The Tribune

* Resort can’t become ‘wasting asset’

* Chair’s ‘no faith’ in ‘bad’ Holistica deal

* Board mulls options; awaits KPMG review

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Lucayan’s Board is mulling a February 2021 re-opening in a bid to prevent the resort from becoming a “wasting asset” amid the growing uncertainty surrounding its potential sale.

Michael Scott QC, chairman of Lucayan Renewal Holdings, the Government-owned vehicle that owns the resort, told Tribune Business he and the Board were “considering a number of options” as it awaits the results of the KPMG probe into the merits of the revised ITM Group/Royal Caribbean deal.

Confirming this newspaper’s exclusive revelations of last week, Mr Scott said he personally views the sale to the duo’s Holistica partnership as “a bad deal” that does not create sufficient immediate benefits for the Bahamian people after the commercial terms were watered down due to COVID-19.

KPMG and its accounting team have been hired to provide an independent opinion on whether this is the case, but the Lucayan chairman said he did “not have any faith in it” as the sale conditions stand now.

Suggesting that his views were shared by other Board members, Mr Scott said he was pushing for KPMG to complete its review within “the next couple of weeks” with the directors now looking at “other viable options” for the Grand Lucayan’s future in case the ITM Group/Royal Caribbean deal fails to materialise.

“The Board is considering a number of options including opening the hotel some time in February,” he told Tribune Business. “It’s always very hard for a hotel property to sit their fallow as a wasting asset. One has to think carefully about this, but it doesn’t help the economic situation of the country, and of Freeport, to have it sitting there as a wasting asset.”

Other sources, speaking on condition of anonymity because they were not authorised to talk publicly, said the Board was proposing to recommend to the Government that it re-open the Grand Lucayan on February 1 next year following its summer closure in anticipation the ITM Group/Royal Caribbean deal would have closed by now.

The phased termination of the remaining 208-strong workforce began in June, with total termination packages since the Government acquired the Grand Lucayan in September 2018 likely to cost taxpayers more than $11m.

Now the Government/Lucayan Renewal Holdings face the prospect of having to hire at least some of those staff back if it follows through on a February 2021 re-opening in a bid to revive at least something of a stopover tourism product for Freeport amid the ravages of COVID-19. Much may yet hinge on the KPMG review’s outcome. “KPMG is doing a review of the merits or otherwise of the Bahamas Port Investments (ITM/Royal Caribbean) proposal, which I view as a bad deal, so that we can have independent evidence that either supports or does not support that proposal.

“I don’t personally have any faith in it, and one has to think laterally and consider other options, and look at another sale or lease options.” Mr Scott declined to give details on why the revised ITM/Royal Caribbean offer was “a bad deal”, although this newspaper’s contacts suggested earlier plans to develop 1,000 new rooms within the first 21 months have been reduced to refurbishing the existing hotel.

“It’s a watered down, diluted version of their original offer,” the Grand Lucayan chief added, “and from my perspective the material benefits if any really, really hinge on the growth factor and success of any project.

“There will be no immediate benefit. It’s all very long-term, spacing out over five to ten years. It doesn’t offer any relief immediately or in the next two years.” Asked how quickly KPMG has been tasked to complete its work, Mr Scott replied: “I’m trying to get it as soon as possible, certainly in the next couple of weeks. “They’re considering the efficacy and financial viability of the revised Bahamas Port Investments proposal from the perspective of Grand Bahama and The Bahamas.”

The Grand Lucayan chairman’s comments confirm prospects for the ITM Group/Royal Caribbean deal going ahead are far less rosy than made out by Senator Kwasi Thompson, minister of state for Grand Bahama, in his recent national address unless something radically alters.

He had voiced optimism that the Grand Lucayan will be “fully turned over” to the ITM Group/Royal Caribbean joint venture before year-end 2020, adding that they remain “committed” to the hotel’s transformation and that of Freeport Harbour.

However, Mr Thompson acknowledged that the project’s start will be delayed due to COVID- 19, saying: “We are currently reviewing their post COVID-19 development plans and hope to fully turn over the hotel property before the end of the year.”

When confronted with Mr Scott’s assessment, Mr Thompson said he “stands by the comments I made in my report, and I don’t have anything to add to that”. Dionisio D’Aguilar, minister of tourism and aviation, last night also suggested it would be incorrect to describe the Grand Lucayan deal as “in trouble”, although he referred this newspaper back to Mr Thompson for further comment.

Several sources, meanwhile, suggested that while some in the Minnis administration viewed “any deal as better than no deal”, there were others insistent it had to deliver the necessary benefits for the Bahamian people by acting as the catalyst to revive Grand Bahama’s tourism product and wider economy.

The Government is likely becoming desperate to get the Grand Lucayan off its and the taxpayer’s books, with the formerly loss-making - and now shuttered - resort likely now costing it $100m-plus and counting when the $65m purchase price, staff termination packages, subsidies to cover operating losses and expenses are now factored in.

Both it and ITM/Royal Caribbean are likely to blame COVID-19 for disrupting the deal.

The latter have used the pandemic, and its multi-billion dollar impact on the cruise line in particular, as justification for negotiating less onerous financial terms, while the Government will likely argue that the deal would have been sealed much sooner but for the global health crisis.

The result, besides the reduction in the number of new hotel rooms to be constructed, is a redevelopment timeline pushed further and further back as the Grand Lucayan becomes increasingly secondary to the cruise component and Freeport Harbour. This contradicts the Government’s main goal, which was to ensure the resort’s transformation has equal billing with the harbour’s redevelopment as a water-based adventure theme park, given that it would provide the greater amount of job opportunities, entrepreneurial spin-offs and economic benefits for the Bahamian people.

Mr D’Aguilar, who had said the final ITM/Royal Caribbean deal will likely look different to the one struck pre-COVID-19, recently confirmed that the joint venture partners want to seal “the entire transaction at once” to protect their commercial interests and not hand an advantage to either Freeport Harbour Company or the Government. Securing the hotel without the harbour, and the proposed additional cruise berths and water-based adventure theme park, would hand the advantage to Freeport Harbour Company and its 50 percent shareholder and manager, Hutchison Whampoa.