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Grand Lucayan sales agreement reveals mounting costs

The government yesterday tabled in Parliament the resolution and purchase and sales agreement for its $65 million acquisition of the Grand Lucayan Resort in Freeport, detailing even more costs the government must bear for taking on the struggling property.

While Prime Minister Dr. Hubert Minnis was expected to deliver a communication explaining the government’s reasons for purchasing the hotel, debate on the resolution was put off until today to allow the opposition, which received the agreement yesterday morning, time to review the documents.

According to the resolution, which was tabled by Deputy Prime Minister and Minister of Finance Peter Turnquest, the purchase price does not include inventories in the resort, including, but not limited to, all food and beverage, inventory held for sale to resort guests in the ordinary course of business; engineering, and maintenance and housekeeping supplies, including soap and cleaning material, fuels, stationery and printing items.

The purchase price also does not include other supplies of all kinds whether used or unused, opened or unopened such as china, glass, silver and linens.

The document states that upon the completion date of the purchase, Hutchinson Lucaya Limited (HLL) and Bahama Reef Limited (the vendors) shall receive credit for the total value of the inventory.

The government will be responsible for any stamp duty associated with the sale of the property, including stamp duty payable on the conveyance and the mortgage, and any other taxes, as well as all recording fees, the document reads.

The stamp duty on the mortgage is $3.5 million.

The government will pay HLL and Bahama Reef Limited $1.5 million as a subsidy for operational losses while keeping the Lighthouse Pointe open during the completion of the purchase.

According to the document, the first installment of $1 million was to be paid on August 15.

The balance will be paid in six installments.

Including in the resolution is a promissory note for $1 million for the “balance of the subsidy or payment for the balance of the subsidy if the completion date is after 11th September, 2018”.

The sale was executed on September 11.

As part of the purchase, HLL and Bahama Reef Limited agreed to operate the Lighthouse Pointe hotel only in the ordinary and usual course as carried out prior to the agreement; discharge all liabilities of the business as and when they become due; and use its “reasonable endeavors” to preserve the goodwill of the business and existing relationships with customers and suppliers.

HLL and Bahama Reef Limited will also pay all outgoings on the property which are due and payable to the government, any ministry or board or agency during the period prior to the completion date; maintain a full force and effect all insurance policies with respect to the hotel; and make any claim under the insurance policies in respect of the property without delay.

The government has agreed to honor all reservations at the resort, including the rates at which those reservations were made, including wholesale bookings or group bookings on or prior to the “cut-off time for periods on or after the completion date”.

Additionally, the government will indemnify the former owners against all claims and liabilities arising from the reservation and contracts assigned to them for the period on or after the completion date, according to the documents.

It also notes that HLL and Bahama Reef Limited will indemnify the government against all and any losses which the government incurs arising in connection with any claim or demand by an employee for personal injury before the completion date.

The former owners will further indemnify the government from any trade union, staff association or other representative’s claim in connection with any breach by the former owners of any industrial agreement or failure by the HLL and Bahama Reef Limited to comply with any obligation, custom, practice or arrangement in relation to any employee before completion.

The government will be responsible for all employees following the completion date of the purchase.

According to the agreement, the government accepts the property, which includes more than 55 acres of land “as is”.

Any employment expenses occurring or accruing prior to the cut-off time shall be credited to the government against the purchase price at the completion date, the resolution notes.

Cost

As a lessor, the resort already collects $300,000 per month from the Government of The Bahamas for hotel rent supplement reef village.

It also collects $6,000 annually from Batelco, which has as GSM antenna on top of Breaker’s Cay.

As a landlord, the resort collects nearly $100,000: $62,689.92 annually from Hutchison Development (Bahamas) Limited for two retail buildings; $12,000 annually from Inlight Partners Ltd for a real estate office; $400 per month ($4,800 annually) from Minnis & Russell Company Limited for a retail store; and $13,200 annually from Mackey Media Limited for an office space.

According to the sale agreement and accompanying documents, the resort has more than $150,000 in service contracts with over $86,000 being paid per month in security contracts between two firms; Simmons Security & Investigations Limited ($84,000) and Candid Security Services ($2,666).

It costs the hotel another $52,000 for outsourced “casual labor”.

A closer look at the maintenance contracts for the hotel shows that landscaping maintenance services provided by ‘Sanitation Services’ cost the resort nearly $20,000 per month.

It pays nearly $6,000 per month in pest control and maintenance services.

The maintenance contract for the elevators held by Caribbean Elevator Company represents an expense of more than $4,200 per month.

Water treatment services cost the resort approximately $4,100 per month.

The resort has another 16 contracts ranging from technical support, accounting systems, retail and hospitality hardware and account management, among other operational services.

The documents show that the annual premium of its employment practices liability insurance with RoyalStar Assurance Ltd is nearly $23,000, while the annual premium for its combined insurance package with the same company for property damage is nearly $5,000.

Documentation related to salaries and wages at the resort was supposed to be submitted to the government after the close of the sale.

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