State of desperationIngraham: Bad idea for govt to buy Grand Lucayan | Former PM says govt failing to deliver for Grand Bahama
Former Prime Minister Hubert Ingraham thinks it would be an all around bad idea for the government of The Bahamas to buy the Grand Lucayan resort in Freeport.
“There are clearly better and more viable options for the government to pursue in relation to the Grand Lucayan hotel in Freeport, Grand Bahama,” Ingraham told National Review.
“I note that the prime minister referred to the Grand Lucayan as the heart of Freeport, Grand Bahama, and I patted myself on my shoulder and said, ‘Oh, you created the heart of Grand Bahama’. Of course, I didn’t create [any] heart of Grand Bahama, but the reality is that the Grand Lucayan hotel should be opened. It should not be opened by the government.
“The government has a variety of tools in its tool kit to ensure that it does not have to purchase that hotel and one thing it could do, to start with, it could jump on a plane and go to Hong Kong, and show respect to the owners of Hutchison Whampoa and speak to them directly. I did it. Christie did it. Minnis should do it also.”
Ingraham, of course, was referring to former Prime Minister Perry Christie and the current prime minister, Dr. Hubert Minnis, who said in Grand Bahama recently that the government is prepared to purchase the Grand Lucayan.
Minnis was talking to a group of Free National Movement (FNM) supporters at the time. He said people in Nassau may not understand how important the hotel is to Grand Bahama.
“They don’t understand that the Grand Lucayan is the heart of Grand Bahama,” Minnis said. “If the Grand [Lucayan] fails, it will have a domino effect on the Lucaya strip…so the Grand Lucayan is very important.”
But Ingraham does not believe the Minnis administration has explored all of its viable options in this matter.
“Go and see them,” he said, referencing Hutchison Whampoa. “Talk to them. See what other options we can explore. After all, they have vast interests in Grand Bahama. They own half of the development company land, they own half of the airport, they own the harbor, you name it.
“So there are many, many options that we can pursue in discussions with them that do not result in the government having to buy a hotel. We lost hundreds and hundreds of millions of dollars, squandered, in the hotel business and should never ever go back into it again, never ever.”
The former prime minister added, “[It is] strange that monies may be found to buy a hotel to save jobs when the government terminated nearly 1,000 persons employed on contract in June, ostensibly to avoid paying them the 15 percent gratuity they would have been entitled to had they stayed until July, but monies can be found to save a few hundred jobs in Grand Bahama. The persons (on government contracts) were terminated mostly without notice and left on the same day word came down.
“They were not permanent civil servants, but they were hired on contract and paid by the government, some for quite a few years. They were summarily terminated in June. The point is, they say they were not needed and government could not afford it. Fine. Now it could afford to buy the hotel to save jobs. Really?”
Ridding the government of the burden of hotel ownership was a key policy of the first Ingraham administration, which came to office in 1992.
It sold two hotels on the Cable Beach strip that were government-owned. The Ambassador Beach Hotel was purchased by John Issa and became SuperClubs Breezes. The Balmoral Beach Hotel was bought by Gordon ‘Butch’ Stewart and became Sandals.
Most of the three-piece hotel strip on Freeport’s Lucayan strip has been shut down since Hurricane Matthew in 2016. It resulted in several hundred people losing their jobs. There are fears that the 200-room Lighthouse Pointe, which remains open, will close within weeks.
Ingraham said Grand Lucayan should have been up for consideration when the extension of benefits under the Hawksbill Creek agreement were being negotiated.
“Under the Hawksbill Creek Agreement, some of the benefits expired, like for instance real property tax and business license, so in 1992-93 when they expired we negotiated with the Port Authority and there is a whole long list of benefits that The Bahamas got as a result of extending their agreement further until quite recently. The government has extended them again. I’d like to know what benefits they got because that hotel should have been in that deal. If that hotel was not in the deal it should have been put in the deal for the extension of the benefits of no payment of real property tax, business license fees, and so the government has many tools in its box it can go and sit down and talk to Hutchison about,” he said.
Ingraham responded to the matter after being contacted by National Review for his views, which he subsequently put on paper for us yesterday.
In that statement carried in full in today’s paper titled “Government should buy the Grand Bahama Port Authority instead of buying [Grand Lucayan]”, Ingraham noted that the exemptions in respect of real property tax and business license fees provided for under the Hawksbill Creek Agreement expired in 1990 and sometime between then and the general election in August 1992, the last Pindling-led government extended the provisions to take them to August 1993.
To stimulate investment interest in Freeport, the first FNM government caused the Freeport Grand Bahama Act of 1993 to be enacted. The act extended the life of the expiring real property and business license exemptions for an additional 22 years – that is, up to August 4, 2015, the former prime minister also noted.
As a requirement of this extension the Grand Bahama Port Authority was obligated to fulfill a number of infrastructure and other works. The extended exemptions in respect of real property tax and business license expired in 2015. These were extended once more by the Christie-led government for a one year period to May 2016.
Ingraham also pointed out that the Grand Bahama (Port Area) Investment Incentives Act of 2016 extended the tax concessions agreed in the Hawksbill Creek Agreement for a further 20 years.
He noted that the hotel sector in Grand Bahama had been in decline for some time before the 1992 election of the FNM to government and before the entry of Hutchison into the Freeport economy.
In keeping with the Hutchison’s development of a hotel division within its international holdings, the company ventured into the hotel sector in Freeport in the late 1990s. Hutchison purchased the government-owned hotels – Lucaya Beach and Holiday Inn.
The government also facilitated Hutchison’s purchase of the old Atlantic Beach Hotel, which was subsequently imploded. The Our Lucaya Hotel was constructed on the site. It is now called the Grand Lucayan resort, Ingraham further noted.
An additional government-owned property in Freeport, opposite the old Atlantic Beach Hotel, was sold to the Christiansen group which developed the Pelican Bay Hotel and Marina property.
Hutchison has invested heavily into its hotel properties in Grand Bahama, offering some of the best terms of employment in the sector including health insurance for its employees. Hutchison has kept the Grand Lucayan resort open notwithstanding sustaining heavy operational losses, Ingraham also highlighted in that statement.
Ingraham said the government’s focus ought to be on seeking to purchase the Grand Bahama Port Authority.
“The Port Authority needs new leadership. It needs new ownership. And, Freeport needs new and additional investment,” he said.
“The owners of the Port, even before the passing of Sir Jack Hayward, have from time to time indicated an interest in the sale of the company however satisfactory terms have not been reached.
“In light of the foregoing and considering the future of Grand Bahama, I am of the view that the government should not purchase the Grand Lucayan hotel; instead it should purchase the Port from the Hayward and St. George families and also acquire their families’ 50 percent ownership interest in the DevCo, the Harbour Company, the Airport Company and other related entities.
“Grand Bahama needs a reset, and the ownership of the Port by the government with some other financially capable strategic partner(s), including Bahamian investors, could be that reset. The ownership of the Port and 50 percent of the Port Group of Companies by the government (and its private sector partners) should establish a new entity heavily managed and directed by private experts.”
Ingraham suggested in his interview with us that the Minnis administration is feeling tremendously pressured to do something to fix Grand Bahama’s economy.
“I don’t think that they feel that it’s the best option,” he said, referencing the government’s planned purchase of the property.
“To be very candid, I think that they feel boxed in and they promised Grand Bahama lots of things and they can’t deliver. They have been unable to deliver, but I think it is also telling that they have been unable to persuade the private sector to buy the hotel or persuade Hutchison to stay.
“That speaks volumes itself but, you know, either the prime minister or his deputy, the minister of finance, and minister of tourism, who are fully empowered should be able to go to Hong Kong and sit down with Canning Fok, the head of Hutchison, and do a deal and the deal doesn’t mean the government will buy it.
“The government used to own 20 percent of the hotel rooms in The Bahamas and they are out of that business. Praise the Lord, hallelujah. We must never go back in that business again, hundreds and hundreds and hundreds of millions of dollars have been squandered and you have no idea how much it will cost you to go back in hotel ownership.
“I’m not talking about the $60 million, $70 million, $80 million that you have to find to buy it. That’s the easy part. It will take millions to run it, to upkeep it, to get people in it.”
Last week, Toronto-based real estate developer Paul Wynn, who had been in talks with Hutchison to purchase the property, announced that he was out of the deal. He estimated it would take between $110 million and $120 million to get Grand Lucayan open.
Last December, the government announced that Wynn had signed a letter of intent with Hutchison Whampoa for the Grand Lucayan. The next step was for the government to enter formal discussions with Wynn on a heads of agreement to detail the future development of the hotel strip.
“We expect this process to be completed within the next month to two months,” Minnis noted at the time.
“The government is very hopeful that this important formal step will lead to the full renovation, opening and redevelopment of the entire strip in the early part of 2018, helping to bring much needed economic growth and jobs to Grand Bahama, which will also help to boost the national economy.”
Many supporters of the government celebrated that announcement, but as the months dragged on, it became clear that there would be no deal with Wynn.
Ingraham believes the government is now being driven by desperation in respect of the Grand Lucayan matter.
“They were desperate to find an answer and that’s the nearest thing they can come up with it, but they should go and talk to Hutchison, talk to Hutchison,” the former prime minister repeated.
“Asians love to be respected. Hutchison is accustomed to talking to prime ministers in The Bahamas. They came here on my watch. I met them in Hong Kong. I met them in London. I met them here. Talk to them. Don’t send no junior minister to talk to any representative, go and see them.”
Ingraham suspects the Minnis administration will likely still forge ahead with a plan to buy Grand Lucayan.
“Now that I spoke, they will probably buy it,” he told National Review.
“If I had said buy, they probably would not have.”