By NEIL HARTNELL
Tribune Business Editor
The government has extended the Letter of Intent (LOI) for the Grand Lucayan’s purchase by 30 days as ITM and Royal Caribbean seek to “tie down” their airlift and sealift plans.
Well-placed Tribune Business sources confirmed last week that the LOI, signed by the the two parties at end-February 2019, has been extended to the end of July to give the joint venture extra time to investigate all aspects of their hotel acquisition.
This newspaper was told, though, that the Minnis administration is aiming to “claw back” the extra month’s due diligence once both sides move into negotiating the hotel purchase and the Heads of Agreement.
A draft Heads of Agreement is being readied for presentation to ITM/Royal Caribbean at July’s end when the LOI extension expires, with the government and Grand Lucayan Board taking the position that the extra due diligence granted should shorten the deal’s closing time.
The complexity of the deal, and involvement of multiple parties, is thought to have complicated talks to-date. Tribune Business was told that ITM, in particular, was becoming increasingly uneasy over what it perceived as difficulties in tying down the Hutchison Whampoa-controlled Freeport Harbour Company over redevelopment of the harbour.
That project, and addition of extra cruise berths, is critical of ITM/Royal Caribbean are to generate the passenger numbers necessary to sustain a transformed Grand Lucayan. Multiple Tribune Business sources, though, said the harbour and cruise port deal between ITM and Hutchison is “now signed”, with the closing having taken place within the last fortnight.
But, with sealift out of the way, this newspaper understands that attention is turning to Grand Bahama International Airport - also ultimately controlled by the Freeport Harbour Company - given that securing sufficient airlift is also key to the ITM/Royal Caribbean plans.
ITM is thought to have been reluctant to make headway on the Grand Lucayan’s purchase, and negotiations with the Government, until both the harbour and airlift issues are squared away with the Hutchison Whampoa-controlled entities. Efforts are now under way to bring all parties involved in the negotiations together for a meeting so each can understand where the overall deal is at.
One contact, speaking on condition of anonymity, confirmed that the airport was “on the table” for discussion, and added: “There are a number of options and problems regarding the airport that they have to look at. In order for something of this mega value to succeed you need to have the airlift and sealift tied down.”
Another source with knowledge of the Grand Lucayan talks added: “They have extended the timeframe on the Letter of Intent, but what Michael Scott has done is try to claw back that back in time for completion of the contract. By that point they should know exactly what they’re doing.”
Mr Scott, chairman of Lucayan Renewal Holdings, the Government-owned special purpose vehicle that owns the Grand Lucayan, declined to comment when contacted by Tribune Business.
However, the LOI’s extension was confirmed by another well-placed contact, also speaking on condition of anonymity, who added: “They (ITM/Royal Caribbean) were recently given an extension of time on the due diligence, but the Government plans to get it back at the end so the long stop or closing doesn’t change.
“The LOI was extended until the end of this month, but they’re still moving this along and expect to have a draft Heads of Agreement in place in the next days. It’s moving to a conclusion that makes sense in a commercial way, and the completion date will be the end of September/October. The worst case scenario will be the end of October.”
Dionisio D’Aguilar, minister of tourism and aviation, recently told Tribune Business that the Grand Lucayan negotiations had reached “the critical stage” and were “continuing”, although he provided no details.
“There’s going to be a bit of haggling back and forth, but that’s normal in negotiations,” he added. “We’re still within our schedule. This takes time with people travelling and out of town. We’ve working very hard to get that done.”
Mr D’Aguilar told this newspaper he was out of town on vacation when reached yesterday, and referred it to Kwasi Thompson, minister of state for Grand Bahama, who could not be reached before press time.
The ITM/Royal Caribbean project was branded “a game changer” for Freeport’s economy when revealed by Tribune Business earlier this year, as it promises a revival of the tourism industry that could - together with Carnival’s $100m cruise port - help drag the city out of a 15-year slump.
The Mexican port developer and cruise line have said the $130m first phase investment will cover a 24-month period, meaning that a revived Grand Lucayan - complete with water-based theme park and associated retail, gaming and restaurant amenities - may only be ready to receive its first guests come winter 2021 if the current timeline.
The joint venture, if the deal closes, will pay $65m to acquire the Grand Lucayan as part of a development aiming to create 2,000 new jobs in its first phase. This will bring in an extra two million cruise passengers to Grand Bahama every year, transforming the area into “a world class destination”.
As previously detailed by Tribune Business, the proposal focuses on developing water-based adventure theme parks at both Freeport Harbour and around the resort. The Grand Lucayan will be upgraded to “five-star hotel accommodation”, and feature multiple gaming, entertainment and restaurant experiences.
Although few specifics have been released, the joint venture envisions combining Port Lucaya and Freeport Harbour into a “unique destination” that will set Grand Bahama apart from its competitors, not just Florida and other Caribbean nations, but Nassau/Paradise Island and the Family Islands.