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Govt's Grand Lucayan Deal 'Not A Huge Risk'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government's $65m Grand Lucayan purchase is "not a huge risk", the GB Chamber president asserted yesterday, with the alternative a repeat of the "Royal Oasis fiasco".

Mick Holding told Tribune Business that allowing "the status quo" to continue at Freeport's anchor resort represented a much more "serious risk" than committing taxpayer dollars to acquiring the property and keeping its doors open.

He praised the Government's strategy of buy, then effect a quick sale to the best investor, as "the right move" given his belief that it should not be involved in business - either as owner of a hotel or any other sector.

While acknowledging that the Government may take "a hit" by having to sell the Grand Lucayan for less than it paid, Mr Holding said the tax spin-offs from economic activity generated by a successful buyer could more than make up any shortfall long-term.

The Grand Bahama Chamber of Commerce chief added that the purchase would also give the Government "a freer hand" by removing the Grand Lucayan's current owner, Hutchison Whampoa's real estate arm, from the buyer search.

"The Government was in a situation where they didn't have any choice," Mr Holding told Tribune Business. "With the alternative - to do nothing and retain the status quo - we'd have ended up with another International Bazaar and Royal Oasis situation, which was obviously untenable.

"I don't think it's a huge risk personally; I think they've made the right decision. The alternative was nothing, and that's quite a serious risk. We were risking another International Bazaar and Princess Towers (Royal Oasis) fiasco. On that basis the risk is worth taking. I can never see that area recovering again."

The Royal Oasis's then-owners, Driftwood (Freeport), closed the resort in September 2004 in the wake of Hurricane Frances and departed with the storm-related insurance proceeds. A similar fate threatened to befall the Grand Lucayan, with Hutchison Whampoa failing to reinvest its $80-$85m Hurricane Matthew insurance payout into repairing the property.

Dionisio D'Aguilar, minister of tourism, said the Hong Kong-based conglomerate had repeatedly threatened to close the resort following the May 2017 general election. With the insurance payouts due to end last month, Hutchison Whampoa's patience was said to be exhausted, with any closure effectively eliminating Freeport's presence in the mega resort market.

But many observers believe the Government is taking a major gamble by acquiring the Grand Lucayan, with everything hinging on its ability to effect a rapid sale to a buyer with the necessary capital and vision to turn the property - and surrounding area - into a destination that is differentiated, but also able to compete - with Nassau/Paradise Island and rivals in the Caribbean and Florida.

Taxpayer exposure could increase significantly should the Government and its special purpose vehicle (SPV), Lucayan Renewal Holdings, have to hold on to the Grand Lucayan for any length of time given that hotels are capital-intensive, costly businesses, to operate.

But Mr Holding, while conceding that government ownership of hotels was against his philosophy, said the purchase had "thrown some hope" to Grand Lucayan staff, Port Lucaya Marketplace businesses and their employees, and all companies and workers that relied on tourism for their livelihoods.

"I don't believe in government ownership of businesses," the Chamber president added. "That belongs in the private sector, and hotels are very much in that category.

"The fact they bought with a view to selling on is the right move. Once they've completed the deal they have a freer hand to find a buyer, even if they sell it for less than they paid for it. If the place opens sooner rather than later it's an investment worth making."

Mr Holding added that he "couldn't agree more" with suggestions that efforts to find a buyer had been made easier by Hutchison Whampoa's replacement as vendor by the Government.

The Toronto-based Wynn Group, the last potential purchaser to negotiate with the Hong Kong-based conglomerate, described it as "disinterested at best" in the Grand Lucayan's fate. It accused Hutchison Whampoa of being inflexible in its demands for a $65m price - a constraint that will be removed under government ownership.

"By the Government purchasing there are only two parties in the negotiations," Mr Holding said. "Hopefully it will make things easier. I can only make observations, but that certainly is the appearance of what has been happening - an unmotivated vendor replaced by an extremely motivated vendor. Hopefully that brings us a quicker and better sale.

"Nothing can be done without risk, clearly, but everything has its price. Hopefully the Government won't have to sell it for a lot less than they paid for it, but if the price is right they'll find a buyer. It's just how much of a hit they take in the process."

The Chamber president told Tribune Business that any "hit" could be "worth it" long-term if the chosen buyer transforms the Grand Lucayan into a profitable, sustainable resort destination.

"If one thinks of the revenues the Government is losing - hotel tax, tourism tax, not getting VAT from the hotel and other people who have revenues for the Government suffering as well - if they sell it at a loss they will recoup that over time by the increased trade and taxes they will reap from it," Mr Holding explained.

"It's one of those things where, if they didn't do something and it never re-opened, every year that passed would make it much harder to get back into that sector. It would become more and more difficult."

Mr Holding added that purchase price "might be the deciding factor" for potential buyers, and urged that a recognised hotel brand/operator be part of any solution.

Comments

TalRussell 2 months, 2 weeks ago

Ma Comrade Mick, it's just that your Lucayan Hotel predication can't be believed. This hotel was first built 2 years after former prime minster Pindling was to fight his very final general election.....its run down, hurricane damaged and needs be demolished.....neither late Pindling nor hotel can be fixed.

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birdiestrachan 2 months, 2 weeks ago

Mike and doc smart just alike . and Turnquest are all in the same sinking ship.

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ThisIsOurs 2 months, 2 weeks ago

This is just amazing. Everybody including the seller telling ootential buyers we only jokin you know this thing een worth half of what we asking for it. What is this?????? Are they helping a buyer colleague? They certainly een doing the bahamian people no favours

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Socrates 2 months, 2 weeks ago

just like the money wasted on so many other gov't 'business adventures', this will likely be a collosal waste of taxpayer money. Maybe this could be a luxury a wealthy society could stomach for the greater national interest, but given our current predicament and a stagnant economy with an anemic growth rate, thats another question.

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Economist 2 months, 2 weeks ago

Hutchison had to be taken out of the picture. Nothing good was going to happen as long as they were involved. Government did the right thing. The cost of doing nothing was a collapse of the Grand Bahamian economy and that would cost the Country a great deal more than $65 million.

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ThisIsOurs 2 months, 1 week ago

Well you're the economist and since they already bought it I hope you're right. But in my mind the actual transaction is one thing the thought that went into anything around it is another. This govt simply doesn't strategize, they do whatever is politically expedient in the moment.

D'Aguilar has been making all kinds of contradictory statements around this hotel, we won't renovate, we will, it can't be that much extra to renovate, we don't know how much it will be to renovate and on and on. So while there was action, it doesn't inspire much confidence. Kwasi Thimpson says now that the hotel is sold the economy can turn around. That was the scariest statement yet. What happened to the thousands of people who were gonna flock grand bahama for the tech hub. My belief is they could have left the hotel, invested the money in a well thought out small development and had a much better outcome.

Imagine a village with brightly painted little 30x30 shacks for living accommodations. Cathedral roofs with upstairs 2 bedroom attic space. Hurricane proofed, maybe on stilts! Well groomed yard space, houses not crammed together. A local grocery store, a small tiki bar, a night club, a theatre, a walking trail, bakery, clinic, a few speciality dining areas from fine dining to casual, outdoor activity center, a small inland water park. And all of them owned privately by small Bahamian entrepreneurs with a central planning committee overseeing the operation, like NAD for example. Initial subsidies from this 65 million investment but the govt doesn't own it and it's not one big developer. Rather than individual developments the whole community is planned "together" to produce a seamless Eco system that gives the customers a relaxing, beautiful, serene, well laid out living experience. A mini Marina village meets Bahamar, Disney world, American ninja warrior and Broadway. And put some local residential spaces in their too so it's not just a tourist space and it thrives year round. THAT to me would have generated more buzz than this hotel. Immediate construction jobs, pay the hotel staff for a year or two while the development gets off the ground. The construction jobs would provide supplementary income in lieu of hotel activity since the guys need to work, eat, have relaxation time and have transportation to work.

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ThisIsOurs 2 months, 1 week ago

Yeah the local residential spaces mixed with the touristy shacks would be the key to keeping the community alive. It would be a brand new style of sustainable development. And a school as well, some specialty area high school and tertiary. Maybe you get people to come down to take courses in this beautiful environment another category of tourist

And a well thought out plan for safety

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ThisIsOurs 2 months, 1 week ago

Maybe 20x20 shacks. Should be enough for a kitchenette a bathroom 2 upstairs bedrooms or a big master, and a small living area. It's not the Kings palace after all...only a week's stay and it has good yard space...maybe a shaded outdoor deck on some of them

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