The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Lucayan's former purchaser yesterday said he "feels much more comfortable investing" $200m in Nassau than seeking "massive subsidies" to make that deal work.

Paul Wynn, the Wynn Group's chief executive, told Tribune Business that Freeport's anchor property was "not for me" and he "can't do it", given that the potential purchase lacked "economic feasibility".

He argued that any buyer would be seeking the same multi-million dollar taxpayer subsidies that he required to rebuild airlift into Freeport, plus renovate and remediate the existing hotel properties, pegging the latter cost at between $45-$55m.

Mr Wynn said his potential operating partners, AMR Resorts and Sunwing/Memories, had both sought "substantial sums" to defray the cost of building sufficient airlift capacity - something he was unable to accommodate after the Grand Lucayan's owner declined to accept a lower price.

The Canadian developer said he had attempted to renegotiate the purchase price down from an initial $65m to $40m, but Cheung Kong (CK) Property Holdings - the entity into which Hutchison Whampoa transferred as its real estate assets - refused to accept.

The $25m difference between the two prices is the same amount included in the 2018-2019 budget by the Minnis administration to finance the Government's purchase of an equity stake in the Wynn deal, plus airlift and marketing support.

But, with that deal now off, the Government will have to find considerably more if it is forced to intervene and purchase the Grand Lucayan itself to prevent its closure - Mr Wynn admitting that the administration was in a "no-win situation".

He also denied assertions by Philip 'Brave' Davis, the Opposition's leader, that the former Christie administration had left a solid deal in place with him before being voted out of office last May.

Mr Wynn described that arrangement as "vague and nebulous", and branded as "unconscionable" what he described as "a lot of money being thrown at me" just prior to that month's general election.

Putting the Grand Lucayan and Freeport behind him, the Wynn Group chief said he was focusing his Bahamian investment interests solely on New Providence. Apart from the $120m GoldWynn project, upon which he hopes to break ground by September 1 once final permits are obtained, Mr Wynn said he was eyeing two other potential projects.

Declining to provide much detail, he suggested one would be "a regular housing development", while the other involved a $72 million investment at a western New Providence property that is already under contract.

Speaking one day after the Prime Minister's press secretary, Anthony Newbold, said Wynn's Grand Lucayan proposal had been rejected as "unacceptable" to the Government, the Canadian developer said that while such assertions were "subjective" he was "not disagreeing".

"I feel much more comfortable spending my money on these other developments in New Providence," Mr Wynn told Tribune Business. "I'm coming to the Government [on the Grand Lucayan] needing massive subsidies on the building side and the lift side.

"Whether it was AMR or Sunwing, they were asking for substantial monies to rebuild the lift..... At the end of the day I feel I'm asking the Government too much, but anyone looking at it is going to ask the Government for the same or more.

"We're investing over $200 million in New Providence. I feel comfortable doing developments where I'm creating employment, creating a tax base, bringing in new tourists but you're not asking me to stick my hand out for money," he continued.

"I have a lot of faith in the Bahamas. I like the people, like everything about it, but the business for us is in New Providence. You have the airport, you have the lift. It's established, and you have the old city, you have Paradise Island. It has attributes Grand Bahama can't achieve. The facts for the last 15 years speak for themselves."

That period has seen the closure of both Freeport's major resort properties, the Royal Oasis and Grand Lucayan, with CK Property Holdings/Hutchison Whampoa thought to have lost between $15-$20 million per year prior to its post-Hurricane Matthew closure.

Some observers are likely to interpret Mr Wynn's comments as a damning indictment of Freeport's economic and investment prospects, especially in the moribund hotel sector, which has seen 59 percent of its inventory - around 1,000 rooms - taken out of stock as a result of the Grand Lucayan's closure.

Mr Wynn yesterday suggested it would "be better" for Bahamians to own the resort, and warned that the Government will have to invest in both airlift and environmental remediation if it proceeds with acquiring the hotel complex itself.

"The buildings will need substantial remediation," he told Tribune Business. "Our budget, done with AMR and before that with Sunwing, was $45-$55m." Mr Wynn explained that the variance was for mold remediation, given that the developer would only have been able to fully assess this situation once an acquisition was completed.

"We're not even certain that the Lighthouse Point should stay up," he added. "The 23 villas that face the water, they have to be demolished. You open the doors and the mushrooms are coming out the walls; it's that bad."

Mr Wynn suggested CK Property Holdings had not done enough to prevent the growth and spread of mold, with air conditioning not switched on despite rook leaks. "You have an owner that's at best indifferent," he added.

"They were losing so much money for so long they're only really interested in the [Container] Port. They've collected their insurance money and have just washed their hands of it."

Mr Wynn said the Government was now in "a no-win situation" over the Grand Lucayan's fate, confirming that CK Property Holdings refused to accept a lower, $40m purchase price that would facilitate the "very expensive" rebuilding of airlift.

He added that opening costs would have required a further $8-$9m investment, and said the Most Favoured Nation (MFN) clauses in the Heads of Agreement for Atlantis and Baha Mar prevented the Government from providing the Grand Lucayan with more favourable tax breaks as these would then have to be extended to the two New Providence resorts.

The Canadian developer suggested that Sunwing/Memories, who operated one of the Grand Lucayan properties prior to Hurricane Matthew, "came to the some conclusion" as himself after realising that the economics and financial model did not work.

In particular, Mr Wynn said the Bahamas' market position as a high-end, luxury destination with expensive labour and energy costs did not favour the all-inclusive model used by Sunwing and himself in the Dominican Republic.

Comparing the latter to the Bahamas, Mr Wynn said this nation "can't compete". Labour costs in the Dominican Republic are $300 per capita per month; energy costs 25 percent of what they are here; and "consumables are 50 percent less" because that country grows more of its own food.

"It doesn't matter what the pricing was, they [Sunwing] just can't do what they want to do in Grand Bahama," Mr Wynn added. "It's not the market that works for Grand Bahama. Someone in the Government said the Bahamas can't race to the bottom; it has to keep its brand."

Praising the Minnis administration, Mr Wynn said he had "tremendous empathy for the Government" on the decision it likely faces over whether to step in and save the Grand Lucayan from possible closure.

"The Government will do their best, but they're going to bat with one hand tied behind their back," he told Tribune Business. "I hope they get bipartisan support, and I really hope people don't exploit this because the Government has to do something.

"The economics were challenging. It's not for me to manage. I can't do it. There's no fiscal feasibility to it." Mr Wynn said he had spent several hundred thousand dollars on Grand Lucayan due diligence, and described his involvement with Freeport as akin to "doing my thesis".

Mr Wynn also denied that a substantial deal for the Grand Lucayan was left in place by the former administration. "There was no deal with the prior government," he told Tribune Business. "The deal was so vague and nebulous, and they were throwing a lot of money at me that was unconscionable. It was prior to the election, need I say more? I don't want to be that person."