'Snake's' Resort Project, Failing?
A leading Bahamian businessman yesterday said the resort project he was leading had "totally abandoned any attempt to sell real estate" to wealthy overseas buyers due to the worsening global credit/liquidity crunch, find warned that many Bahamas-based resort projects would be placed "in a stationary mode".
Franklyn Wilson, the Arawak Homes and Sunshine Group chairman, said that while he and fellow investors in Eleuthera's Cotton Bay mixed-use resort project were not burdened by debt repayments, the current economic climate simply made it imprudent to solicit real estate buyers.
"The fortunate thing for us is that we always stayed away from debt, and do not owe any bank any money. There is no debt and interest payments ticking on us," Mr Wilson told Tribune Business.
"We have totally abandoned any attempt to sell real estate, and have not spent any money on advertising and promotions. Who's listening?"
Mr Wilson said he and his fellow investors had to date invested "in the vicinity of $40 million in cash" into Cotton Bay, and construction work was "more than halfway at the hotel site".
"We are not totally on hold, because to do so means we would run the risk of vandalism," Mr Wilson explained. "There is a skeleton crew there and some security. Some activity is going on, but at a minimal pace. These circumstances are very challenging and problematic for the country."
With former blue-chip Wall Street investment bank Lehman Brothers placed into Chapter 11 bankruptcy earlier this week, top insurer American International Group (AIG) rescued by an $85 billion US taxpayer bailout, Morgan Stanley said to be desperately seeking a merger partner and the credit markets tighter than they have ever been, accessing debt financing at all- never mind at an acceptable rate of interest - is as tough as it has ever been.
Apart from the difficulty second home buyers will have in accessing mortgages to purchase Bahamian real estate, mixed use resort developers who have targeted this nation will be experiencing the same problems.
For instance, the Lehman Brothers' collapse is almost bound to have an impact on the Ritz-Carlton Rose Island project; despite assurances from the main developer, the Miami-based Gencom Group, that the development will continue to move forward.
Lehman Brothers' private equity arm, apart from having a 25 per cent equity stake in the project, is also understood to be the senior secured debt lender, with a debenture secured on land on Rose Island.
With all new funding from Lehman Brothers now dried up, a key issue going forward will be the identity of whoever acquires the bank's equity stake and debt, and their attitude to the Rose Island project. Will they will be willing to finance it, and on the same terms as Lehman, or will they look to sell the equity interest.
Meanwhile, Mr Wilson told Tribune Business: "Even before this latest round of turbulence, it has become very challenging to get any financial institution to talk about financing mixed-use developments.
"Yesterday, I spoke with an investment banker from New York, and his take on it was : 'The market's dead. Banks aren't even lending to banks.' The idea of lending money to a Caribbean real estate development is very difficult."
Mr Wilson said the investment banker advised him to look to Russia as a potential source of investor financing, while the likes of Baha Mar were eyeing China.
"The fact of the matter is that all these projects in the Bahamas that we've talked about, and are at various stages of completion, there's a high probability they will go into stationary mode," Mr Wilson said. "This is not looking very good."
While he had his own ideas as to how the economic blow for the Bahamas could be cushioned, Mr Wilson said he wanted to give the Prime Minister a chance to layout his and the Government's plans.
However, he criticised the FNM's 2007 election campaign platform and rhetoric about the former PLP government giving away too much real estate to foreign developers and buyers, given that the market had completely dried up.
"It shows how unwise and senseless the rhetoric of the last general election campaign was," Mr Wilson said.
However, there was better news for him on the Freeport Holdings (FOCOL) front, of which Mr Wilson is the largest shareholder.
He told Tribune Business that another $1.5 million preference shares had been placed with investors, taking the offering to "close to $14 million out of $15 million" being placed.
Source: The Tribune