The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Resorts World Bimini’s financial performance has “never been close” to budget projections in 15 years, its minority owner is complaining, as the property suffers under an annual $57m debt servicing burden.

The financial plight of Bimini’s major hotel was the focus of Board discussions on March 12, 2024, as representatives of RAV Bahamas, the vehicle created by Miami-based developer Gerardo Capo, demanded to know whether Robert DeSalvio, Genting Americas’ president, had “ever encountered these kinds of financial numbers” during his 40-year career in the hotel industry. Mr DeSalvio stayed silent.

The Board meeting minutes, filed with the south Florida federal court to support RAV Bahamas’ claim for $600m in damages against its Genting partner, also reveal plans to terminate Hilton as the brand/flag partner for the 305-room resort and the minority owner’s suspicions that the Asian conglomerate is preparing to sell and exit the property.

Genting, in a statement to the Malaysian stock exchange that appeared to have been forced by this newspaper’s revelation of its Bahamian legal battle, earlier this week slammed RAV Bahamas’ lawsuit as “baseless and totally without merit” while pledging that it will “vigorously defend” itself against allegations that it perpetrated a “massive and co-ordinated fraud” on its minority partner.

The document trail, though, reveals that the two sides’ relationship has been steadily deteriorating for some years prior to the recent spectacular breakdown that culminated in the Florida lawsuit. An “emergency shareholder” meeting called in March 2020, immediately prior to the COVID pandemic, saw RAV Bahamas blame Genting for multiple “one-star” guest reviews that had caused real estate sales to totally dry up.

Similar claims had earlier been aired at a Board meeting for Resorts World Bimini’s immediate holding company, BB Entertainment, that very same day - March 3. “There was a discussion about the amount of negative online reviews of the hotel and the condition of the property,” the meeting minutes state. “It was commented that the reviews from guests online are almost exclusively negative.

“RAV Board members presented a collection of bad reviews pulled from travel websites such as Yelp, Trip Advisor and Travelocity. The Board then reviewed a substantial number of the negative reviews. It was commented that much of the property has not been properly maintained and had fallen into disrepair.

“RAV Board members then presented a large presentation with pictures taken that past week showing the neglected and abandoned parts of the property, highlighting the property’s poor condition. It was agreed that the hotel, the property and the amenities need to be managed and maintained in a manner competitive with other resorts.”

The same concerns were then aired more vigorously just one hour later at the “emergency shareholder meeting”, featuring both Genting Americas and RAV Bahamas officials, which appears to have been called in an ultimately failed bid to resolve the two sides’ differences.

Alejandro Capo, RAV Bahamas’ chairman and Gerardo’s son, presented what was described as a “package that contained over 200 reviews from homeowners that are almost all negative. There are one-star reviews of the service and the food, and reviews saying the property and the client engagement being terrible, customers saying they’ll never go back etc”.

“When RAV takes its real estate clients to the resort to see it, the clients see that the property is in disrepair and Fisherman’s Village is abandoned and in disrepair,” he said. “RAV’s real estate clients spend a substantial amount of money on a second home in Bimini. They want and expect a great experience. However, the current experience they are getting is not good. That results in damages to RAV’s core real estate business.”

Asserting that RAV Bahamas, as the 22 percent minority owner, “can’t sit by and watch” Genting and its management affiliates “run the resort into the ground”, Alejandro Capo added: “We are probably spending nearly $100,000, or more, on equipment that we are replacing because it wasn’t managed and maintained properly. 

“And we are spending money on repairs because [Genting’s management firm] allowed the property to fall into disrepair.” Alejandro Capo, according to the meeting minutes, alleged that improvements only occurred after he brought a senior Genting executive, referred to as KJ, to the island to see conditions at Resorts World Bimini.

“We should not have to drag Genting upper management to Bimini to point these things out before they are maintained. They should always be properly maintained and cared for under the resort management agreement,” Alejandro Capo argued

This prompted Missy Lawrence, Resorts World Bimini’s president, to hit back by asserting that RAV Bahamas was equally to blame for the state of the resort and conditions encountered by some 300 homeowners. “This isn’t only Resorts World’s doing; it’s yours, too,” she blasted.

However, Alejandro Capo was unwilling to let the matter rest. In one of the meeting’s final remarks, he asserted: “The management of the resort has been awful. We need to work together to make this place make money. RAV’s primary revenue source is real estate sales, and if Resorts World does not do its job, RAV can’t sell real estate. You have affected my core business to the point that I have no sales.

“What you do materially affects what I do. Moving forward, I need to have guaranteed good service at the resort and for our prospective real estate clients to protect BB Entertainment’s image, and to ensure RAV can sell real estate.”

Rafael Reyes, RAV Bahamas’ president and Gerardo Capo’s son-in-law, added: “The operation of the resort needs to be better all around. People buy based off of reviews, so we can’t afford to have negative reviews or at least try to limit them to a great extent.” Alejandro Capo added: “Bad reviews affect our bottom line.”

It appears, though, that “the emergency meeting” resolved little with tensions between Resorts World Bimini’s two owners continuing to simmer and fester through the COVID-19 pandemic. The minutes for a January 27, 2022, Board meeting reveal Mr Reyes opened with: “The purpose of this meeting is to emphasize that we need to have transparency and a good relationship with our partners.”

Moving on to the March 12, 2024, Board meeting, Alejandro Capo complained that Resorts World’s sales, general and administrative expenses (SG&A) were “extremely high for a 300-room hotel”. He called for a “full breakdown” of salaries and benefits, and added: “This executive team has been here for roughly four years, and the hotel has continued to lose money - less money than in prior years, but still lose money.”

Turning to Mr DeSalvio, as Genting Americas president, Alejandro Capo then asked: “Bob, have you ever encountered these kinds of financial numbers in your 40-year history in the industry?” The meeting minutes record Mr DeSalvio as giving no reply.

However, Shane Pomeroy, Resorts World Bimini’s chief financial officer, replied: “The largest components of the SG&A expense line item are insurance premiums of $2.8m; transportation costs of $2.4m; HOA (homeowners association) fees of $1.6m, freight costs of $1.1m, Hilton royalty fees of $1m; and bank fees of $0.8m totalling nearly $10m.”

And, in response to a question from Mr Reyes, he added: “Debt service is roughly $57m a year.” Alejandro Capo then challenged: “How realistic is the 2024 budget, as these budgets have rarely, if ever, accurately projected the true financial picture?

“In fact, RAV has been through approximately 15 of  these projected financial presentations, and the year-end results have never been close to how the financials were presented.” This saw Mr Pomeroy reply: “We are confident in the numbers.”

As for resort operations, Mr DeSalvio said Resorts World planned to either terminate the flag agreement with Hilton or allow it to end. “Resorts World brand does not wish to continue with the Hilton brand,” he confirmed. “The company believes it is the right move for the property to terminate the franchise agreement or let it expire.”

The Genting representatives on Resorts World’s Board, though, did not emphatically deny that they were planning to sell Bimini’s ‘anchor’ property when challenged by RAV Bahamas. “Has Genting management attempted to sell the property? Is the hotel for sale,” asked Alejandro Capo.

To which Mr DeSalvio replied: “I’m not aware of any listing agreement to sell the property, but I will check with other Genting executives and respond back to the Board.” Alejandro Capo added: “RAV formally requests disclosure and to be involved in any meeting or communication whatsoever related to the sale of the property. Any discussions, formal or informal, involving the sale of the hotel should include RAV as a shareholder.”

RAV Bahamas is essentially accusing Genting of using its 78 percent majority ownership, plus Board and management control, to conceal how it funnelled hundreds of millions of dollars in liabilities incurred elsewhere in its global empire on to the Bimini resort’s books.

Complaining that this has undermined the value of its investment, while also “depriving” it of expected profits, RAV Bahamas claimed that Genting “has deliberately kneecapped” its attempts to gain a true understanding of Resorts World Bimini’s true financial position by denying “full access” to the property’s financial records and its calls for an independent audit.