available likely being 12 per cent.
The Bank of the Bahamas credit facilities were secured by a $5 million personal guarantee from Mr Bastian, and his “assignment” of a $250,000 deposit to cover the credit cards. BMG also assigned its interest in one of its commercial properties, the Aventura Plaza, to the bank.
The construction loan and its full proceeds were eventually transferred to Quantas Investments, the BMG affiliate responsible for Venetian West.
- All BMG’s three investment/commercial properties were leased to the Government under the former Christie administration. All three of the Aventura Plaza, the Bellagio Plaza and the Bel-Air Plaza were leased for the same 10-year terms.
Aventura Plaza was leased at a rental rate of $68,802 per month, and the Bellagio Plaza at $24,973 per month. BMG even spent $296,640 redesigning the Aventura Plaza according to the Government’s specifications.
“We concluded lease agreements with the Government of the Bahamas for three of our commercial buildings, all of which are under 10-year contracts,” BMG confirmed. “There are other commercial properties under management in New Providence and Freeport, Grand Bahama and Paradise Island. Our rental run rate is $1.125 million per annum.”
Paul Major, who recently resigned as BMG’s president and managing director, wrote in the annual report: “We manage seven corporate entities with over $83 million in assets under management.... Growing assets and income by more than 16 times is no small feat by any stretch of the imagination.
“BMG generated profits of $1.5 million, which represented a growth of 267 per cent. Quantas Investment Group generated a profit of $2 million representing 1,092 per cent growth, and Vandoff which is the construction vehicle of our conglomerate broke even because it is essentially a cost centre at this stage.”