The Tribune

• Gov’t: ‘Previous objections’ to $110m deal resolved

• To convert leased Crown Land to ownership interest

• Pledges ‘greater Bahamian participation’ in all phases

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government last night said it has approved Royal Caribbean’s $110m Paradise Island beach club project after negotiating greater Bahamian ownership and entrepreneurial participation in the development.

Chester Cooper, deputy prime minister who also has responsibility for tourism, investments and aviation, said in a statement that the Davis administration believes it has resolved all “previous objections” to the cruise giant’s plans by ensuring more Bahamian involvement “at all phases” of its construction and operation.

Stating that specific activities at the Royal Beach Club, including water sports, entertainment and food and beverage, will be reserved for local businesses and entrepreneurs, he pledged that Bahamians will also be able to invest in the project and collectively take a 49 percent equity ownership stake. This would leave Royal Caribbean owning the majority interest.

As for the Crown Land being leased to the cruise giant, Mr Cooper said the Government planned to also convert this asset into an ownership stake in the development that would be held by the country’s sovereign wealth fund, now known as the National Investment Fund.

It is unclear how much Crown Land will be leased to Royal Caribbean as the Government’s statement did not specify the quantity. Both the cruise line and the Government had been embroiled in a long-running battle, including in the Supreme Court, with Bahamian entrepreneur, Toby Smith, who has asserted he has a binding lease for at least two Crown Land acres that Royal Caribbean is seeking to use in its project.

Mr Smith declined to comment when reached by Tribune Business last night, but the go-ahead for the cruise giant - likely formalised at yesterday’s full Cabinet meeting - comes less than three weeks after the February 16, 2023, ruling by Sir Ian Winder, the Chief Justice, which rejected the entrepreneur’s claim that his lease agreement is valid.

That ruling likely paved the way for the Royal Caribbean deal to proceed, although Mr Smith still has time to appeal and tie-up those acres in litigation once again. There were unconfirmed suggestions last night, though, that Royal Caribbean’s beach club boundaries may have been revised so that it does not include the Crown Land also claimed by the Bahamian entrepreneur who is seeking to renovate the lighthouse on Paradise Island’s western tip.

Mr Cooper, in his statement, said: “The project when completed will offer guests beach and water sport activities, as well as Bahamian entertainment and retail experiences. The Government is satisfied that it has addressed previous objections to the project by ensuring much greater Bahamian participation at all phases of the construction and in the ongoing operations.

“Royal Caribbean will not have equity ownership in any ferry business from Prince George Wharf to the site. Several key activities at the site, including water sports, entertainment, tours, food and beverage, retail, security, environmental monitoring and landscaping, will be reserved principally for Bahamian entrepreneurs and businesses.”

Mr Cooper said the Government will impose a Tourism Development Fund levy equivalent to 1 percent of the annual gross revenue generated by the Royal Beach Club. Based on the cruise line’s previous projections that the development will generate an extra $26m in visitor spending per annum, this could amount to $260,000 annually, which would be paid into a fund created under the Tourism Development Corporation Bill that has been tabled in Parliament.

“Further, the Government intends to convert the Crown Land contribution into an equity stake of the project. That equity stake will be conveyed to the country’s sovereign wealth fund (SWF),” the deputy prime minister added. The size of such an equity stake was not disclosed, and it is unclear how this fits alongside the assertion that Bahamians will have a 49 percent collective ownership interest and Royal Caribbean “the remainder”.

While it is possible that the Government’s interest may be included in that 49 percent, Mr Cooper said: “Bahamians will also be invited to invest in the project and hold equity up to 49 percent, with the remainder being held by Royal Caribbean.

“This project will create hundreds of jobs, both during the construction and operational phases, further contributing meaningfully to the tourism rebound and economic growth that has been set in motion by the focused policy initiatives of this administration. We take great pride in the fact that in this and similar upcoming projects we have significantly expanded opportunities for Bahamians to participate during the development stage and throughout the life of the project.”

Royal Caribbean has amassed around 13.5 acres on Paradise Island’s western end by buying out private landowners in the area or taking options over their properties. And the Minnis administration effectively gave the cruise giant a minimum 150-year lease over seven Crown Land acres, some of which were being claimed by Mr Smith.

The lease gives the cruise giant an initial 25-year extension plus “no less than four additional options”. All these “options” are 25 years in length, meaning that when they are added to the original 25-year lease, Royal Caribbean can exercise its rights to potentially occupy that land for one-and-half centuries.

The agreement, which was executed on May 25, 2021, also commits Royal Caribbean to paying an annual $140,000 rent to the Government for use of land that it holds in trust for the benefit of the Bahamian people. Over a 25-year lease, this amounts to $3.5m in total rental income with VAT at 10 percent contributing a further $350,000 to the Public Treasury.

It is uncertain whether these lease terms and duration have now been revised. The Royal Beach Club is forecast to generate $26m in extra annual visitor spending, a figure that rises to $650m when extended over the initial 25-year lease term. Royal Caribbean previously said its $110m Paradise Island investment will boost overall visitor spending by $1bn over a ten-year period, although it is uncertain where this impact falls.

However, Bay Street merchants, restaurants, straw vendors, tour and excursion providers and other industries that rely on cruise tourism had previously voiced concern that the Royal Beach Club will suck much-needed customers away from their enterprises with all the benefits being repatriated outside the jurisdiction by Royal Caribbean.

Yet Russell Benford, Royal Caribbean’s vice-president of government relations for the Americas, told this newspaper that rather than creating an exclusive enclave where the cruise line will take all its passengers and retain 100 percent of their spending, it would instead act as an “engine to get people off the ship”.

With the Royal Beach Club able to accommodate 3,500 persons maximum once it is completed, Mr Benford said then that this number was equivalent to just 20-25 percent of the up to 14,000 passengers that Royal Caribbean brings to Nassau daily.

He said Royal Caribbean’s research indicated that passengers would spend a maximum four to four-and-a-half hours at the Royal Beach Club, giving them five hours to participate in additional activities given that its cruise ships are typically docked in Nassau for nine to nine-and-a-half hours.

Mr Benford also disclosed that the cruise line envisioned the Royal Beach Club as being at the centre of a water and land transportation loop that will ferry its passengers to attractions such as the Arawak Cay Fish Fry, Junkanoo Beach, The Pointe, Baha Mar and Graycliff, thereby ensuring their spending impact is distributed widely among Bahamian-owned businesses.

UPDATE: In a statement, Deputy Prime Minister Chester Cooper said that there would be four acres of Crown land included in the lease.

He said: "This first of a kind project for RCI will cover 17 acres - of which 13 acres represent privately held land and some four acres of Crown land that was included in the lease to RCI by the former administration. It is important to note that the land currently proposed under the project has not been subject to any dispute or litigation. Final approval of the project is subject to submission and approval of a standard Environmental Impact Assessment and an Environmental Management Plan."