The Tribune

• Regulators give Beach Club environmental go-ahead

• Cruise line hopes for early 2024 construction kick-off

• Working to value Gov’t stake; capital raise by year-end

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Royal Caribbean’s Bahamas chief has hailed as “a critical milestone” the environmental go-ahead for its Paradise Island beach club “that could benefit hundreds of businesses and tens of thousands of Bahamians”.

Philip Simon, the Royal Beach Club’s president and general manager for the cruise line’s Bahamas operations, told Tribune Business there “has never been any confusion” as to how important approval of its Environmental Impact Assessment (EIA) and related issues were to the $100m project’s ability to move forward.

He spoke after Dr Rhianna Nelly-Murphy, the Department of Environmental Planning and Protection’s (DEPP) director, affirmed in an August 15 letter to Jason Mayes, Royal Caribbean’s senior investments manager for private destinations, that the cruise line has “substantively addressed the environmental concerns” surrounding the western Paradise Island project and can move forward with submission of its Environmental Management Plan (EMP).

“The department is satisfied that Royal Caribbean International has substantively addressed the environmental concerns associated with the development of the Royal Beach Club at Paradise Island,” Dr Neely-Murphy wrote. “The DEPP is also satisfied that Royal Caribbean has demonstrated a high degree of of representation throughout the public consultation process and ensured that all key players were involved.

“In our review of the processes undertaken, in correlation with the final report, Royal Caribbean provided access to information, transparency, confidentiality of information and dedicated resources to achieve the goal of facilitating the public consultation requirements as ascribed by law.”

Branding Royal Caribbean’s report on the EIA public consultation as “thorough”, and containing “the necessary responses” to all questions that were raised, Dr Neely-Murphy said the DEPP “now closes” the consultation process. She added that the Government’s environmental watchdog “offers no objection” to the terms of reference, outlining the EMP’s scope, and that it now awaits this document’s submission by Royal Caribbean.

Mr Simon confirmed that the DEPP’s approval “takes us to the next step” of submitting the EMP and, following the agency’s review and hoped-for approval, a Certificate of Environmental Clearance (CEC) to confirm the Royal Beach Club has satisfactorily addressed all issues relating to this topic.

He acknowledged, though, that the CEC “does not negate” the need for Royal Caribbean to obtain the necessary permits and approvals from other government agencies given that it confirmed in its 169-page public consultation report that it has “not received approval from Town Planning” yet.

Still, Mr Simon told Tribune Business that while the environmental process “has taken a little longer than expected” the cruise line’s ultimate goal of having its 17-acre Royal Beach Club open by summer 2025 remains on schedule. He voiced optimism that Royal Caribbean will be in position to start construction on Paradise Island, beginning with site preparation and the demolition of existing structures, in the first or second quarter next year.

As for the Royal Beach Club’s economic impact, the cruise line’s Bahamas chief said its ambition to increase the number of passengers it brings to Nassau by 150 percent compared to pre-COVID levels - from one million per year to 2.5m by 2027 - will “no doubt” generate sufficient customers to ensure all businesses - as well as the Paradise Island destination - benefit.

“By 2027, we expect between 900,000 and one million guests will visit the Royal Beach Club each year. As a result, we would expect an annualised maximum daily capacity of [around] 2,750 guests per day. This translates to 171 guests per acre (assuming one acre is removed for back of house needs),” the cruise line said in a response to questions submitted as part of the EIA consultation.

That means 40 percent of the 2.5m passengers it plans to bring to Nassau in 2027 will go its its Paradise Island destination. Asserting that “everyone should benefit as that pie continues to grow”, Mr Simon explained that his reference to “hundreds of businesses and tens of thousands of Bahamians” benefiting from the Royal Beach Club alluded not only to spin-off opportunities involving the supply of goods and services but the opportunity for locals and the Government to collectively own a 49 percent equity stake in the project.

Besides the environmental aspects, he confirmed that Royal Caribbean has already initiated the process to value the four Crown Land acres that will be included in the overall 17-acre site. This valuation will be used to monetise the Government’s contribution in the project and determine the size of the equity stake it will hold via the National Investment Fund, the country’s sovereign wealth fund.

Once the value of the Government’s equity stake is determined, the balance of the collective 49 percent Bahamian interest in the Royal Beach Club that will be held by private investors can be calculated. That will then set the stage for the equity capital raise from Bahamian investors, with Mr Simon confirming that Royal Caribbean is still aiming for this offering to take place before year-end.

“That’s an ongoing process,” he affirmed of the Crown Land valuation. “We have had evaluators and surveyors working on that. We hope to complete that process in full very shortly and present that to the Government. We are very satisfied with the work done thus far.”

Mr Simon declined to be drawn on a timeline for completing the valuation, but added: “We understand how important that is to the economic model,” he added. “We have to ensure that we do things the right way, and that we’re not unduly taking our time doing that. We’re trying to that as expeditiously and efficiently as possible given the timelines are expected to potentially have the Beach Club open and operational by summer 2025.

“We are going to push as hard as we can, full steam ahead, to meet our goals and objectives.” Asked about how far efforts to structure the Bahamian capital raise have progressed, Mr Simon added: “We’re still aiming and pushing, and committed to keeping this timeline towards the end of the year. We are having rigorous conversations with potential stakeholders and partners in that regard.”

The Royal Beach Club’s local equity raise will be structured similar to that of the Nassau Cruise Port. In the latter, Bahamian investors acquired shares in an investment fund, the Bahamas Investment Fund, which hold the collective 49 percent equity interest in the Nassau Cruise Port on their behalf. This will likely be the model employed for the Royal Caribbean project.

Mr Simon described this equity model, where The Bahamas and Bahamians hold a collective 49 percent ownership interest in a tourism development alongside a major investor, as “just representing such a unique and tremendous opportunity”. He added: “If we get it right, it has the potential to be a wonderful model.”

Royal Caribbean, in answers submitted to questions posed as part of the EIA public consultation, confirmed: “Bahamians will have the opportunity to own equity in up to 49 percent of the Royal Beach Club at Paradise Island joint venture.

“That equity is made up of two parts: Equity that will be granted to the Bahamas National Investment Fund for the fair market value of the four acres of Crown land, and individual Bahamians will be invited to own equity through an investment fund that will be created for Bahamian investors.”

It added: “As an illustrative example, if the valuation of the Crown land is determined to be worth 9 percent of the value of the joint venture, then 40 percent of the total value of the joint venture’s equity will be made available to individual investors. The profits generated by the joint venture will be distributed to all equity partners (including the Bahamas National Investment Fund) based on their proportional share of equity in the total joint venture.

“As an illustrative example, if the Bahamas National Investment Fund owns 9 percent equity in the joint venture (in exchange for four acres of Crown land) it would receive 9 percent of the total profit available for distribution.”

The DEPP’s decision that Royal Caribbean has “substantively addressed” these concerns brings the investment opportunity for Bahamians one step closer to fruition. “It’s a critical milestone,” Mr Simon told Tribune Business of the DEPP go-ahead. “It’s been any number of months and, for some, even longer than that. This entire process, which again is a very important process for the company and the country, and of course it has gotten a lot of attention.....

“Royal Caribbean has been committed to this from the very beginning. There’s never been any confusion as to how important the environment and environmental protection is, and obviously the plans and policies relating to marine life and land use. This is a very important and critical milestone. It takes us to the next step, which is completion of the EMP and Certificate of Environmental Clearance approval.”

Mr Simon added: “Everything is moving ahead. Looking at the timelines, we are on schedule right now. The environmental process has taken a little longer than expected, but it has not impacted the overall timeline we have set for the project thus far.

“We’re almost at the beginning of where we can move into phase one, which involves the site preparation, demolition of existing structures and getting construction drawings so we can send our requests for proposals (RFPs). Hopefully we can commence construction in the first quarter or second quarter of next year.”

Asserting that Royal Caribbean plans to grow the cruise passenger market, rather than seize it all for itself, with only 40 percent of the 2.5m it brings to Nassau in 2027 visiting its Paradise Island destination, Mr Simon said: “The company has committed quite a lot of of its resources to the Bahamian market.

“Through the Royal Beach Club at Paradise Island, just a limited number of persons will experience that on an annual basis. The number of passengers coming to The Bahamas from the company will increase. We have ships that are on screen, bigger vessels, that will bring a greater number of visitors to our shores and there will be the need to have as many options as possible within the destination and other areas of Nassau and The Bahamas for them to experience.

“If we are all as stakeholders building a better product, offering more attractions and delivering greater service to our guests, as that pie continues to grow everyone should benefit from the oval.” Mr Simon said the ultimate goal is to create a “win-win-win” where Royal Caribbean, The Bahamas, its people and businesses, and the Government all benefit.

“It just represents such a unique and tremendous opportunity,” he added. “The potential benefit to out country.... that was the deciding factor for me, a model that could benefit hundreds of businesses and tens of thousands of Bahamians through the spin-offs and equity.”