0

Govt's Grand Lucayan Purchase 'Only Option'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Purchasing the Grand Lucayan resort is the "only option" available to the Government, a former Port Authority (GBPA) attorney argued yesterday, as its closure has "gone on way too long".

Carey Leonard, the former GBPA in-house counsel, told Tribune Business that while it was "regrettable" the hotel's fate now rested in the Minnis administration's hands, it was "the right decision" to make in the circumstances.

Speaking after the Prime Minister confirmed at the weekend that the Government "will intervene and, if necessary, purchase the Grand Lucayan", Mr Leonard said his comments had provided Port Lucaya Marketplace merchants - and other businesses that rely on the resort - with some certainty that the property will not be allowed to close.

He added that government action was "much better than waffling around with Wynn", amid ongoing doubts that the Toronto-based developer's $70 million deal to purchase the Grand Lucayan will move ahead.

"Quite frankly, I think that if they buy it then they are in a position to at least be able to negotiate with somebody else," Mr Leonard said of the Government. "The fact they're buying it means Wynn is out, which is a good thing.

"I think it's the only option anyway, and I'm not surprised because Wynn did not strike me as someone who knows what they're doing. It puts the Government in the driving seat for negotiating further down the road. It's regrettable they have to do it. Let's hope they open up a bit more of the hotel, and that others [potential buyers] come forward and say they'd like to take a look."

Mr Leonard said he was aware of other interest in the Grand Lucayan besides Wynn, adding: "I have heard of one, and that one is quite credible."

Tribune Business revealed on July 12 that the Government was scrambling to find potential alternative solutions for the Grand Lucayan's near 22-month closure amid fears that the Wynn Group's purchase may not work out.

The Prime Minister's remarks at a meeting of Free National Movement (FNM) Grand Bahama branches at the weekend, coupled with K P Turnquest, deputy prime minister, revealing that the resort's fate will be determined "30 days from now", merely confirm the growing uncertainty over whether a private sector buyer will emerge before time runs out.

The Grand Lucayan's fate has effectively come full circle in 12 months, for it was last August when Dr Hubert Minnis suggested the Government may take an equity stake in any acquisition of the resort.

That arrangement, based on his remarks, is now squarely back on the table with the clock set firmly against the Government. Unless an acquisition is completed imminently, Freeport's "anchor" property - and, by extension, the city's entire stopover visitor industry - run the considerable risk of missing out on a third peak winter tourism season.

And Mr Leonard confirmed he had "heard too" that CK Property Holdings, the entity into which all Hutchison Whampoa's real estate assets were placed, plans to close the one Grand Lucayan property still open by end-September and walk away if no buyer is found.

"Hutchison has not done a good job running the hotel anyway," he added. "I don't think the Government can do any worse than Hutchison has done, and with a bit of luck they can do better.

"The fact the Government is stepping in, making a decision that they're going to do something about it, is much better than waffling around with Wynn who don't have a plan. At least it's positive in the fact there's some action rather than no action at all."

Mr Leonard said he was "really hoping it's come in time", acknowledging that the "main thing" was to renovate and re-open the Grand Lucayan in time for the winter 2018-2019 season.

"We've spent a year at least on this," he told Tribune Business. "Let's get on with running the hotel ourselves, and find someone else in the process. This thing with 'no motion' has gone on for way too long.

"At least people in Port Lucaya Marketplace now know they have some certainty the hotel is staying open for a while longer. At least now they have a much clearer picture and can plan better. Business likes certainty. I'm sorry it had to come to this, but I think they've made the right decision."

For many Bahamians, government involvement in the Grand Lucayan's acquisition is likely to recall dark memories of Hotel Corporation ownership during the Pindling administration, when millions of taxpayer dollars were squandered on financing loss-making government resorts.

The Government, though, has always presented its plan as akin to the US auto and UK banking industry bail-outs in the aftermath of the 2008-2009 recession, with the intention being to exit its ownership investment as rapidly as possible.

It had already earmarked $25 million in the 2018-2019 Budget for financing an equity stake, believed to be 20 percent, in the Grand Lucayan's acquisition, plus subsequent marketing and airlift support.

The strategy for re-opening and revitalising the Grand Lucayan has always seen Wynn solely as the 'real estate owner', with a variety of hotel and casino brands operating the property on its behalf as part of the Government's drive to convert the area into a true destination that is no longer reliant on taxpayer subsidies.

However, well-placed sources yesterday revealed to Tribune Business earlier this month that the Government is exploring alternative buyers to Wynn amid suspicions its deal as structured "is not going to work" and "doesn't make sense" - especially given the added pressure from CK Property Holdings warning that it will walk away.

"Wynn is expecting the Government to pay for it, and they walk in as owner," one contact, speaking on condition of anonymity, told Tribune Business. "I can tell you the Government isn't interested in that, and has no choice but to start to look for another buyer immediately.

"Hutchison [CK Property Holdings] has said that come September that's it for all of it. Hutchison has confirmed that, in very short order, it will close the entire plant down. The tower and 200 rooms in the Lighthouse Point.

"The Government of the Bahamas is going to have no choice but to step in and quite literally take over operations of that hotel regardless of what the cost may be." The source added that CK Property Holdings' exit decision was being driven by the end of its Hurricane Matthew-related insurance payouts, with the final one set to be released by end-August or early September.

The Grand Lucayan's post-Matthew closure has resulted in much of the property being shuttered for 21 months, causing the loss of over 1,000 jobs and 59 per cent of Grand Bahama's hotel room inventory - effectively taking the island off the stopover tourism map.

CK Property Holdings had been running a sales process for the Grand Lucayan when it was interrupted by Hurricane Matthew. Wynn then emerged as the potential buyer with a $110 million offer just prior to the 2017 general election, but was unable to close the deal. It walked away, and the Minnis administration then revealed its plan to take an ownership stake in a purchasing group.

This prompted Wynn to return with a $65 million all-cash deal, which was accepted by CK Property Holdings. The Government suspended its plan, and the two companies signed a Letter of Intent (LoI) for the Grand Lucayan's purchase just before Christmas 2017.

Dr Minnis suggested then that the purchase would close by end-February 2018, but no deal was forthcoming and the Grand Lucayan's fate has dragged on for five more months with no resolution seemingly in sight.

In the meantime, Wynn has broken ground on its $120 million Goodman's Bay condo-hotel in New Providence. Paul Wynn, its principal, reassured that negotiations on the Grand Lucayan were making progress, but gave no specifics and was very vague.

Tribune Business sources have previously suggested that the former Christie administration encouraged Wynn to look at the Freeport-based resort in returning for helping to sort out covenant and zoning restrictions that were then-impeding its Goodman's Bay development.

Comments

Well_mudda_take_sic 3 months, 2 weeks ago

Carey Leonard and Brave Davis have no need to fret where the money will come from to buy the Grand Lucaya. Minnis and Turnquest are already on record that they had originally planned to increase VAT by 100%, from 7.5% to 15%. But they were advised to do it in two steps, 12% VAT effective July 1, 2018 with an increase to 15% effective July 1, 2019. The IMF and IDB are still upset that VAT was not initially set at 15% as they had all along recommended. These intentional agencies have been encouraging our government to increase its borrowing ability by raising new tax revenue. They want our government to increase its foreign currency denominated borrowings notwithstanding the grave currency mismatch that will arise from having to repay such foreign borrowings using revenue derived from more VAT hikes in the future, which of course can only be denominated in Bahamian dollars. LOL

0

proudloudandfnm 3 months, 2 weeks ago

They need to hurry the hell up! Freeport needs its hotels!

0

Sign in to comment