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Lucayan - We’Ll Hit A Home Run

Minister of Tourism Dionisio D’Aguilar.

Minister of Tourism Dionisio D’Aguilar.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The $65m Grand Lucayan deal "is not a cataclysmic event" for the Government's finances, a Cabinet minister argued yesterday, insisting: "We think we've hit a home run."

Dionisio D'Aguilar, minister of tourism and aviation, told Tribune Business that the purchase price paled into insignificance when compared to the $2.636 billion recurrent spending budgeted by the Minnis administration for the 2018-2019 fiscal year.

Defending the Government's hotel acquisition from critics he described as "armchair quarterbacks", Mr D'Aguilar said it was only paying $30m of the purchase price this fiscal year - a sum that was just $5m greater than what it had originally allocated to support the failed Wynn Group purchase.

The Minister admitted the Government is "taking a risk" through its intervention, and "history will judge" whether it "hits a home run" - as it believes - or "strikes out" as critics such as Fred Smith, the Freeport-based QC, anticipate.

Comparing the Grand Lucayan situation to a baseball game, Mr D'Aguilar said the Government could ill-afford "to sit in the dug-out and do nothing" as current owner, Hutchison Whampoa, closed the property and the majority of Freeport's stopover tourism industry.

He pointed to the nearby Royal Oasis as an example of shuttered resort properties that had proven impossible to re-open, and described the Grand Lucayan as "a rounding error already written off" by the Hong Kong-based conglomerate.

Mr D'Aguilar revealed that Cheung Kong (CK) Property Holdings, Hutchison Whampoa's real estate arm, had been threatening to close the resort since the May 2017 general election, and it was only the Minnis administration's intervention then that kept the Grand Lucayan open "for as long as it has been".

With CK Property Holdings' patience wearing thin as the Hurricane Matthew insurance payments ran out, and Wynn withdrawing from the purchase, he argued that the Government was faced with "an emergency situation" that left it no alternative but to act.

Mr D'Aguilar also confirmed to Tribune Business that appointing a brand operator/management company to run the Grand Lucayan was the Government's "second choice", and would likely only be considered if a quick sale was not achieved.

He added that the Minnis administration was not keen on adding an extra layer of cost, and to become a landlord, given that such a scenario would likely incur increasing losses for Bahamian taxpayers.

Mr Smith and others have blasted the Government's Grand Lucayan purchase as "economic suicide", and a move that will "plague" Bahamian taxpayers and the Public Treasury for years to come, but Mr D'Aguilar countered that its economic importance to Freeport meant it could not be allowed "to wither and die".

"Look, the analogy I like to draw is the game of baseball," he told Tribune Business. "We could sit in the dug out and do nothing, and let it take the course it was going to take. Hutchison Whampoa was going to close the hotel, and history shows when you allow a hotel to close it's a lot more difficult to get it open again.

"We decided to go up to the plate and swing the bat. We could hit a home run, which we think we're going to do, or strike out, which Mr Smith thinks could happen. History will tell us who was right.

"We feel it was worth the risk; that we had to do something. We had to step up to the plate, we had to swing the bat. We can't let the hotel wither and die without making some effort."

The Grand Lucayan deal is structured such that the Government has paid a $10m deposit upfront, with a further $20m due to Hutchison Whampoa upon closing and conveyance of the real estate. The $35m balance is to be paid off in a series of seven bi-annual $5m instalments spread over the next three-and-a-half years.

As a result, Mr D'Aguilar said the acquisition costs would impose no undue strain on the Government's 2018-2019 Budget - especially since some $25m had already been allocated to finance an equity stake in the aborted Wynn deal, and for marketing and airlift support.

"There's time to pay for it. In this current fiscal year we're spending only $5m more than budgeted," Mr D'Aguilar told Tribune Business. "It's not like in a $2.6 billion Budget this is going to be the cataclysmic event that causes a change in our economy.

"It's about leadership. We have to take the risk. If all decisions were easy we'd make an easy decision, but life is about risk. We have to take the risk. Our risk is going to try and make this work.

"We could sit in the dug out and do nothing, but that is not what we were elected to do. The Government was elected to take that risk, get up to the plate and swing the bat. We may not hit a home run every time, but we've got to try. Many people are going to armchair quarterback this decision, but it behooves the Government to step in," he continued.

"Tourism is a large employer. It's the most efficient way of putting money in the hands of the people. The fact we're such a tourism-dependent nation behooves us to act."

Hutchison Whampoa was sticking rigidly to its $65m price - a level that was unlikely to attract private buyers, given the likely $100m-plus investment required to repair, renovate and re-open all the Grand Lucayan, plus rebuild airlift and promotional activities.

Taking the Hong Kong conglomerate out of the equation means there will be more flexibility on purchase price. And, with $25m already allocated in the 2018-2018 Budget, the Government could 'break even' on the acquisition if it were to obtain a price of around $40m - the figure at which Wynn sought a renegotiated deal.

Mr D'Aguilar argued that the Grand Lucayan was a relatively insignificant part of Hutchison Whampoa's empire far from Hong Kong, which meant that it did not merit the attention required by Freeport's economy and tourism product.

"We're a motivated seller and this hotel is a rounding error to Hutchison Whampoa," he told Tribune Business. "They don't care. This is an asset they've clearly written off already. They're not interested in doing anything with it as they've sucked all the insurance money [from Hurricane Matthew] out. They've checked out.

"Hutchison have been trying to sell this property since 2016 and have had no luck. One can argue they're not a motivated seller, as they were not moving very quickly. In almost two years they've had no purchaser and have not sealed a deal.

"They are in a completely different timezone, and it's such a tiny, tiny portion of their empire. They don't feel the sense of urgency we feel to make something happen. The Government is trying to be a bit more nimble and get results faster. Time will tell."

Tribune Business revealed last month that Hutchison/CK Property Holdings was set to close the Grand Lucayan's last remaining property, the 196-room Lighthouse Pointe, next month after the last insurance payment from Hurricane Matthew was received.

Mr D'Aguilar, though, revealed that the prospect of closure had loomed long before. "They were threatening to close the hotel from May 2017," he disclosed. "It was thanks to the intervention of this government that we were able to keep it open as long as we did.

"I know from the time we came to office they've been threatening to close that hotel. The intervention of the Prime Minister is what saved it, but I guess we reached the end of that course."

Mr D'Aguilar said his "gut" instinct told him the Grand Lucayan would attract interested buyers. However, any purchaser will not be taking on just a hotel but the task of rebuilding an entire city's/island's tourism product, turning it into a destination that does not compete head on with Nassau/Paradise Island, Florida or other regional rivals.

This likely means the Government must seek out visionaries such as Sol Kerzner (Atlantis) and Sarkis Izmirlian (Baha Mar), with both the financial backing and imagination to take a risk in reviving an island that has lost 59 percent of its room inventory since Hurricane Matthew.

"The primary goal is to sell the property," Mr D'Aguilar reiterated. "The Government should not be in the business of running a hotel. This is an emergency situation where we had to step in, but we fundamentally believe the Government of the Bahamas should be in this business."

He added that Dr Hubert Minnis, as a former Hotel Corporation chairman, was all too aware of the perils and multi-million dollar financial bleeding that hotel ownership can impose. "We'd obviously like a quick sale but a sale to the right buyer," Mr D'Aguilar said.

"We want someone in there who's passionate about Grand Bahama, and really wants to transform that hotel and give it the level of attention and passion given to Baha Mar and Atlantis. We need someone with that level of attention, that level of love for Grand Bahama who really wants to make it work. We're anxious to sell it onward to the right buyer."

Mr D'Aguilar described a rapid sale as the Government's "choice number one", with the hiring of a brand operator/management company acting as a fall-back option if that was not achieved.

"The Government would prefer not to be in a position where it is the lessor," he explained. "We would prefer not to be in the landlord position, as landlords have certain obligations to maintain the property and absorb losses because the tenant manages the property.

"The tenant takes their fee as a percentage off the top, and the losses are absorbed by the owner. We would prefer not to be in that situation. That's not an ideal outcome."

Comments

proudloudandfnm 11 months, 4 weeks ago

While you guys talk nanny Freeport is dying. We've been begging for action for over a year. And all we got was lies. Now we drive past a dead hotel that's owned by our government every day. So far this plan has had zero impact. So far all this plan does is maintain our horrible status quo. What about WE NEED ACTION do you guys not understand???

Hutchison failed not the hotel. Memories was full from day one. So don't tell us it can"t be successful. We know better.

Open the damned hotels!

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Dawes 11 months, 4 weeks ago

If the hotel could be successful the private sector would have bought it. Whats going to happen now is all Bahamians will have to fund a hotel in freeport until the Government can find someone to buy it at a large loss. The fact is that tourists don't want to go to Freeport. They should have dealt with the port and told them if they don't do something to save the hotels then the Government will provide incentives to get the rest of Grand Bahamas going and leave Freeport to its fate. What they are doing now is a waste of money.

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BoopaDoop 11 months, 4 weeks ago

"We think we've hit a home run." The "We" is the FNM sitting members. Most right-thinking Bahamians see this whole game as a sure loss for Grand Bahama and The Bahamas.

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tell_it_like_it_is 11 months, 4 weeks ago

I'm starting to wonder if DD's name stands for Dodo!
SMH

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Socrates 11 months, 4 weeks ago

they need to start random drug testing for politicians.. this statement is ludicrous.. we keep trying to put square pegs in round holes. GB is not a touristic destination. it needs to be promoted for offshore industry.... chemicals, plastics, whatever... of some kind.

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ThisIsOurs 11 months, 4 weeks ago

I don't agree with you on it not being a tourist destination. Money solves all problems. In 1980 who would have said the south was a luxury destination for the super wealthy?... On the other ill volunteer to administer the tests

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TalRussell 11 months, 4 weeks ago

Ma Comrades, there should be a petition circulating to stop saying they lives on paradise island Grand Bahamaland - when ever since Sir Stafford and Wallace signed the 1955 crafted by Bay Street Boys graft, greed, corruption and US gangsters, the Hawksbill Creek Agreement - it has never come anywhere close being neither a grand island of paradise. nor a United Grand Bahamaland. The only difference is Pindling had the gates exclusively separating black islander natives from mainly foreigner white Freeport - torn down.

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TheMadHatter 11 months, 4 weeks ago

Again i say, that Fred Smith is opposed to it, automatically means it is good for Bahamians. I guess there's not enough Haitians in FPO looking for hotel work.

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The_Oracle 11 months, 4 weeks ago

And what legitimate buyer/Owner/operator is going to come and deal with the Port Authority? Current owners are neither Wallace groves or Stafford Sands calibre. A silk purse from a sows ear comes to mind.... Does anyone else liken this situation to the frantic panic seen towards the end of a ship sinking? A prior article pointed out the waste of leverage by granting Devco/Freeport Industrial 20 year exemptions on Real Property taxes, (which also threw licensees into panic and uncertainty) That could have seriously "Motivated" the Port to get off it's stumps and do its Job! Responsibility lies with the Port first and last. Anything else is a short lived bandaid.

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TalRussell 11 months, 4 weeks ago

Unbeknownst many ma comrades, the British Royal Family's extensive property and investment portfolio extends far beyond the UK and have long included properties on Shirley Street in Nassau - making them an eligible and much suitable Buyer Port Authority families shares....,. would inject some badly lacking British tourism flavour into Freeport. The Royals investments come with excellent management skills. The Royals investment outlay required purchase all Port's outstanding shares would be like drop in penny bucket for the British Royals.flush with cash deep pockets. Freeport badly needs some cultural injection - don't you thinks... or it's highly possibly Freeport go the Shantytown way - living under another 10 to 15 years economic bust period,

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TheMadHatter 11 months, 4 weeks ago

Oracle - you are very correct that the 20 year deal Igraham did to remove property tax was dead wrong, and FPO is dead as a result.

However, as long as i see Nassau people buying grocery and tings from communist Chinese "convenience stores", i know they don't understand why they really have to pay VAT.

The small savings they MAY get compared to Super Value, they end up paying back triple in VAT, closed hotels, interest loans, road traffic sports stadiums, and OTHER grave problems that Chinese communists cause here.

Some won't understand until our dollar is 138:1 like Jamaica.

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bogart 11 months, 4 weeks ago

.........the Hotel workers should be the ones to hit a HOME RUN.......now that the Hotel has been sold they should get good lawyer to see what bdnefits they are due...severencing payments from the previous owners....plus if the new owners are smart would keep them all on to make the "new" hotel function.plus .......would again upon sale of hotel a second time.....should again look into severencing payouts.....plus be rehired....HOME RUN.....,!!!!.

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TheMadHatter 11 months, 4 weeks ago

.....by the way, does anyone know the nationality of all the "funny lookin" maids what dis clean rooms in Lucaya for $3/room?

Yes THREE dollars per room. And so many of them they only get 3 or 4 rooms each per day. When you deduct bus fare, how much is left? Where do they live? What do they eat?

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sucteeth 11 months, 4 weeks ago

Deadport is finished .. the government shouldve forced Hutchison to re open and abide by the deal they structured with them when opening the container port. they are making fools of all of us especially the politicians as they see are nothing more than whores for the country. they walk all over them and laugh!! grow some balls and stand up to these scum !!

In the meantime give the owners of the GBPA 1 year to find a buyer or force them into liquidation as they have raped the assets and done nothing to improve Freeport.

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TalRussell 11 months, 4 weeks ago

Ma Comrade Minister tourism, a $65 million invest in some neglectful improvements hotel sitting years empty paying guests is no substitute lack tourism product in Freeport. ..... and pray tell me what kinds heritage sharing cultural stories and history is there tourists experience .... $65 million will not satisfy visitors expectations:for the chance to taste some natives culture... what culture? Is this the Freeport tourism product you're really goin' be presenting the world as
"Home Run?

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joeblow 11 months, 4 weeks ago

Only idiots would pat themselves on the back with a deal like this! These guys smell more and more like PLP's everyday!!

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DWW 11 months, 4 weeks ago

Wait what? They gone spend $7,000 per Bahamian man woman and child in the country in just 1 year? Holy $#+× batman

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The_Oracle 11 months, 4 weeks ago

On a point of order, the "gates" between Freeport and EMR were a Bahamas Customs checkpoint, to control all the duty free materials flowing into Freeport, which were found flowing out to the western settlements. I love how this fallacy perpetuates itself. Ingraham (and Christie for that matter) couldn't think past lunch, hence the hotel renovated and opened was the deal tied into the Airport/Container port, no promise to run it forever, or at all. It has always been a money sink made worse with no casino to speak of. Same was true for Princess who created their own Gambling Junkets, self generated revenue/support, via Freddy Laker and the operator before (or was it after?) Meanwhile the Absent Insurance Report is most telling, it may well show there was structural damage. Hope that deposit is refundable!

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DWW 11 months, 4 weeks ago

Bahamas labour force is 220,000 people. 62% of that work in private sector and essentially pay the salaries of the other 38% employed by government. This means that 136,000 people pay all the bills for the government. Or put another way $19,000 in tax per employed person in this country. No wonder everyone is broke. And we gonna buy one hotel to keep 400 people employed using gov't tax dollars. Has no one actually considered that there is a reason all the hotels in fpo are closed... let's flog some more dead horses aye?

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OldFort2012 11 months, 4 weeks ago

We'll hit something alright. But it's the reef. And sink.

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John 11 months, 4 weeks ago

So the government is being taken to task for continuing to collect duties from some merchants on items on which it has passed laws to make these items duty free once purchased from m the Bahamas. And since government no longer has the legal authority to collect these duties they are actually garnishments. And unless the government has intentions of applying these garnishments to other taxes a company may owe, they will have to return this revenue to the respective businesses once international bodies bare informed and become involved. When an idiot is appointed and tries to run a government financial department of which he has no experience, the results are not only more government revenue being lost or frittered away, but legitimate business seeking route to level the playing field as a matter of survival.

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TalRussell 11 months, 4 weeks ago

How many more public purse's $65 million and specially appointed committees and investment vehicles will it take now 63 long years since signing Hawksbill Creek Agreement to motivate Freeport thousands 110,000 acres 'crown lands gifted land rich foreigner comrade owner families Port to get off their asses switch over from being the 'missing in action link' that passed on so many opportunities presented to them - time and time again - by various Bahamaland central governments to lift Freeport - and by extension the entire island Grand Bahamaland - up from economic recession and hard times? Kick their comrade asses out from even just one more day as quasi government Freeport.

........///////https://www.youtube.com/watch?time_co...">https://www.youtube.com/watch?time_co...

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John 11 months, 4 weeks ago

Personally I think the Bahamian people needs to look under the table and see who is holding hands (or getting feel up) with this Lucayan deal. When the government cancels the only major sporting event on its calendar for at least another year, and reduced its school uniform assistance program’s revenue by one third, then jumps up in almost the same breath, one must wonder whose brass is getting polished, at the expense of the Bahamian people. No one denies Freeport needs help. No one can argue that if no one steps up to the plate, then the government of The Bahamas must step up to the plate and assist the people of Freeport and Grans Bahama. Just hope they not getting pitched no curveball and getting strikes out. Which inning are they (your government) anyway?

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birdiestrachan 11 months, 4 weeks ago

This man does not mention what the government will pay to renovate the hotel. Is that amount in their budget?. here in lies the problem. which he and his government ignores. also the operation cost. It will not be a game and they will realize it soon enough when the bucket comes up empty.

persons with vision consider all . not just the purchase cost. He has to do better , because he knows better. The spin will not do.

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Gotoutintime 11 months, 4 weeks ago

If it hadn't been for Stafford Sands & Wallace Groves the Island of Grand Bahama would still be nothing much more than a Billy Butlins Camp at West End, back in the day. Obviously Groves didn't kiss Pindling's ass sufficiently and there is no doubt that the position that Grand Bahama now finds itself in is strictly the fault of Pindling and the old PLP Government.

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TalRussell 11 months, 4 weeks ago

Ma Comrade Gotoutintime, if it hadn't been for Sir Stafford and Wallace, how else could've the Bay Street Boys received their monthly hand delivered Bribe envelopes - sealed tight with $5,000 to $10,000 cash in bribes for looking other way on licensing Gambling... so so much so that the Paradise island's casino license was once owned by Wallace's wife Georgette? { No making up this monthly hand delivery cash fat envelopes to lawyers, doctors, merchants. media realty offices and harbour pilots - on and near Bay Street... want list ALL names taking the Bribes? }.

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Gotoutintime 11 months, 4 weeks ago

Hi Tal--Happy to join issue with you---It's true the Bay Street Boys got their bribe money--The problem was that Pindling wasn't given enough so he shut the place down! I would love to see the list to see if I'm on it!!

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TalRussell 11 months, 4 weeks ago

Ma Comrades, think 'Tourism Pennies from Heaven.'
Freeporters, now got their own $65 million government run Lucayan Hotel - so clean up some ya sins and transgressions against Jesus - engage your sitting idle since 10th May, 2017 red shirts House MP's and senators to alternate taking turns dressing in Baptismal looking clothing - and put them good physical use - offering daily ducking underwater for only $50 tourist Baptisms at poolside. { Can't just be making this being imaginative 'Tourism Pennies from Heaven.' stuff up }. Combine this Ducking with some Weed sales and we could be talkin' realization 'Tourists Pennies from Heaven' to the tone $100 million each and every calendar twelve months Amen!

http://tribune242.com/users/photos/20...">http://thetribune.media.clients.ellin..." alt="None">

by TalRussell

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ThisIsOurs 11 months, 4 weeks ago

ROTFL, I thought I couldn't before, but now I really can't. Lol

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bogart 11 months, 4 weeks ago

Dis is getting real weird.....wid all dese gubbernment experts....all types of information....on Dis hotel acquisition.....THERE SHOULD HAVE BEEN A GAG ORDER PLACED ON THIS TRANSACTION AND THE GUBBERNMENT HANDLE THE OUTCOME.....THIS OWNER AN AFFILIATED BUSINESSES ARE TRADED ON HONG KONG STOCK EXCHANGE ....????....

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BahamaPundit 11 months, 4 weeks ago

The biggest problem with purchasing the hotel is the completely messed up narrative it provides to the Bahamian people. First part: We need to charge 12% VAT because the country is broke. Second part: We have 65 million to buy a hotel that we wont use. The equivalent would be having an ex wife that takes you to court and makes you pay half of your salary to pay for her food and upkeep, and the next week she buys the largest house in Lyford Cay. It just don't work. Worst PM ever (didn't think Christie could be beaten, but he has been).

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Gotoutintime 11 months, 4 weeks ago

Hi Tal---Happy to join issue with you---It's true that the Bay Street Boys got their bribe money. The problem was that Pindling wasn't given enough so he shut the place down. I would love to see the bribe list to see if I'm on it!!

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TalRussell 11 months, 4 weeks ago

Ma Comrade, the best my recollection POP Symonnette, only one didn't accept Wallace's cash stacked envelopes.

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Gotoutintime 11 months, 4 weeks ago

At least there was one honest man in the crowd---We will live in hope!!

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John 11 months, 4 weeks ago

Yes they s government house is in financial disarray. Simply because they have dumb and inexperienced people in key positions that don’t know nothing about nothing. How can Government still be charging some merchants duty on clothing and shoes when they went to the people’s parliament to make these items duty free? So by government itself operating outside the law, it is giving more latitude to persons who are also operating outside the law at the expense of established Bahamian businesses. And once you destroy the established local economy, like someone did a few years ago, downgrades would be among the least of your worries.

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truetruebahamian 11 months, 4 weeks ago

Got out in time is the only one using actual historical precedent to argue his/her case. I remember when it was Pine Ridge, the doctor in charge was Dr. Ejnar Gottlieb, who later moved his practice to Marsh Harbour, Abaco, his son Cay Gottlieb who wrote a Bahamian Anthem " Daybreak and crow fly away" lived there earlier in life , his brother, lawyer and ex parliamentarian Frederick Florian Gottlieb was born there, Cay moved back later on to open up a law practice and radio station with his talented partner, Dave Mackey and the Cicada Studios where I recorded as well, history will give great memory but the Hutchison Whampoa business is faceless and is without care now or ever for Grand Bahamas rich and varied history. St. George and Hayward are the huge drivers of the face and economy of Freeport Mr. Pindling's bend or break broke what was a promising gold mine for the Bahamas and it has never been able to regain its original impetus, direction or worth. We lost big time with Ping and his bunch of short sighted crooked bandits.

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Gotoutintime 11 months, 3 weeks ago

True-True---It got so bad in Freeport that poor Cay ending up shooting himself!!

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John 11 months, 4 weeks ago

So what was Marlon Johnson fired from BTC for? Ok a less harsh term ‘forced to resign ‘. (His boss was definitely fired) Will this government successfully prosecute any of the former politicians or government workers when its own administration seems to be steeped in the same challenges. Is this government about empowering Bahamian people or pandering still to only foreign interests?

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ThisIsOurs 11 months, 3 weeks ago

Only the people in the board room know. But clearly whatever it was, Minnis thinks its made him the perfect candidate to sign off on million dollar contracts at Finance and to get all of Minnis' financial goals accomplished in five years. Almost hit a home run with Oban . Coulda put his feet up for the remainder of the term

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Greentea 11 months, 3 weeks ago

Freeport is not a tourism hub. It has nothing to draw even Bahamians much less foreigners to vacation. Sorry to say, there is nothing unique or special about it. The hotel is only going to be useful in a transformed economy and the fact that the government and the locals can't think of a single alternative to invest in besides tourism says a whole lot about the future of the island. Without vision the people will indeed perish.

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Islandboy242242 11 months, 3 weeks ago

I like the braggadocious picture to go with the oh so humble statement... dang...

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FPO 11 months, 3 weeks ago

The Grand Lucayan is just another needed domino in order to make Freeport the New Silicon Valley of the Caribbean as was announced in June 2018. http://www.tribune242.com/news/2018/j..." rel="nofollow">http://www.tribune242.com/news/2018/j...

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ThisIsOurs 11 months, 3 weeks ago

Mouth could say anything. It's very telling that they have no idea how much anything will cost. That means there was zero thought put into this. You could do that if you on the road and you trying to decide between bamboo shack or Kentucky.

Btw, these dominoes supposed to stand up or fall over?

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SP 11 months, 3 weeks ago

Typical Bahamian arm chair geniuses with nothing to offer but useless criticisms and smart talk. It's no wonder the dam Haitians are taking over the country.

The government needs pull their heads out of their backsides and "create" the incentive to make the Island of Grand Bahama attractive by making the entire Island a duty free shopping destination.

Every shuttered retail and hotel property on the Island would be sort after and the Island would mushroom overnight.

Nuff said!

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