The Grand Lucayan resort.
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Grand Lucayan's chairman yesterday accused Hutchison Whampoa of displaying "a lot of bad faith" over the $65m deal's closing, branding negotiations as "nasty and torturous".
Michael Scott, chairman of Lucayan Renewal Holdings, the Government-owned special purpose vehicle (SPV) that controls the resort, told Tribune Business he was now awaiting Cabinet approval after finally settling the closing terms and costs with the Hong Kong-based conglomerate.
"We have finally agreed the accounts with them after a long, arduous, nasty and torturous process," he said. "I'm waiting for the Deputy Prime Minister to get formal Cabinet approval for it, and then the deal is done. It's been nasty, and there's been a lot of bad faith on the part of Hutchison Whampoa."
Tribune Business understands that approval of the Grand Lucayan purchase completion will likely be sought, and discussed at next Tuesday's full Cabinet meeting. The $300,000 monthly lease payments that the Government was making to Hutchison under the terms of a guarantee figured prominently among the many contentious issues the two sides fought over in the closing talks.
This newspaper was informed that Lucayan Renewal Holdings sought to resist the Hong Kong conglomerate's demands that the Government pay the final monthly installments it claimed were due under this agreement, despite the underlying lease having been terminated when Memories abandoned the resort in January 2017.
The dispute relates to the deal to entice Canadian tour operator, Sunwing, to open the former Reef hotel with its Memories brand. As part of the agreement, the former Christie administration agreed to guarantee its monthly lease/rental payments to Hutchison Whampoa.
Memories' deal foundered after the Hong Kong conglomerate, as landlord, failed to repair Hurricane Matthew-related damage to the property in the aftermath of the October 2016 storm, resulting in the Canadian resort's departure with 400-500 direct job losses.
Despite Lucayan Renewal Holdings' belief that the Memories pull-out effectively terminated the lease, the Christie administration decided to honour the guarantee by paying Hutchison Whampoa the $300,000 per month rental fee from January 2017 onwards - a practice continued by the current government.
As a result, Hutchison Whampoa has likely earned around $6m from the lease guarantee over the past 20 months, saddling Bahamian taxpayers and the Public Treasury with another burden they could ill-afford.
The Memories lease also highlights the ever-growing costs that taxpayers and the Government are incurring in relation to the Grand Lucayan acquisition, with Hutchison Whampoa seemingly trying to squeeze every last cent out of the property before it exits.
Besides the $65m purchase price, the Government has also committed to a $2m subsidy to cover Hutchison Whampoa's operating losses between August 1 and September 11, and waived the payment of $3.25m in Stamp Duty on the conveyancing by the Hong Kong conglomerate. The latter also walked away with $80-$85m in Hurricane Matthew insurance proceeds, rather than put them into repairs.
Mr Scott declined to comment further yesterday on the "closing of accounts" negotiations, which typically involve a purchaser and seller settling how much the former should pay for inventory, such as food and beverage supplies, that they inherit upon the completion of a hotel purchase.
Tribune Business sources reported last week that "trying to agree the final numbers, the accounts" on the Grand Lucayan's inventories was another issue yet to be settled. They revealed that Lucayan Renewal Holdings had hired a team of accountants to assess, and value, the inventories inherited after being presented with a series of bills by Hutchison Whampoa.
Once the acquisition's closing is completed, and receives government approval, Lucayan Renewal Holdings will then be able to focus on readying the property for potential sale. It will have to obtain an appraisal of the property's value, and complete documents that will be made available to potential buyers in a sales process, as well as oversee a voluntary separation process for Grand Lucayan staff wishing to leave.
Meanwhile Mick Holding, the Grand Bahama Chamber of Commerce's president, told Tribune Business that the nine-figure subsidies demanded by the last private buyer to negotiate with Hutchison Whampoa, the Wynn Group, more than justified the Government's move to acquire the property itself.
"My position remains the same, as I have often said, in that I don't believe in government ownership of businesses that belong in the private sector, but this one was a needs must," he said.
"I think they've done the right thing. They're taking one of the players [Hutchison] out of the equation, and seeking a buyer. But it's not just a buyer; it's finding the right buyer."
Mr Holding said the Grand Lucayan needed more than just a product upgrade, with the resort needing to rebuild its marketing and airlift presence. He added that he was not surprised by the level of taxpayer subsidies Wynn had sought, and suggested the issue was likely "to be a factor" in any negotiations with a new purchaser.
"With the [Wynn] negotiations going on as long as they were, part of it had to be down to the level of subsidies requested," he told Tribune Business. "I always thought it was somewhere in the background and one of the factors, given how long the negotiations were taking.
"There will be a potential trade-off between the selling price and the subsidy. If the Government is prepared to take a hit on the selling price, they may not have to make so many ongoing concessions."
The Wynn Group requested a $159m subsidy in its first revised offer, and its final bid included a 20 percent electricity rate discount, hundreds of work permits, and Government guarantees to cover any losses and guarantee a 7 percent investment return.
The Government cited this as justification for why it believed it would be more effective, and cheaper, to acquire the Grand Lucayan itself.
Comments
birdiestrachan 5 years, 6 months ago
The Our Lucaya deal and the OBAN deal are both bad deals. But this is what the FNM Government does . make bad deals. What is Mr: scott talking about. The party with the best negotiating Skills wins and gets the best deal;
When you dumb you dangerous, Lots of mouth but no substance.
Have doc tell whom ever he likes when to go and how deep and see what happens, and how far it will take him.
SP 5 years, 6 months ago
It is amusing that Michael Scott seems surprised at being railroaded by Hutchison Whampoa.
Anyone with a peanut-sized brain and the ability to read knows that Chinese are cutthroat business people that have absolutely no tolerance for foreign intervention, partnerships or cooperation at any level. The Chinese are well known for doing business with foreigners on a "need" bases only and with the ultimate goal of getting rid of the foreigner as soon as possible at any cost and at the earliest possible opportunity.
https://www.redding.com/story/opinion...">https://www.redding.com/story/opinion...
Without a doubt, the Chinese government rightly perceived Perry Christie as an easily caged & corruptable minion, hence the present situation of Chinese ownership of our major tourism product.
We can expect many more complications than Michael Scott's experience thanks to the personal greed and gross stupidity of Perry Gladstone Christie and Hubert Alexander Ingraham!
John 5 years, 6 months ago
Hubert Ingraham kicked hot hostile and incredible investors and Lynden Pindling just made it impossible for them to operate. And In the case of Eleuthera, the North is finally showing signs of recovery, but the South is just how Pindling left it.
Economist 5 years, 6 months ago
From all the reports it appears that the former government gave Hutchison millions for nothing.
After looking how the Chinese have taken advantage at Baha Mar and the Point, both PLP approved investments, this should be a lesson for all us Bahamians that, to do business with the Chinese is to get screwed.
proudloudandfnm 5 years, 6 months ago
You guys let Hutch walk all over you. All you had to do was seize the property due to non-performance per the original HOG. Why kiss their ass? Throw them out. Simple and easy....
BahamaPundit 5 years, 6 months ago
The only way to explain these 300K a month payments is that some entity (likely China or the company itself), behind the scenes, is already holding the Bahamas Government hostage and they are too scared to resist. There's no other explanation to pay 300K for a rental that has been terminated by the landlord failing to repair. No country with its sovereignty intact would agree to pay this.
BahamaPundit 5 years, 6 months ago
Re SP & Economist I agree with everything you've said. The extortion and control has just started and will get much much worse, until Bahamians are begging on their knees for the US to intervene. I won't be surprised if the Chinese will build and own the new BPL power station and Shell will simply manage it. What Perry and Hubert have done to this country by selling our tourism product to a communist, repressive country is unforgiveable.
happyfly 5 years, 6 months ago
The reality is that the Chinese Government (and their state-owned and controlled corporations) are not here as sun-loving tourists or altruist philanthropists. They have 1.4 billion people back home that need money and food and they are in the Bahamas to get as much of ours as they possibly can....... and the easiest and quickest way for them to do that is to corrupt and out-maneuver some dumb a... hick politician
TheMadHatter 5 years, 6 months ago
We have finally agreed the accounts with them after a long, arduous, nasty and torturous process,"
LOL. Yall ain't seen nothin yet. Keep foolin wit dem yellow people.
bogart 5 years, 6 months ago
ERRY FORREIGN BUSINESS COMING AN OPERATING IN DA BAHAMAS IS ADVISED BY ........BAHAMIAN...LAWYERS.....AN....ACCOUNTANTS...the Agreement for Sale these experts draws up must be perfectly clear.......aint no way in a .....$65 million dollar transaction.....an involving multimillion dollar loan by seller also involving millions of dollars......can anyone get the .idea there is a dispute of some second hamd golf cart....valued what..?? $500.....to a multi Billion dollar conglomerate that gives more in donations...????.......... MANY OF THESE ACCOUNTANTS AND ADVISORS WHO SITS GETS APPOINTED TO MANY GOVERNMENT ENTITIES OR EMPLOYED BY FOREIGN BUSINESSES.....NEEDS TO HAVE THEIR WORKS EXAMINED......,!!!!.....but seems while we has BoB....Bahamas Mortgage Corporation....Development Bank....W&S....BPL....PMH.....aint no one ever is wrong wid what the last ones oversaw..who nevrr saw nothin wrong wid the previous ones...who been there.repeat.......mind you the Water an Sewage fella mussey done try correcting what never ever done to straighten tings out
BahamaPundit 5 years, 6 months ago
China should be treated like Lion Fish. Look but don't touch.
John 5 years, 6 months ago
So what about the Port Authority in all this? Why are they sitting on their assets and allowed Freeport to go to the dogs? Is Hutchinson sabotaging Grand Bahama with their high fees both at the air and sea ports?
bogart 5 years, 6 months ago
GIVEN THE IMMIGRATION RESTRICTIONS Previous..??...erry ferreign INVESTOR ....has to depends on bottom line ....Bahamian 'experts advisors'...top echelon people....seems windfall to many Lawyers...Accountants..many negotiations....between Govt echelon experts...an FDI.....top echelon advisors.....Deals CUT WITH HUNDREDS OF ACRES....PORE PEOPLE BIRTHRITS LANDS....FINANCIAL EXEMPTIONS....affecting pore Bahamians.....Many deals ...AND WHEN DESE DEALS FAIL....PORE BAHAMIANS SUFFERS....and top echelons move onto next deals.....Hundreds or thpisands of acres .pore people birthrighr in GINN...Atlantis now taken ovr by Brooksfield....Mayaguans deal wid all beachfront gone but stopped in time.....Bahamar with acres of birthright....Clico.....Bahama Suprrmarket....PLENTY DEALS TYING UP IMPERILLING PORE BAHAMIAN BIRTHRIGHT.......time delays...loss of millions in...incomes...jobs...salaroes...pensions...??.......an...an...an...not ONE songle top echelon Director Offocal ...guilty of anyting.....!!!.....pore Bahamian tiefs small can of tuna an small bag of rice..valued $3.15 ..he gets jail time...!!!
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