The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Prime Minister Perry Christie yesterday pledged that the Government “cannot be held hostage” to the intentions of any Grand Bahama Port Authority (GBPA) developer, delivering his clearest warning yet that the current owners must seek an exit route.

Mr Christie, in kickstarting House of Assembly debate on the proposed three-month renewal of Freeport’s expiring investment incentives, gave his most forceful public statement yet on the need for “new blood in Freeport”.

In what was largely a repeat of his previous House address on the proposed Hawksbill Creek Agreement reforms, the Prime Minister said his administration was not prepared to leave Freeport’s development to chance and the whims of foreign investors.

His comments came as he focused on the Hawksbill Creek Agreement Review Committee’s first two recommendations. These propose that the GBPA’s current owners, the Hayward and St George families, sell within 12 months of Freeport’s expiring tax breaks be renewed for a further 20 years, and that the Grand Bahama Development Company (DevCO) submit a master plan for Freeport’s development within six months.

Implying that his administration wanted to ensure the ‘right purchaser’ for the GBPA was secured, Mr Christie said: “This is the 21st century, yet the Government has to sit and pray that someone comes along and buys the Grand Bahama Port Authority, and that that person is a good person and makes meaningful development [occur].

“How can the Government of the Bahamas be held hostage to such circumstances? It cannot happen. There must be a plan, Mr Speaker.”

Further emphasising the Government’s determination to bring about change at the GBPA, the Prime Minister added: “The Government is fully committed, and fully aware, that we need new blood in Freeport, new leadership in Freeport, and the Government is dedicated to bringing that about.”

Many of the GBPA’s 3,500 licensees, and Freeport’s 60,000-70,000 residents, would likely back the need for new ownership of the city’s quasi-governmental authority. They will also, though, be wary of any government involvement in facilitating such a change.

Tribune Business sources familiar with developments at the GBPA have revealed that the Hayward and St George families have been “shocked” by the Government’s “aggressive approach” to forcing their exit.

Although the expiring real property, capital gains and income tax exemptions are all being renewed for another three months, the Government believes it has other leverage over the GBPA’s owners.

This stems from its charge that the GBPA has failed to meet one of its key obligations under the Hawksbill Creek Agreement, which is to compensate the Government for any annual deficits it incurs between expenditure and revenues in Freeport.

Several sources have suggested the Government is claiming the GBPA owes it around $100 million under this clause, but several observers - including Fred Smith QC - have expressed doubts over whether this is correct, and if it is, why Nassau has never held the Port accountable for these obligations.

Still, the Prime Minister’s public statement will further increase the pressure on the GBPA’s two ownership families to find a buyer that meets his requirements before the Government does it for them.

The families have been searching for a buyer themselves, but the renewed legal war over the Hayward family estate thwarted negotiations with two world-leading asset managers - BlackRock and Carlyle - over the GBPA’s sale.

BlackRock, with $4.5 trillion in assets under management, and Carlyle with some $203 billion, would likely have met the Government’s criteria as plausible GBPA buyers. Both, though, are understood to have walked away from discussions.

Mr Christie, meanwhile, said yesterday that the Committee’s recommendation for DevCo to supply a plan, together with proof of financing, stemmed from the belief that Freeport’s development needed strategic direction.

“The Committee is being driven by the fact there must be a plan for Grand Bahama. We cannot sit idly by and watch it,” the Prime Minister said.

Mr Christie hinted that some of the Committee’s recommendations, such as the Government gaining an equity stake in the GBPA and Port Group Ltd in proportion to the value of the extended tax breaks and unmet development obligations, would be more difficult to accomplish.

In particular, the Prime Minister described the suggestion that real property tax be levied on undeveloped land in Freeport as “an important one that must be looked at carefully”.

The Committee’s intent here is to spur investors with unused landholdings into development activity via the imposition of so-called ‘carrying costs’ - a deterrent to simply ‘buying and holding’ real estate.

The company most impacted by this will be DevCo, which is owned 50/50 by the GBPA’s Port Group Ltd affiliate and Hutchison Whampoa, with the latter holding management control.

Acknowledging the likely ‘push back’ this recommendation will receive from the Hong Kong-based conglomerate, Mr Christie said it would likely cite the huge losses it has incurred in keeping hundreds of Bahamian employed at the Grand Lucayan resort.

“Hutchison will be able to demonstrate they’ve lost hundreds of millions, many millions of dollars, when looking at the operation of their holdings,” he added.

“We want to look very carefully at this recommendation. We know they will bring it to us.”

Reassuring Freeport about the Government’s intentions, Mr Christie said: “The Government of the Bahamas has no intention of causing there to be any discouragement to investors, any disincentive to investors.

“We believe we have a tremendous opportunity to transform the economy of Grand Bahama, not just Freeport. We believe we have an opportunity now to put in place the basis of a new paradigm in Freeport, and new paradigm in Freeport, with consequences for the entire Bahamas.”