The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian yesterday jumped back into the Baha Mar fray, describing his former development as a ‘Potemkin hotel’ that was being used by the Government to “deceive Bahamians into thinking the situation is better than it really is”.

The project’s former owner and his BMD Holdings vehicle broke several months of silence by hitting at the “uncertainty” surrounding the multi-billion dollar resort’s opening, which was further exacerbated last week by Rosewood revealing its 200-room property will only open in Spring 2018.

Mr Izmirlian and BMD Holdings said Rosewood’s disclosure, which came in an official company release, was “a huge walk back” from the “rose-coloured statements” made by Baha Mar’s new owner regarding the property’s opening.

Arguing that the project’s main contractor, the Beijing state-owned China Construction America (CCA) was “playing the same song, with some slightly different notes”, over Baha Mar’s construction, the original developer argued that Bahamians could have “little confidence” in statements by both the Government and new owner, Chow Tai Fook Enterprises (CTFE).

“The misleading, and often illogical statements now being made about progress at Baha Mar, and its opening, have made Baha Mar into a Potemkin hotel; that is, using this still-incomplete property to deceive others into thinking the situation is better than it is,” Mr Izmirlian and BMD argued.

“There is no reason to have confidence. Bahamians do not really know if there is a final ownership deal firmly in place for Baha Mar. Bahamians do not know what promises and giveaways may have been made to Chow Tai Fook, the alleged new owner, to attach its name - for now - to the property. And, for sure, the real future of the project still sadly remains in the hands of CCA, which has a long clear record of misleading and failing on Baha Mar.”

CTFE has completed a purchase agreement, and paid a deposit, to acquire Baha Mar and all its assets from the property’s main creditor, the China Export-Import Bank.

However, it subsequently confirmed that the purchase will not close, and it become Baha Mar’s new owner, until CCA completes Baha Mar’s physical construction.

Mr Izmirlian and BMD Holdings yesterday noted the frequent changes to the number of rooms that will be available for Baha Mar’s ‘soft opening’ on April 21. This number was initially pegged at 700-800, only to change to a range between 200 to 1,000 rooms.

Baha Mar’s full completion, and grand opening, was initially scheduled for November/December 2017, when the final two resort properties - the SLS Lux and Rosewood - were supposed to be ready to receive guests.

However, Rosewood last week said its property will only open in Spring 2018, a change that was yesterday seized on by Mr Izmirlian.

“What we do know is, over the last few weeks, the activity around Baha Mar has revealed the uncertainty around opening,” he and BMD said.

“However, we do not know if there is a casino operator in place for Baha Mar, or whether the Government of the Bahamas even has granted a gaming license to operate the casino. Hyatt issues a very bare bones press release confirming it will be part of an opened Baha Mar, but says nothing more about when.

“Rosewood goes a step further and, in what appears to be a huge walk back from Chow Tai’s Graeme Davis’ rose-coloured statements about soft and full openings, makes clear that it will not commit to being part of Baha Mar until sometime in 2018.”

Mr Izmirlian’s statement said that with opening delays likely to last into 2018, the Government’s chosen route for resolving Baha Mar’s woes - the winding-up petition and appointment of provisional liquidators, followed by the China Export-Import Bank appointing its own receivers - had cost the Bahamian economy billions of dollars in lost earnings.

This, he suggested, amounted to $4 billion in revenues, 15,000 direct and indirect jobs, and $500 million in tax revenues from VAT, gaming and departure taxes, and NIB contributions, as a result of the project’s failure to open on schedule in March 2015.

“During this delay, Baha Mar, and therefore our country, have lost an estimated 1.6 million stopover visitors, with the expectation that each would have spent approximately $576 per day in the Bahamas,” Mr Izmirlian and BMD Holdings said.

It is unclear, though, whether the Chapter 11 bankruptcy process initiated by Mr Izmirlian to save his family’s investment in the project would have produced a swifter resolution and ensured all Bahamian creditors were made whole.

Mr Izmirlian and BMD Holdings yesterday said their bid to re-acquire Baha Mar would have achieved that result, as they clearly exploited the latest opening delays to both re-submit their offer and extoll its virtues.

However, it is highly improbable that Mr Izmirlian will be able to regain ownership of Baha Mar, given that a new owner with close ties to the Beijing government has been selected, and the continued Chinese determination to freeze him out.

The other reason for Mr Izmirlian’s statement appears to be a desire to respond to criticism of himself, and the former Board, by Sir Franklyn Wilson over their ‘failure’ to require CCA to post a performance bond.

This would have provided the necessary security to ensure Baha Mar’s construction completion, but Mr Izmirlian and BMD yesterday accused Sir Franklyn of peddling “misinformation”.

They pointed out that they had secured two completion guarantees from CCA’s parent, China State Construction Engineering Corporation (CSCEC), and initiated legal action in the UK High Court to obtain $192 million under those guarantees.

However, the end to Baha Mar’s Chapter 11 bankruptcy protection and subsequent winding-up brought pursuit of that $192 million to an abrupt halt.

“The Government’s hand-picked provisional liquidators did nothing whatsoever to actively pursue the completion guarantee claim, which could have amounted to hundreds of millions of dollars for Bahamian creditors,” Mr Izmirlian and BMD said.

“Furthermore, the receivers, as agents of the China Export-Import Bank, also did not pursue the suit to enforce the completion guarantees. This is not surprising given that the China Export-Import Bank has the same owner as CSCEC and its subsidiary, CCA.

“It also is important to note that subsequently our affiliate, Granite Ventures, brought proceedings in The Bahamas Supreme Court in an attempt to have the guarantees claims pursued. But, reflecting its common ownership with CSCEC, China Export-Import Bank chose not to pursue the claims despite it being to the detriment of all parties affected by CCA’s failures on Baha Mar.”

Mr Izmirlian argued that such guarantees from CCA were needed again, given that the Chinese contractor was “a serial failure” in meeting schedules necessary to complete Baha Mar on time, and on budget.

And, disputing claims that he and the Board were responsible for Baha Mar’s cost overruns, Mr Izmirlian blasted: “These costs are almost all a direct result of CCA’s documented over-billing and numerous failures - its failures to perform competently, its failures to have proper procedures and controls in place, its failures to properly staff the project and, importantly, its failure to meet completion commitments made both to us and Prime Minister Christie. Throughout the process, independent mediation on numerous occasions found CCA to have committed these violations.”