The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government yesterday hit back at its detractors by arguing it was “on the money” with both the timing and value of its $65m Grand Lucayan deal.

Dionisio D’Aguilar, minister of tourism and aviation, lost little time in pointing out that the sale price agreed with the ITM Group/Royal Caribbean Cruise Lines joint venture is exactly the same as the sum the government paid to purchase the resort from Hutchison Whampoa last September.

Implying that there will be no loss to the taxpayer as a result, Mr D’Aguilar said the agreement with the Mexican port developer and cruise line had put the government “on a path to hopefully realise a return on our investment”.

Branding it “a good deal all around”, Mr D’Aguilar said the Grand Lucayan’s resurrection - and combination with Freeport Harbour to turn the area into a destination product - was a key element in the government delivering on its promises to revive Grand Bahama’s economy.

He added that the ITM/Royal Caribbean deal, for which a Heads of Agreement and purchase deal now has to be concluded, together with the $100m Carnival cruise port that also remains a “work in progress” and the “technology hub” ambitions, should make all Grand Bahama residents “positive and optimistic about the future”.

The minister’s position was backed by Michael Scott, chairman of Lucayan Renewal Holdings, the Government-owned vehicle that currently controls the Grand Lucayan, who said the Minnis administration had delivered on its commitments to the Bahamian people in relation to the resort.

“The minister [Mr D’Aguilar] and I gave a commitment that we would get this done [the sale] by the end of the first quarter in 2019, and we are on the money,” Mr Scott told Tribune Business. “We were on the outer limits of it, but are on the money.”

The Government yesterday signed a Letter of Intent (LOI) with ITM Group/Royal Caribbean to trigger exclusive negotiations with the joint venture for the Grand Lucayan’s sale and a Heads of Agreement on their wider proposal, which involves combining the resort and upgraded Freeport Harbour into a water-based adventure theme park-type destination.

While no timeline was given for when talks will complete, and the sale close, LOIs and similar sales agreements usually give both sides 90 days to complete any deal and all the necessary documentation before closing - unless an extension is agreed. Mr D’Aguilar previously indicated a sale may close by the end of the 2019 second quarter, consistent with the 90-day timeframe.

Mr Scott, meanwhile, said the ITM/Royal Caribbean deal meant the Government was also making good on pledges not to exit the Grand Lucayan’s ownership at a loss. “Not only are we on time, I said we would not take a loss on the hotel. We got $65m,” he told Tribune Business. When asked how happy taxpayers should be, he replied “very”.

The Government took heavy criticism from its political opponents and others last year over its decision to acquire the loss-making resort from Hutchison Whampoa, with many fearing it would trap taxpayers in never-ending subsidies to prop up a hotel it would struggle to sell.

The Minnis administration, buoyed by yesterday’s LOI signing, will now seek to throw such concerns back in the Opposition’s face, although the “matching” $65m purchase price does not necessarily mean all expenses incurred to-date will be recovered.

Besides the initial sale outlay, the Government also committed to paying Hutchison Whampoa around $1.5m to cover losses incurred between the date their purchase agreement was signed and the actual September 2018 closing. There are also the estimated $1m per month subsidies incurred over the past seven months to cover operating losses, and the $3.2m payout to departed line staff.

Further potential costs of between $3.1m to $5.5m could arise depending on whether a similar payout deal is struck with the Grand Lucayan’s managers, along with interest on the bonds given to Hutchison as part of the purchase price.

The Government’s six-month fiscal “snapshot” for the period to end-December 2018 revealed that it had injected $45.4m into the Grand Lucayan over that period, including $13m to cover its operational costs. The latter sum will not be recovered by the purchase price.

However, the Minnis administration will likely argue that reviving the resort was always its main objective, and that what it will earn in taxes on the back end from all the economic activity and jobs created will more than make up for any initial taxpayer exposure.

“It’s important to emphasise there were a lot of naysayers out there,” Mr D’Aguilar told Tribune Business yesterday. “It’s important to highlight that we bought a hotel for $65m and are selling the hotel for $65m.

“We’re selling the hotel to a partnership coming with an incredible project, and the impact will be significant for the Grand Bahama community through employment and empowerment.

“At the end of the day it was the right decision to buy the hotel,” he added. “We’re now on a path that hopefully, and ultimately, will realise a return on our investment. It’s a great deal all around.

“People in Grand Bahama should feel positive and optimistic about the future. If you’re thinking about investing in a new business, starting a new business, building a new home, couple this with the Carnival transaction which is also a work in progress and there’s a sense of optimism.”

While the details of the Heads of Agreement with ITM/Royal Caribbean have yet to be worked out, Mr D’Aguilar promised that the Government will “solidify and ensure that embedded in the agreement are the necessary guarantees to ensure Bahamian businesses are given first priority” on the retail, restaurant, transportation and tour/excursion opportunities that will become available.

He reiterated that The Bahamas needed to exploit the “booming” cruise industry, with between 80 to 111 new vessels expected to come online within the next several years, by creating new destinations and experiences to attract its passengers.

While Freeport becoming “a home port” for cruise ships via the ITM/Royal Caribbean investment was “always a possibility”, Mr D’Aguilar said this was unlikely given The Bahamas’ proximity to three of the largest such ports in the world - Miami, Fort Lauderdale and Cape Canaveral.

“The cruise industry is booming,” he said. “Every single ship that leaves Miami, Fort Lauderdale and Cape Canaveral is going 100 percent full. This is a market that is experiencing phenomenal growth, and they need destinations to go to.

“That’s why they’re looking for new ports, and existing ports to be expanded. Studies have shown this is a very recession-proof business. Despite all the calamities that happen in the world, the cruise industry continues to grow.

“God has blessed The Bahamas with great geography, putting it next to the three busiest cruise ports in the world. We have to take advantage of this blessing.”