The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The $2.8bn revival of Grand Bahama's West End, which promises to create 1,400 full-time Bahamian jobs, has been delayed by marina-related concerns that have impacted the deal's closing.

Tribune Business can reveal that Skyline Investments, the Toronto-based developer, missed the scheduled September 4, 2018, date to complete its purchase of the bulk of the former Ginn Sur Mer project's real estate.

That deal, with a lending syndicate headed by Credit Suisse, is understood to have been rescheduled for September 26-28, as Skyline seeks to close the first of two purchases required to give it total ownership of the West End development.

Besides acquiring 1,476 acres from the Credit Suisse group, the Canadian developer - which is listed on the Tel Aviv Stock Exchange in Israel - is acquiring the remaining Ginn sur mer assets in a separate deal from Lubert Adler, the Philadelphia-based investment bank that was Ginn Development Company financing partner on the original development.

That purchase, which is due to complete on October 15-17, involves 280 acres plus the existing Old Bahama Bay resort and its marina. It is the latter asset, Tribune Business has been informed by multiple sources, which is producing last-minute concerns for Skyline Investments over completing both deals.

This is because the marina's operating lease, and Customs and fuel docks, are held by parties not directly involved in either purchase from the Credit Suisse group or Lubert Adler.

The lease, and operating licence, are currently held by Island Ventures Resort Club (IVRC), the company formed by condominium owners at the Old Bahama Bay resort to keep the property alive following Ginn Development Company's bankruptcy in 2011.

And the marina's Customs and fuel docks lie on an 18-acre land parcel acquired by John MacDonald, IVRC's president, for his own multi-million dollar Grande Harbour resort project that was unveiled last week.

As a result, Tribune Business sources suggested Skyline Investments was delaying completing both purchases until it could either purchase or work out an agreement with Mr MacDonald for itself and its clients to have access to/use or the marina's fuel and Customs facilities.

This newspaper was also informed that Lubert Adler, as landlord, was concerned whether IVRC would comply with its notice to vacate the marina by October 17 to make way for the Skyline takeover.

Mr MacDonald, in an interview with Tribune Business on Friday, said IVRC's attorney had confirmed the company's willingness to comply with the vacation notice in a letter sent that day. He also emphasised his and Grande Harbour's desire to work with the Canadian developer as good neighbours, since there were "a lot of synergies" between their respective plans.

However, he seemed to take a harder line in a subsequent e-mail to Tribune Business at the weekend, saying Skyline Investments "simply cannot come in and take over" everything at Old Bahama Bay, including the marina and fuel docks.

"IVRC is the legal license holders, and there is no valid reason for us to forfeit these as we still have our core business to run even if Skyline closes on their deal," he added. Mr MacDonald produced copies of IVRC's Business Licences to operate the hotel, marina, retail and gasoline station at Old Bahama Bay, all of which are valid until January next year.

He added that Lubert Adler held "zero" licences at Old Bahama Bay, having abandoned the resort and its condo owners to their fate in the aftermath of Ginn's 2011 default.

"When Ginn-Lubert Adler closed the doors on us in late 2011, they also forfeited their licenses stating 'they do not want the liability'," Mr MacDonald said. "The owners were then faced with a choice: Close down, or have our attorneys create a Bahamian corporation so we, the owners, can run and operate the resort, obtain the proper licenses, insurance and have the ability to hire staff.

"We chose to form IVRC. IVRC is, and has been, the only entity that holds these licenses since 2012. This places Skyline in a bit of a situation as they simply cannot come in and take over as Ginn-Lubert Adler would have them believe.

"IVRC is the legal license holder, and there is no valid reason for us to forfeit these as we still have our core business to run even if Skyline closes on their deal. Skyline must start fresh from the beginning, just as IVRC was forced to do when Ginn-Lubert Adler shut the doors on us in late 2011. I can tell you that these licenses do not come overnight."

Tribune Business, though, was told that completion of the Skyline purchase relies on IVRC relinquishing its marina lease. "I'm told that he [Mr MacDonald] has got to be out of there by October 17; that he has no right to be there," one source said, speaking on condition of anonymity. "He is the operator of the marina, has a lease in the marina, and has been given notice to quit.

Another added: "Lubert Adler cannot give vacant possession if the guy is still there, and that's what's causing the hold-up. The Government has to click its heels and resolve this issue immediately.

"Who owns the seabed? It's Lubert Adler and the Government of the Bahamas. What needs to happen is the Government needs to clear up who controls and holds the marina lease from a sea bed basis. The Government is in a precarious position, whether to step in or nor step in. They have to tip toe around this one, as they cannot be seen siding with anyone here."

Mr MacDonald, though, suggested that such concerns were unfounded. "Our lawyer sent them a letter today telling them we accept their notice," he told Tribune Business on Friday.

That just leaves the marina's fuel and Customs docks, which sit on land formerly owned by West End Resorts Ltd (WERL) that was acquired by Mr MacDonald for the Grande Harbour project.

The IVRC president revealed that Skyline executives had initially seemed to believe these assets were included in their deal with Lubert Adler, a notion he said he swiftly disabused them of.

"IVRC has never leased the fuel docks from Ginn-Lubert Adler, as Ginn-Lubert Alder has never owned the fuel docks," Mr MacDonald said. "The fuel docks were leased from WERL, the original owners, and to IVRC."

He blamed any problems between IVRC and Skyline on a lack of direct communication, suggesting that Lubert Adler had "kept us apart". Despite executives from the Canadian developer having been present on the ground in West End for the past 18 months, Mr MacDonald said the first formal contact came at a meeting with IVRC some four weeks ago.

Multiple sources familiar with developments, and spoken to by Tribune Business, gave mixed views on the outlook for the Skyline purchase and relations with IVRC and Mr MacDonald. Some warned that the matter was likely to result in litigation, which could potentially freeze the $2.8bn project and its development plans for months, even years - although this now seems unlikely given Mr MacDonald's confirmation of the marina lease vacation.

Such a scenario would be the worst possible outcome for the Bahamas' economic interests, given the four-figure construction and full-time jobs that West End's revival is projected to create, and its role in creating a 'Smart City' that would boost the Government's ambitions to develop a technology hub in Grand Bahama.

Tribune Business sources also warned that Lubert Adler and the Credit Suisse group were becoming nervous following the earlier closing's miss, and did not want the deal to be delayed while Skyline Investments worked out the terms of its relationship with an unrelated third party.

"Every time a closing date is missed the odds of a successful deal go down significantly because the seller loses confidence and faith in the buyer," one contact said bluntly.

Others, though, were more hopeful and sanguine about the West End situation, with one contact suggesting the marina-related issues were equivalent to making "a mountain out of a mole hill". In the context of a $2.8bn project, they suggested it was hardly a material impact if Skyline Investments had to construct and develop its own Customs and fuel docks.

"It'll work out and everything will be good," one source familiar with developments added. They suggested it was in the interests of all sides to co-operate and live together, given that they all had amenities the other side and its clients would want to use.

This sentiment was echoed by Mr MacDonald, who told Tribune Business of Skyline: "We've got to give them a chance. They're going to be our neighbours. I think we can work with them on so many things.

"There are a lot of synergies that could work very well for all of us. We've looked at this group. They run a lot of hotels, and I think they can be very good." Mr MacDonald suggested the Government has already started to "intervene" in the situation, with Kwasi Thompson, minister of state in the Prime Minister's Office, having contacted him to put him in direct tough with Skyline.

"One project would be great, two phenomenal," Mr MacDonald said of Skyline and his own Grande Harbour development, which he last week said would create 900 construction jobs and 300 full-time posts across 460 condominium units.

Apart from Old Bahama Bay and its marina, the 280 acres that Lubert Adler holds were earmarked as the site for Ginn's hotels and casino, and key amenities such as the airport and utilities.