The Tribune

• Full-year subsidy near-doubling to $19.4m

• ‘Less focus on price’, more on right buyer

• GB needs ‘stool with three legs’ to work

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The failed $100m Grand Lucayan sale is set to cost Bahamian taxpayers a further $9.1m with subsidies to the resort for the full fiscal year near-doubling in the 2022-2023 mid-year Budget.

The Davis administration is increasing funding for the hotel from the originally-forecast $10.3m to $19.4m, an 88.3 percent rise, which has almost certainly resulted from the Government having to hold the property for longer than anticipated after its sale to Electra America Hospitality Group collapsed in November 2022.

The extra $9.1m may seem relatively minor when measured against the Government’s projected $3bn in recurrent spending for the 2022-2023 fiscal year, but the taxpayer’s total Grand Lucayan exposure - including the initial $65m purchase price paid to Hutchison Whampoa’s real estate arm in September 2018 - is now likely to be moving close to the $200m mark.

The revelation of further subsidy increases yesterday prompted renewed calls for the Government to “pay less attention to the sales price” and instead focus on finding the correct purchaser who can transform the Grand Lucayan - and, by extension, Freeport and the wider island - into a true tourism destination once again via a sustainable business plan that can attract the necessary demand and airlift.

Magnus Alnebeck, the Pelican Bay resort’s general manager, yesterday told Tribune Business that the increased subsidy could be to help open more rooms, or upgrade the property and its infrastructure, rather than just covering operational losses and expenses.

However, he added of the increased Budget allocation: “It’s very concerning. It’s six-and-a-half years now [since Memories closed]. I think we should pay less focus to the selling price and instead make sure we get a sustainable operator and get it open because of the amount of money lost to the economy over the past six-and-a-half years. 

“It’s not easy to open a hotel that has been dead for six-and-a-half years. When you ask people who know this stuff how much it will cost to redevelop it, the numbers are all over the place. Nobody knows what they’re going to find.... If we’re going to spend all that money on the airport, then we’re going to need to have the hotel rooms to put the guests in that are flying into the airport.

“It’s a stool with three legs. It’s the Grand Lucayan, it’s the airport, and to create the airlift. If you don’t have one of them... having a new airport and the Grand Lucayan open, and not having airlift, you’re not going to solve the problem. And you’re not going to get airlift without the airport. Those are the three legs: Airport, airlift and the Grand Lucayan.”

Multiple Tribune Business sources, speaking on condition of anonymity, have revealed that a major New York-based real estate investment firm has been locked in talks with the Davis administration over the Grand Lucayan’s potential purchase in the months following the Electra America deal’s failure.

It is understood that the prospective buyer was initially a possible financing partner for Electra America, but it moved into the negotiating seat once the latter withdrew and has been seeking to acquire the resort itself. “I know there was a real estate firm out of New York,” one contact said.

“They were some of the finance people behind the Electra deal, and when they did not get the numbers to work, they looked at doing it themselves. I know their people were coming and going up until a few weeks ago.” 

Meanwhile, another Freeport business contact said the increased 2022-2023 Budget subsidy for the Grand Lucayan should be a signal to the Government that it rapidly needs to find an exit route. “What that tells me is that they need to find someone to give that hotel to,” they said. “You have got to know when to say when, and it’s now the time to say when. Hire it out, agree a price to redevelop it.

“What it tells me is clearly there’s no buyer in sight, and if that’s the case we have a real issue here that nobody wants to think about. It makes no sense whatsoever to keep it. It’s a loss leader.”

The Government appears to have made more progress in finding a partner to finance, construct and manage a new Grand Bahama International Airport. Chester Cooper, deputy prime minister and minister of tourism, investments and aviation, indicated earlier this week that a finalised public-private partnership (PPP) deal may be close, saying that final terms on a contract were being pinned down.

No further details were revealed, although Tribune Business previously revealed that the preferred bidder appeared to be a group featuring CFAL’s president, Anthony Ferguson, and Bahamas Hot Mix (BHM) chairman Tony Myers, together with the company itself. Manchester Airport Group out of the UK were said to be the operating partner.

“I see that there is work there, and every week a few things are being done,” Mr Alnebeck added. “That’s encouraging because at least they are tackling the low-hanging fruit and fixing that. The airport is looking better, looking nice and that’s good.”

Michael Pintard, the Opposition’s leader and Marco City MP, yesterday suggested that the $9.1m extra subsidy that the Government is making available to the Grand Lucayan is unlikely to cover the remainder of the fiscal year. “We know that the expenses for the hotel are increasing,” he said. “$9.1m is really a small amount.

“They’ll have to go to the Budget to continue to fund that unless they cut back on the staff they have in place. We expect that figure to increase. I think the $9.1m is likely to run out before they get someone to pick up the salaries.”