The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s April 21 opening was yesterday branded “an election gimmick”, after it was confirmed that the acquisition by Chow Tai Fook Enterprises (CTFE) will not close until all construction work is completed.

Robert Sands, Baha Mar’s senior vice-president of government and external affairs, told Tribune Business that CTFE had agreed “to take possession and operate portions of the resort” until its deal with the China Export-Import Bank could close.

Mr Sands’ comments came after Graeme Davis, CTFE (Bahamas) president, triggered a renewed onslaught from Opposition politicians by confirming that Baha Mar will open without its sale being completed.

Speaking to foreign media visiting the Bahamas as part of the ongoing Caribbean Marketplace conference, Mr Davis told PressToday: “We’ve made commitments to the islands of the Bahamas, to the Government and to the bank that we would open the project even before we close [the deal].

“We will be opening the project on April 21 and it will be in a phased manner. Our flagship property is going to be run by Grand Hyatt.”

Clarifying Mr Davis’s comments, Mr Sands confirmed that CTFE’s acquisition of Baha Mar would only close once all construction was completed.

This implies that the conglomerate’s deal with the state-owned China Export-Import Bank, as Baha Mar’s secured creditor, will likely only close in late 2017.

The best estimate is November/December, as this is when both the Rosewood and SLS properties are supposed to be completed as part of Baha Mar’s ‘grand opening’.

“We have signed a definitive agreement to purchase the shares of Perfect Luck,” Mr Sands told Tribune Business, referring to the special purpose vehicle (SPV) created to hold Baha Mar’s resort assets for sale.

“The closing of this purchase will be finalised once CCA (China Construction America) completes the construction of the project.”

Mr Sands added: “In the interim, we [CTFE] have agreed to take possession and operate portions of the resort as it is completed.

“As such, we anticipate being in position to undertake the soft opening on April 21, with rooms in the casino hotel, the casino, the golf course and the convention centre.”

Tying construction completion to the purchase closing is not unusual given the circumstances of the Baha Mar transaction, especially given CCA’s previous failings to hit finishing deadlines - something that many observers believe was responsible for igniting the dispute with the original developer and the property’s woes over the past two years.

CTFE is thus taking prudent steps to protect itself, and minimise its risk exposure, by tying deal completion - and full payment of a $1 billion-plus purchase price - to CCA’s efforts and the obtaining of occupancy certificates for the entire project.

“Until the product [Baha Mar] is completed they can’t close,” a source familiar with developments at Baha Mar, speaking on condition of anonymity, confirmed to Tribune Business yesterday.

“They’re selling a completed product. Would you buy that building before it was completed? Until the close, they’re [CTFE] saying they are going to run the property and take it over.”

However, Mr Davis’s comments and the subsequent Baha Mar response ignited a frenzy among Opposition politicians, who argued it showed that the April 21 meeting was nothing more than “an election ploy”.

Those spoken to by Tribune Business said that since there was no obvious commercial rationale for opening the $4 billion-plus development on that date, the move was simply “a quid pro quo” and expression of gratitude by the Chinese.

They argued that the April 21 opening and associated 1,500 jobs, likely coming just weeks before the general election, was a reward by the Chinese for the Christie administration’s co-operation in removing Baha Mar’s original developer, Sarkis Izmirlian.

“Let me tell you something: Baha Mar is an election gimmick,” said Dionisio D’Aguilar, a former Baha Mar director under Mr Izmirlian, who is now the FNM’s Montagu candidate.

“They haven’t closed the deal, and are still finalising the management contracts for the hotels, although Grand Hyatt was done the other day. And they’re spending no money on marketing.

“How can you get ready to open these hotels if you haven’t got management agreements in place? It’s an election gimmick, a quid pro quo from the Chinese paying the Government back. It’s just putting people on the payroll for election; that thing ain’t ready to open.”

Branville McCartney, the Democratic National Alliance’s (DNA) leader, seized on confirmation that Baha Mar’s purchase has yet to close to allege that Prime Minister Perry Christie had misled the nation on the deal’s status.

He questioned how CTFE could legally take over the resort properties given that it has yet to become the legal owner, an issue raised by other observers who queried what would happen to Bahamians seeking employment at Baha Mar if the deal should fall apart.

Both the Government and CTFE, though, have acted and spoken as if the latter’s transaction is ‘a done deal’, and subject only to the normal closing formalities, due diligence and approvals/permits.

This, though, did not satisfy Mr McCartney, who said of Mr Davis’s admission: “It shows that they [the Government] are using this as a political ploy.

“The Prime Minister realises he cannot go much further in calling the election, and by hook or crook this government is going to say they got Baha Mar open.

“But how can you open this resort development without closing, and making legal the new owners? The deal has not been completed with the new owners.”

K P Turnquest, the FNM’s deputy leader, told Tribune Business that Mr Davis’s comments showed the April 21 opening date was “obviously a quid pro quo” between the Government and the Chinese.

He argued that it was “very dangerous for sovereignty and how we do business in this country, as investors are concerned about what happened at Baha Mar.

“I had a conversation with an investor about a month ago, and this was one of the things that came up. It is out in the marketplace, and we need to be careful about getting into these arrangements and giving favours which are not necessarily commercial or arm’s length.”