By NEIL HARTNELL
Tribune Business Editor
A Cabinet minister yesterday predicted the government “will be within” the $25m budget allocated for the Grand Lucayan, adding that he could “see no impediment to a speedy closing”.
Dionisio D’Aguilar, minister of tourism and aviation, told Tribune Business that the sums spent by the taxpayer to cover the resort’s operational costs and line staff payouts since the government took over ownership on September 11 last year will “seem miniscule” compared to the benefits that will emerge from the ITM/Royal Caribbean deal.
Asked whether the government had agreed to provide extra tax breaks and incentives in return for the joint venture agreeing to pay a $65m purchase price, Mr D’Aguilar said these issues had yet to be discussed and would be dealt with in the upcoming Heads of Agreement talks.
“The specifics of the incentives were never discussed,” he explained. “They asked if incentives would be available, and we said yes, but there were no specific discussions at the stage. That’ll be discussed in the Heads of Agreement.”
The Government last week signed a Letter of Intent (LOI) with ITM/Royal Caribbean for the resort’s purchase, triggering exclusive negotiations with the joint venture to close a sales agreement and Heads of Agreement for the acquisition and wider redevelopment of the Port Lucaya and Freeport Harbour areas.
The $65m purchase price was the same sum as the Government paid last year to purchase the property from former owner, Hutchison Whampoa, and several observers suggested this figure was reached for political purposes so the Minnis administration could say it did not take a loss on the deal.
They argued that the Government and ITM/Royal Caribbean had both overpaid for the property, based on past appraisals and the fact that the Wynn Group, the Toronto-based developer who twice emerged as a front-runner to acquire the Grand Lucayan, had sought to reduce the purchase price to $40m.
Mr D’Aguilar, though, both defended the $65m price tag and said no extra incentives had been agreed with ITM/Royal Caribbean to encourage them to pay this sum.
“I don’t know where anyone claims the resort is not worth $65m,” he told Tribune Business. “We purchased it for $65m, they are purchasing it for $65m, so it must be worth $65m. Where the buyer meets the seller, that’s the price.
“Obviously there are persons who would say we invested money in the property when we held it. Absolutely. We had operational costs, severance costs. We budgeted $25m for the Grand Lucayan in the budget this year. Are we going to come within that number? I think we will.”
Mr D’Aguilar said the $25m would have been paid to Hutchison Whampoa to cover the Grand Lucayan’s operating losses and encourage it to keep the resort open until a buyer was found, “but they opted out.
“We opted in to keep it going,” he added. “There were obviously some monies we paid before we took ownership of it. I think the Government was already assisting with the payroll costs because Hutchison Whampoa wanted to downsize and the Government was providing a subsidy to keep people employed. We met that in place from the previous government.
“We had $25m in the Budget for that. It’s going to seem miniscule, that amount of money the taxpayer has paid this year, based on the potential realised from this deal..... That’s money well spent.”
Besides the initial $65m sale outlay, some $30m of which was paid by the closing, the Government also committed to paying Hutchison Whampoa around $1.5m to cover losses incurred between the date their purchase agreement was signed and September 11. There are also the estimated $1m per month subsidies incurred over the past seven months to cover operating losses, and the $3.2m payout to departed line staff.
Further potential costs of between $3.1m to $5.5m could arise depending on whether a similar payout deal is struck with the Grand Lucayan’s managers, along with interest on the bonds given to Hutchison as part of the purchase price.
The Government’s six-month fiscal “snapshot” for the period to end-December 2018 revealed that it had injected $45.4m into the Grand Lucayan over that period, including $13m to cover its operational costs. The latter sum will not be recovered by the purchase price.
Mr D’Aguilar, though, pointed out that previous PLP and FNM governments had spent between $15m to $25m per year in subsidies and other concessions to keep the Grand Lucayan afloat.
He yesterday promised that the Government would seek to complete negotiations with ITM/Royal Caribbean for the resort’s sale “in the quickest possible time”, with a closing - providing all goes well in due diligence - likely in three to six months’ time.
“One never knows how these negotiations will twist and turn,” Mr D’Aguilar told Tribune Business, “but coming off last week everyone was very buoyant, very supportive and the Government and potential purchasers excited and motivated to try and do this in the quickest possible time.
“Right now, standing here, I see no impediment to a speedy conclusion.”