Tuesday, February 16, 2010Bahamas Changes Strategy

NEIL HARTNELL Tribune Business Editor Government 'moving nicely' on $1.8bn project stake exit

The Government's plans to exit its 50 per cent equity interest in a $1.8 billion Bahamas-based investment project could "move ahead rapidly" once it and its developer partner "mutually agree" recommended changes to their agreement, Tribune Business has learned.

Vincent Vanderpool-Wallace, minister of tourism and aviation, confirmed to this newspaper that in return for handing back its equity stake in Mayaguana Island Developers Ltd to its private sector partner, the I-Group, the Boston-based company would return some 5,000 acres of land on that island to the Government.

The minister explained that such arrangements were part of the Ingraham administration's strategy to avoid conveying or leasing large tracts of Crown/Treasury land to developers, especially in the Family Islands, for mega mixed-use resort projects.

The global credit crunch, and subsequent deep global recession, left the Bahamas littered with resort investment projects that either stalled or never got started, potentially tying up huge tracts of valuable real estate and, in some cases, scarring the landscape and environment with half-finished marina excavations, for example.

Mr Vanderpool-Wallace told Tribune Business it was "a very bad idea" to allow developers to acquire huge real estate parcels from the get-go, explaining that the Ingraham administration favoured a 'phased approach' where investors obtained enough land to facilitate the initial development and then acquired more as their expansion plans warranted.

Confirming that the Government had seen enough to indicate the I-Group, owned by the wealthy Roy family, was a bona fide investor with the wherewithal to carry out its stated plans, Mr Vanderpool-Wallace said negotiations between the two parties over a new agreement for the Mayaguana project were "moving along nicely".

"We met with their principals a few days ago," the minister said, "just to go over the final bits and pieces, and we're now at a point where we could move ahead rapidly provided the changes agreed recently are mutually agreed."

Although declining to confirm details of the Government's discussions with the I-Group, Mr Vanderpool-Wallace agreed that Tribune Business's description of the talks being centred around a 'land-for-equity' swap was "vaguely correct".

"It's in the right neighbourhood," he added. "There are a number of items that we have been discussing." The former Hotel Corporation held the Government's 50 per cent stake in the Mayaguana project, and in return for gaining 100 per cent ownership and control, the I-Group will reduce its landholdings by around 50 per cent - from almost 10,000 acres, as per the original Heads of Agreement signed under the former Christie administration, to 5,000 acres.

Praising the I-Group for having "made some significant improvements" to Mayaguana via the project, Mr Vanderpool-Wallace said: "That's why we think we're dealing with someone who has the capability to do what needs to be done."

The Government was currently in the process of "verifying" the I-Group's total investment and spend on the Mayaguana project, Mr Vanderpool-Wallace telling Tribune Business that relinquishing the 50 per cent stake would allow the Ingraham administration to focus on its key roles of "oversight and regulation".

The initial Mayaguana project had contemplated two, 200-room hotels, 2,194 residential units, golf courses, 25-unit boutique hotel, marinas and luxury villas.

Meanwhile, Mr Vanderpool-Wallace articulated the Government's policy of not allowing developers to purchase huge chunks of Bahamian real estate before they had proven their capabilities and shown they had the wherewithal to execute their development plans.

He said it was a "very bad idea" to allow investors to acquire major real estate parcels prior to proving themselves, adding: "We have large examples around the Bahamas where that has happened, and we don't wish to head in that direction. We have seen the results of not following that in the past."

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