The Tribune

• Veteran licensee unveils plan to avoid ‘ugly’ fight
• Brands management structure as ‘win-win-win’
• Says Freeport’s ‘real value’ undeveloped land

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A LONG-STANDING Freeport licensee yesterday unveiled a $100m investor and management “dream team” alternative to the Government’s “ugly confrontation” with the Grand Bahama Port Authority (GBPA).

Stephen Crane, the luxury goods and jewellery retail entrepreneur long associated with Freeport’s Colombian Emeralds operation, told Tribune Business he is seeking a “win-win-win” for all sides via his proposal to create a “co-operative or trust” structure that would be charged with managing/administering not just the Port area but whole of Grand Bahama.

His plan, outlined in a column carried on Page 2B today, would see this management entity set up separately from both the existing GBPA and government structures. It would be led by a group of Bahamian and international executives, who would work alongside investors prepared to invest an initial $100m “to kick-start positive change”.

Arguing that “the real value” in Freeport/Grand Bahama lies in “unlocking” its undeveloped real estate, Mr Crane said the newly-created management authority would be charged with valuing this land and creating five, ten and even longer-term master plans to develop these holdings.

While the GBPA’s owners, the Hayward and St George families, and the Government would be represented on its Board, he added that this must also feature investor and Grand Bahama community representatives. And Bahamians will also have an opportunity to buy shares in this management authority “so that it’s not an outside entity all the time”.

Mr Crane asserted that his plan has multiple potential benefits. For the GBPA’s owners, he argued that it would unlock value and investment returns that they and existing management have failed to realise from Port area landholdings, while the Government would be relieved of the financial and administrative burden it presently faces not just in the Port area but the whole of Grand Bahama.

And, by emphasising collaboration as opposed to confrontation, it would end an “untenable status quo” by providing Freeport with a future development path that avoids any perceptions the Government is seeking to “nationalise” the GBPA via its $357m reimbursement demand.

“While some advocate a change in the GBPA’s ownership, the current economic situation and the Government’s $357m invoice make a meaningful ownership change, short of nationalisation, next to impossible,” Mr Crane writes in Tribune Business today.

“A forced sale or nationalisation of Grand Bahama assets would be extremely detrimental to The Bahamas’ international financial reputation. A change in the management of Grand Bahama’s developer, however, is a much more desirable way to revitalise Grand Bahama’s economy.

“Similarly, continuing the status quo is untenable. Nassau has left Grand Bahama behind, and businesses in Freeport and Grand Bahama have been left with a limited market to serve and few prospects for growth. We need to explore new ways forward, and I would like to offer a recommendation.”

Mr Crane acknowledged Freeport’s dilemma - that the city needs new vision and investment at the GBPA’s ownership and management level, but very few of its residents want this to be provided by the Government taking over its quasi-governmental powers and regulatory authority.

“One of the most productive and equitable ways of working together would be to create a new business entity in which Bahamians and international investors can buy shares,” Mr Crane said. “The new entity, possibly a trust or co-operative, should have a suitable management team to work closely with government to modernise the Hawksbill Creek Agreement to facilitate Grand Bahama’s economic rejuvenation..

“A suitably-structured entity that allows Bahamians to invest in the island’s future, and have a say in how the island is developed, presents many opportunities. The entity should engage an expert management team with investors prepared to initially invest an estimated $100m to kick start positive change and be able to put together a dream team of local and international experts to manage sustainable and equitable development successfully.”

Mr Crane admitted that “many details would need to be agreed upon to establish how the new investment should be structured, but with a strong will to co-operate, this could be successfully accomplished”. However, his plan would need co-operation and agreement from the Government, GBPA and the latter’s partner, Hutchison Whampoa, as well as the GBPA’s licensees.

It is far from clear this would be forthcoming, especially with the first three, although Mr Crane’s plan has some similarities with the clause in Hawksbill Creek Agreement, Freeport’s founding treaty, which stipulates that the GBPA’s quasi-governmental and regulatory powers be devolved to a local government-type authority if approved by a majority 80 percent of its licensees.

The management “trust or co-operative’s” role, responsibilities and relations with the Government, GBPA and Hutchison would all need to be determined. But Mr Crane said his proposal offers a potential way out of the current confrontation between the Government and GBPA that threatens to throw Freeport’s growth and development into uncertainty for several years if arbitration proceedings are launched.

“I’m trying to get a win-win-win out of it rather than this ugly confrontation which is not taking us very far,” Mr Crane told Tribune Business of the Government’s $357m payment demand. “I don’t seen that as a positive way forward.

“To a certain extent it could be, because it flushes out the current situation, which is a step in the right direction. But I’m not sure it’s the correct way of doing it. Be that as it may, it’s not helpful. This has to be through co-operation; it cannot be through litigation.

“With that in mind, I think getting together some form of co-operative or trust that takes over undeveloped land on Grand Bahama would be a really constructive way forward, and having it managed by completely new people as well as the rest of Grand Bahama.”

The majority of that undeveloped land, close to 70,000 acres, is held by the Grand Bahama Development Company (DevCO), whose ownership is split 50/50 between Hutchison and the GBPA’s Port Group Ltd affiliate. It is highly unlikely they would simply hand over their undeveloped land holdings to the management-style entity proposed by Mr Crane.

He, however, said the Haywards and St Georges would still be able to participate in his suggested structure. “They’d have a much better chance of getting a return on their assets than under the current structure,” Mr Crane said. “What has happened, to me, is this move [by the Government] has made changing the ownership of the land just almost impossible.

“The only thing of real value on Grand Bahama is the undeveloped land. Not only has the Port failed to develop it, but Hutchison, the other major landowner, has not done anything for whatever reason. I don’t know. It’s not helping the community’s jobs and employment grow. It needs to be unlocked...

“It’s tough to work out what the Port Authority wants. It’s even tougher to work out what Hutchison want to do. They’ve abandoned Grand Bahama in essence apart from the Container Port and harbour. They walked away from the airport, they walked away from the hotel. That didn’t sit easy with the Government and it didn’t sit well, I suspect, with me.”

Mr Crane said the Government’s concerns over incurring a deficit in not just the Port area, but also spending more than it earns in taxes from East End and West End, could be solved by giving his proposed management structure administrative authority and responsibility for providing public services across the whole of Grand Bahama.

“I’m advocating that this new entity, whatever it is, should be structured so Bahamians can invest in it and it’s not an outside entity all the time,” he added. “It’s part of the community with a Board of Directors representative of the Government, community and international parties involved with people contributing investment to its success.”

Mr Crane said he believed the Government is wise enough not to attempt, or be seen attempting, a forced sale or nationalisation of the GBPA as that would “set a precedent that will terrify other major investors in the future”. He added: “I don’t think that’s their first desire.”