The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

SuperClubs Breezes has allegedly been waiting 32 months for proof that the land it will receive from Baha Mar has been freed from all mortgage-related charges.

This, and other key obstacles to concluding the two resorts’ land transfer/swap agreement, are revealed in an exchange of letters between their respective attorneys that have been filed with the Supreme Court.

Apart from the alleged wait for Baha Mar, and its Chinese financing partner, to deliver on their promise to prove the land Breezes will receive is free from all mortgage-related security, the letters also reveal:

• Breezes and its attorneys say “it is not yet clear” whether title insurance will adequately cover all the title issues relating to Baha Mar’s real estate.

• Breezes has been “given pause” after a chartered surveyor refused to sign-off on an affidavit providing “certifications” the resort was seeking.

The documents disclose that Citibank is acting as the representative, or agent, for all Baha Mar’s lenders who have secured their loans to the resort developer on real estate it owns in the Cable Beach area.

Unless lenders, who hold liens and charges over the land to be transferred to Breezes, agree to remove them, the whole ‘swap’ agreement will be jeopardised. This is because Breezes would not have clear title to this property.

The documents reveal that some of the loans, and associated security, may date back to when Baha Mar initially acquired the Wyndham and former Radisson hotel properties from Philip Ruffin and the Government, respectively.

R James Cole, the Higgs & Kelly partner acting for Breezes, in an October 7, 2014, letter to Baha Mar’s attorneys, questioned why China Export-Import Bank had to-date failed to deliver on promises to provide proof that Citibank could secure removal of these charges.

He added that such a pledge had been made in the January 5, 2012, e-mail sent to him by Baha Mar’s attormey, the Higgs & Johnson partner, Sterling Cooke.

“Please advise when we may expect to receive the long-promised documentary evidence of the authority - and capacity - of Citibank (as onshore security agent) to effectively release from the security all of the parcels to be conveyed and demised to PPL Ltd,” Mr Cole wrote.

“More than 32 months (yes, 32 months) later, no such evidence has been forthcoming. Again, what harm is there in providing the long-promised evidence now, we wonder?

“Surely it would be preferable to produce such evidence sooner rather than later so we might consider whether or not such evidence is satisfactory?”

Mr Cole emphasised that Breezes, and its holding company, PPL Ltd, would not complete the land transfer agreement with Baha Mar until it received “true copies” of the recorded title documents and evidence Citibank could release the necessary land.

His letter revealed that one land parcel included in the swap was still subject to a debenture between Baha Mar’s golf course subsidiary, BMP Golf, and Scotiabank. With the debenture still on the Register of Records, Breezes is currently unable to take possession free from all encumbrances - the central aspect of its demands.

“We are surprised to learn China Export-Import Bank apparently does not think it appropriate to proceed to perfect the title to the lands purportedly mortgaged and charged to Citibank now, as distinct from waiting for Baha Mar to commit to completing these long-outstanding transactions,” Mr Cole wrote.

“What harm is there in simply getting on with it, we wonder? After all, until such time as the requisite certificates are duly issued and recorded in the Registry of Records, neither BMP Golf nor Citibank can deduce a good and marketable title to the relevant lands free from encumbrances.”

But Mr Cooke, in a September 25, 2014, letter reiterated that China Export-Import Bank, which has bankrolled the Baha Mar project with at least $1.9 billion in debt financing, would instruct Citibank to sign the releases once all outstanding issues with Breezes were resolved.

“The Export-Import Bank of China (China Exim) has approved the land exchange between Baha Mar and PPL, and China Exim has advised that once all outstanding matters have been resolved and a closing date agreed between Baha Mar and PPL, China Exim will instruct the authorised signatories of Citibank to execute the transaction documents,” Mr Cooke said.

He added that the relevant documents would be released to Lennox Paton, the Bahamian law firm acting for China Export-Import Bank.

The letters show just how complex the land swap agreement, which is vital to both resorts’ future development plans, is. Baha Mar’s $3.5 billion Cable Beach redevelopment cannot proceed without it, and nor can Breezes’ own proposed expansion.

The agreement involves the swap of a 0.66 acre parcel, upon which SuperClubs Breezes’ initial wastewater treatment plant stood, for land of the same size where Baha Mar has built a replacement plant at its expense.

The second component to the deal is the swap of four parcels, totalling 0.995 acres and used by Breezes, for two parcels of the same acreage to be transferred by Baha Mar.

The problems in closing the land swap agreement, which last week prompted Breezes to rush to the Supreme Court for an injunction against Baha Mar, also add to the impression that it is far from smooth sailing with the latter’s project.

The ‘fight’ with Breezes comes after Baha Mar pushed the Grand Opening for its project back to late Spring 2015 from December 2014. And local contractors working on the development have complained about late payments, amid concern that a lack of co-ordination between China State Construction and others has delayed construction completion.

While there is nothing to suggest the Baha Mar project will not be completed, its recent difficulties illustrate just how hard it is to keep a $3.5 billion development moving forward simultaneously on all fronts.

It is likely that all issues, including those with Breezes, will ultimately be resolved to the satisfaction of all concerned, albeit in a more costly and time consuming way than is ideal.

Mr Cole’s letter, meanwhile, also expressed concern that title insurance would be unable to adequately address Breezes’ concerns over the land it is to receive.

Referring to talks with Ed Hamann at Fidelity National Title Group, he wrote: “It is not yet clear title insurance will cover all of the title issues with Baha Mar’s lands.....

“The current position is discussions continue, and whilst we hope for a successful outcome, that remains to be determined.”

As for the reluctance of Denison Theophilis, a chartered surveyor, to sign-off on an affidavit, Mr Cole said the impression gained from speaking with him “is he is uncomfortable in providing the certifications PPL is seeking. This gives PPL pause”.

Mr Cole said Breezes was now talking to another surveyor in a bid to have them sign-off on the documents.

Mr Cooke, referring to Mr Theophilis’s refusal to sign, said Baha Mar had “fully performed all that could reasonably be expected in the circumstances”.

Breezes last week claimed that plans for a 50 per cent expansion had been “completely stymied” by Baha Mar’s failure to complete the agreed land transfers.

John Issa, its owner, alleged that the “Cable Beach Goliath” wants ‘to have its cake and eat it, too’ at his resort’s expense by not fulfilling the terms of the swap agreement.

The SuperClubs Breezes owner’s affidavit supports an application for a Supreme Court injunction, which would “preserve the status quo” by stopping Baha Mar treating the land parcels subject to the ‘swap agreement’ differently from what was agreed in the Letter of Intent.

For Mr Issa alleged that SuperClubs Breezes had “lost control of its own destiny”, with its new wastewater treatment plant - suffering from alleged design flaws and leaks - being operated by Baha Mar on land that had not been transferred to the former’s ownership.

Claiming that his resort was “now at the tender mercy of Baha Mar”, Mr Issa alleged that the failure to effect the land swaps was holding up his resort’s expansion plans, investment and creation of more jobs for Bahamians.

The two sides previously headed to court in summer 2013, after Baha Mar initiated its own action over the land transfer agreement. Mr Issa subsequently told Tribune Business earlier this year that he was optimistic the situation could be resolved outside the courts.