The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Grand Lucayan’s chairman says there are no obstacles or barriers to closing the resort’s $100m sale “from our side” ahead of a key deadline for the negotiations being hit in 48 hours’ time.

Julian Russell, head of Lucayan Renewal Holdings, declined to go into detail on the status of talks with the prospective buyer, Electra America Hospitality Group, other than to confirm that the 45-day extension to their due diligence period is due to expire this Thursday, September 15.

“We’re just waiting until the 15th,” he told this newspaper, while affirming that talks between the Government and Electra were ongoing. Asked if he foresees any deal breakers, Mr Russell replied: “From our side, no.”

The Davis administration, via Lucayan Renewal Holdings, signed a Memorandum of Understanding (MoU) with Electra for the Freeport-based resort’s sale in early May 2022. Following a 60-day due diligence period, the two sides were then supposed to sign a binding sales agreement with Electra paying a $5m deposit on its purchase price.

However, the due diligence period was first extended by 15 days to July 27, and by another 45 days to mid-September after the initial 60 days expired back in August. Thus September 15 represents the current deadline by which Electra is to pay the $5m deposit unless another extension or revised terms are agreed by the parties. The $95m balance on the purchase price was to be paid within 120 days of the MoU’s signing, although this is now likely to be missed.

Meanwhile, Michael Scott, Mr Russell’s predecessor as Lucayan Renewal Holdings chair, told Tribune Business that selling a resort which has cost taxpayers more than $150m since the Government acquired it in September 2018 - four years ago - will be virtually impossible without an “ironclad commitment” by the Davis administration that Grand Bahama International Airport will be redeveloped into a true international gateway with US pre-clearance.

“I maintain the position that we will not see the consummation of a sale, nor the commencement of any reconstruction or renovations or redevelopment works [at the Grand Lucayan] unless and until we have a Heads of Agreement with a commitment, an obligation to redevelop the airport with a long-stop measure,” Mr Scott said.

Describing this as an “undertaking to commence the work within a short period of time” at Grand Bahama International Airport, and see it through to a successful conclusion, he added: “Unless we see an ironclad commitment; a legally binding commitment that is put on the table to initiate and complete the redevelopment of the airport, either by the Government itself or in conjunction with a third party operator and developer of airports, we will not see the completion of the sale of the hotel.

“It’s a very simple economic or business equation. Nobody is going to invest significant sums of money to redevelop and run a hotel unless and until they have a revenue stream on the back end.” In Freeport and the Grand Lucayan’s case, Mr Scott said this requires an airport capable of handling the flights and stopover visitor numbers needed to make a redeveloped resort profitable, as it will not survive off Florida day-trippers or overnighting cruise passengers.

“Unless that happens, forget it,” he added. “As I say in court, I present my case.” Chester Cooper, deputy prime minister, previously said there were three remaining bidders for the contract to redevelop Grand Bahama International Airport via a public-private partnership (PPP) model with the Government. However, the Government may have to begin the necessary upgrades itself prior to the selection of a winning bidder.

Electra sought to show its continued interest in the purchase by the fact that the 45-day due diligence extension was announced via a joint statement with the Grand Lucayan Board.

Russ Urban, Electra America’s chief executive, was quoted as saying: “We are excited about Grand Bahama island, and as we move forward with closing the deal, we reassure the people of Grand Bahama of our commitment to developing a world-class resort and collaborating on community development initiatives.”

The joint statement added that “no other material changes” to the sale’s closing schedule are presently anticipated, and that construction work and renovations to Grand Bahama’s ‘anchor’ hotel property will begin in January 2023 as planned. The Board said the sale was “steadily progressing and on track for completion”.

Besides the Grand Lucayan Board and Electra America closing the hotel’s sale, the purchaser will also have to negotiate a Heads of Agreement for the project with the Government. Besides that document, which functions as the master agreement and sets out the broad terms and conditions of their relationship, Electra America also has to obtain the necessary planning/construction approvals and seal a Hotels Encouragement Act deal for its tax breaks/incentives.

Carey Leonard, the Callenders & Co attorney who sat on the Lucayan’s Board under the former Minnis administration, reiterated his belief that Electra America’s acquisition and $300m redevelopment plans represents “a game changer for Grand Bahama tourism” once the deal is sealed.

“I bumped into someone yesterday who knows Mr Urban,” he told Tribune Business when the 45-day extension was announced. “I was told he certainly wants to proceed, he was still excited about doing it, and trying to work out ways to make sure they can get their guests in one way or another, whether through the airport or an alternative.

“They still plan to proceed. The issue is the timing. The purchaser is still pushing, and I think if this group comes in it will be a game changer for Grand Bahama. This deal is absolutely vital. I’m delighted with what the Board and current government have done.

“It may take longer than September, and I don’t want people to get their expectations up, and it may take longer to break ground, but they seem to be working very carefully to getting it done. I’m delighted that they’ve announced the extension; that confirms they are working on it. I give them my full support for what they want to achieve, and if they achieve it that will be a game changer for Grand Bahama.”

Electra America’s plans involve three resort properties. A four to five-star branded luxury lifestyle hotel, featuring 198 rooms and 24 villas and targeted at corporate and leisure business; a four-star convention hotel with 535 rooms, featuring an amphitheatre and convention centre; and a 257-room condo-hotel style family resort with suites that are double the size of the Grand Lucayan’s existing rooms.