The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The decision to abandon the Central Bank’s new Royal Victoria Gardens headquarters has exposed the banking regulator to a potential $3m-plus claim from one of the project vendors.

The Central Bank’s 2023 annual report and financial statements, released yesterday, disclose it could suffer a total $12m hit over the project’s cancellation if this claim has to be paid in full in addition to the $9m impairment charge already taken.

“In March 2023, the Board of Directors approved the termination of the new premises project and the transfer of the property ownership back to the Government,” the Central Bank’s financials revealed in note four, which deals with property, plant and equipment.

“As a result, the bank has recognised an impairment loss associated with this project totalling $243,068 for the year.” When added to the previous year’s $8.92m charge, the regulator’s total impairment loss stands at $9.163m for the two-year period ended on December 31, 2023. “

“The bank will explore alternative arrangements to meet its long-term accommodation needs,” the Central Bank’s financial statements said. “During the year, a vendor filed a legal claim in excess of $3m against the bank for wrongful termination of the contract. The bank’s external legal counsel are in the process of reviewing the validity of the claim.”

John Rolle, the Central Bank’s governor, declined to identify the vendor/contractor involved or the nature of the contract after being contacted by Tribune Business. However, he said the claim had not turned into “an active lawsuit” against the regulator and explained that it was part of “the process of unwinding” the Royal Victoria Gardens project and multiple contracts that had been put in place.

“I think we’re just going through the process of unwinding the arrangements and that would be one of our relationships on the project,” Mr Rolle explained. “There is no active lawsuit surrounding the termination of the Royal Victoria project. But the Central Bank and certain contractors have to agree on the final sums due under the termination of the project.

“That’s a part of the process of what happens when you are unwinding a contract. You would have to come to an agreement as to exactly what is the contract and separate. There would not be a zero liability for the Central Bank but, to the extent it has not been concluded yet, a provision was put in the financial statements because ultimately it will be realised as a financial exposure.”

No full explanation has ever been provided for the decision to abandon the Royal Victoria Gardens headquarters project other than Michael Halkitis, minister of economic affairs, suggesting “the optics” of the project may not be the best so soon after COVID-19 and that other priorities should take precedence.

However, given the extent of the financial exposure already incurred, with $9m-plus of the Central Bank’s money effectively wasted and possibly further hits to come, questions are likely to be raised as to why the project did not proceed given how the regulator was already so deeply invested. And the funding source was the Central Bank, and not Bahamian taxpayers via the Government, meaning the former was taking all the risk.

Dr Hubert Minnis, the former prime minister under whose administration the Central Bank’s Royal Victoria Gardens project began, yesterday his belief that its cancellation was “a mistake” and had undermined the redevelopment of downtown Nassau.

“I think it was a big mistake to have cancelled that,” he told Tribune Business. “We are talking about the development of downtown Nassau and things to do. The cruise port is a good attraction, has a lot of things to do, especially at the weekend when the amphitheatre is enjoyed by the populace. You have the US embassy that is set to open, and then you had the Central Bank.

“Money was not an issue. It was coming from the Central Bank. They were ready to go. I think it’s a big mistake. The Government slowed down the process of the redevelopment of downtown. They’ve held back the downtown area in terms of developing attractions. Where the Central Bank is now we were looking to make it in an art museum.”

Work on the Central Bank headquarters project had begun in 2017. The winning architectural design was selected in 2018, and the land transferred to the Central Bank by the Government for just $10 in a 2019 deal that was executed in 2022.

Meanwhile, the Central Bank’s financial statements revealed that, since year-end 2023, the regulator has “signed contractual commitments” worth $65.655m related to the construction of its new “cash and data centre” that is now set to break ground next month in June 2024. The contracts involved are for the “main works” and “material handling and notes processing”.

This project has been in the works for five years as the necessary land was acquired back in 2020. “In 2020, the accumulated costs were transferred to land and work in progress in the amount of $2.211m and $268,708, respectively, upon conveyance of the land title,” the Central Bank’s 2023 financial statements disclosed yesterday.

“The bank anticipated that the initial phase of construction will commence near the end of 2021. However this was rescheduled for late 2022 and remains pending for mid-June 2024. As at December 31, 2023, the bank has outstanding contractual commitments on the cash and data centre project in the amount of $1.239m. The bank anticipates ground-breaking by June 30, 2024, with completion within 24 months.”

Tribune Business reported in early 2021 that the Central Bank was planning to invest $24m in the project, which is to be constructed in south-west New Providence off Frank Watson Highway between the Albany and South Ocean properties.

The planned facility is designed to separate the Central Bank’s cash centre and oversight of Bahamian dollar notes in circulation, and will also give it extra security and a second data centre for business continuity planning (BCP) purposes should disasters such as a major hurricane strike.

The facility, the Central Bank said then, will be designed to cope with currency demand that it forecasts will reach between 50m and 73m banknotes in circulation by 2037. It is targeting some 61m notes by that year.

“The construction budget for the project is $24m,” the Central Bank tender said. “The bank, in conjunction with the construction of the new Central Bank building at the Royal Victoria Gardens site, has determined that the separation of its cash centre operations from that primary site would meet a major deliverable as part of its strategic plan.

“Additionally, the building of proper security and logistical conveniences, and the co-locating the secondary data centre and business continuity planning (BCP) operations, would also aid in streamlining back-up operations.”

“The selected site for the Cash and Data Centre...... permits an appropriate level of perimeter security to be designed into the site’s overall footprint,” the Central Bank added.

“The area is a plot of undeveloped land located on Frank Watson Highway with proximity to the Lynden Pindling International Airport. The property is ideally located, providing easy accessibility from the airport and security due to the out of town location.”