The Tribune

By LEANDRA ROLLE

Tribune Staff Reporter

lrolle@tribunemedia.net

BAHAMAS Port Investment Limited offered to purchase the Grand Lucayan resort from the Minnis administration for $50m and also wanted the former government to provide $100m in cash concessions for redevelopment of the property, Deputy Prime Minister Chester Cooper revealed of the since-binned purchase agreement yesterday.

Back in 2018, the Minnis administration purchased the property for $65m - $30m in direct cash and a mortgage with the seller for the remainder, Mr Cooper said.

However, the Tourism, Investments and Aviation Minister said the $50m purchase price was arrived at after the property suffered damage following the passage of Hurricane Dorian.

He made the revelation yesterday in the House of Assembly, disclosing much of the long-awaited details of the former administration’s deal for the Grand Lucayan Resort before the Davis administration cancelled it late last year.

According to Mr Cooper, following Hurricane Dorian’s damage of the property the board of Lucayan Renewal Holdings claimed $20m in insurance damage and received a settlement of $13m, which was applied to the mortgage.

“At this point,” Mr Cooper told Parliament yesterday, “the property was under contract for sale to Bahamas Ports International, a joint venture between Royal Caribbean Cruise Lines and the ITM Group, for $65m, therefore, a discount of $15m was extended to the prospective buyers and the purchase price was adjusted to $50m.

“On March 2, 2020, a Cabinet appointed negotiating committee finalised the Sales Purchase Agreement between LRHL and Bahamas Ports International, at a price of $50m. The agreement included condition precedents, among them the requirement to complete an agreement with BPI and Hutchison on the cruise port.”

However, after the pandemic hit - dealing another economic blow to the Bahamian economy, Mr Cooper said officials sought to amend the agreement with BPI even further.

Details of the revised deal, he added, included requests for a $33m loan to finance with the property’s purchase and millions of dollars in cash concessions from the government among other incentives.

“By November 2020, the BPI’s best and final offer for the purchase of the hotel property (was) for $50m with government contributing $100m in cash concessions to BPI over a 12-year period,” the tourism, investment and aviation minister further told parliamentarians.

“To be clear, this meant that the government of The Bahamas was asked to pay around $10m per year directly to the purchaser to help with redeveloping the property. This was in addition to other concessions and caveats. For example, of the $50m purchase price, BPI asked for an upfront $12m concession payment to be credited toward the purchase price. Also included in the $50m sale price was a government loan to BPI.”

Additionally, Mr Cooper said the revised deal would’ve also resulted in several major projects being scaled back.

“To be more specific, BPI proposed to develop the property in three phases rather than two, whereby initially only 25 rooms at Lighthouse Pointe would be opened in 2022, to be ‘grown with demand’, as opposed to the original 500 rooms Breaker’s Cay Hotel by mid-2022. The new proposal had no timeline for the Breaker’s Cay Hotel opening. The new proposal also deferred the opening of three new cruise ship berths to 2027.”

He continued: “The new proposal also asked the government to provide a $33m mortgage as part of financing of the $50m purchase price in an amortising loan with a two-year grace period, a one-year interest only period and repayment over ten years at an interest rate of six percent for the first five years and eight percent for the last five years.

“So, for posterity let me recap. We paid $65m for the resort. We had agreed to sell it for $50m. The buyers wanted a mortgage of $33m from us to buy the property from us. In addition, we were to pay back $100m to the buyer in cash concessions in addition to a myriad of tax concessions. The board did not find that proposal to be in the best interest of the government or the Bahamian people and said so publicly. And upon coming to office and reviewing the proposal, the new administration concurred, to put it mildly.”

According to Mr Cooper, some $150m in direct government subsidy have been injected into the hotel as of last September.

“We estimate that there have been millions more spent throughout the process in indirect costs and an estimated additional $10m-$15m to be spent before any transaction is completed even on its current trajectory. I remind this honourable House that the monthly subsidy to this resort was in the region of $1.3m to $1.5m per month,” he also said.

Last week, Mr Cooper announced that Electra America Hospitality Group was selected as the new buyer from five potential bidders vying to purchase the resort property.

The US conglomerate is offering $100m to purchase the Grand Lucaya. They also plan to invest $300m to renovate and redevelop the property.

There is a 60-day due diligence period, with closing no later than 120 days.

An upfront deposit of $5m will be paid immediately on execution of the definitive purchase agreement and will become non-refundable at the end of the 60-day due diligence period. The balance of $95m is due at closing, which has been agreed at no longer than 120 days from the execution of the MOU.

The government has committed to standard concessions under the Hotels Encouragement Act. Electra has committed to an estimated $300m renovation to rebuild the Grand Lucayan Resort into an environmentally sustainable, luxury resort.