• Multiple alarms over Baha Mar’s March 27 miss
• Yet CCA’s undermines itself with own evidence
• ‘Consistent failure’: Contractor off-target by year
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Sarkis Izmirlian received more than three months’ warning from his major resort partner that it would only begin accepting bookings from June 1, 2015, as the resort’s target opening was “not a viable option”.
Hyatt’s alarm-sounding letter is among a batch of previously undisclosed documents revealed by China Construction America (CCA) in its bid to prove that Baha Mar’s original developer had known for months - even years - that the revised March 27, 2015, opening deadline would be impossible to achieve.
However, some of the evidence the Chinese state-owned contractor is relying upon appears to torpedo its own case - and strengthen Mr Izmirlian’s $2.25bn fraud and breach of contract claim before the New York state courts - as it reveals CCA was not “achieving the revised targets” agreed by the parties in November 2014 as they sought to get the Cable Beach mega resort back on track.
In particular, a February 2, 2015, report by Martyn Bould, chairman of Rider, Levett, Bucknall (Caribbean), project monitor for the China Export-Import Bank, Baha Mar’s then-$2.45bn financier, said there had been “a consistent failure” by CCA to meet its schedule such that there was a “strong likelihood” that substantial construction completion of the resort’s core could be delayed by a full year.
And Baha Mar’s own December 2014 monthly construction progress report, written just one month after Mr Izmirlian agreed to release $54m to the Chinese contractor to resolve their payment dispute, discloses that CCA’s completion schedules were already “in direct contradiction” to the November Memorandum of Understanding (MoU) signed by the two parties.
“CCA do not appear to be abiding by their commitment as outlined in the November 17, 2014, MoU... although Baha Mar have honoured their part of the accord in the payment of funds to CCA in order to resolve the outstanding commercial disputes to CCA’s satisfaction,” Baha Mar’s report stated.
“In short it is Baha Mar’s opinion that there is little evidence of the paradigm shift in CCA’s overall performance that is required in order for CCA to up hold their commitment to achieve ‘substantial completion and to achieve operational start for paying guests in hotels including amenities by March27, 2015, as memorialised in the November 17, 2014, MoU.”
The Rider, Levett, Bucknall report, in particular, given that it was written for a financier that shares common ownership with CCA - the Beijing government - potentially serves to strengthen Mr Izmirlian’s case against Baha Mar’s contractor, and its failure to fulfill its primary obligation of completing the project on-budget and on-time.
However, the papers again raise questions as to why all bar seemingly Mr Izmirlian and his management team failed to realise the March 27, 2015, opening would not be hit given CCA’s reported failings to hit key construction milestones essential to obtaining a temporary occupancy certificate (TCO) that would allow Baha Mar to accept paying guests.
Hyatt’s letter, dated December 17, 2014, and written by Myles McGourty, its senior vice-president for Latin America and the Caribbean, made clear the resort brand’s belief that March 27, 2015, was not “an appropriate opening date” for the Grand Hyatt property.
“Based on everything we observe and note at the site, we believe that date is best estimated to be June 1, 2015,” he wrote. “This opening depends, of course, on the delivery and installation of all FF&E, (furniture, fixtures and equipment), all areas duly “handed over”and punched in a timely manner to allow for on-site training, receipt of a Certificate of Occupancy, all systems fully installed and the related appropriate training completed, as well as other completion items.
“Of course,Hyatt will continue to make every effort to work with Baha Mar to get the hotel open as soon as possible, but we cannot see the proposed date of March 27 as a viable option at this point. We also noted with concern your suggestion that the property will begin taking reservations in January 2015 for an opening of March 27,2015. Hyatt’s reservations system will not be taking reservations for bookings prior to June I, 2015 at this juncture.”
Calling for due caution, Mr McGourty added: “To fully achieve everyone’s expectations for the hotel, it is crucially important that the Grand Hyatt at Baha Mar open successfully. We believe this success will be dependent on ensuring that the hotel and other key components of the project are, in fact, ready to accept guests and that the hotel is able to deliver exceptional guest experiences from the outset.”
It has never been clear why senior Baha Mar management clung on so long to the belief they could hit the March 27, 2015, opening. An April 13, 2015, e-mail in which Tom Dunlap, Baha Mar’s then-president, describes CCA executive Tiger Wu as “commercial, cagey, and stubborn”, revealed he had “a low comfort level as to the ability to achieve a full occupancy by end of May” with March now firmly in the rear view mirror.
Noting that Mr Wu “won’t put on paper that they have two more months of work in his view”, Mr Dunlap shared with Mr Izmirlian a proposed letter he planned to share with staff, third-party operators and providers and the resort brands regarding the missed March 27, 2015, opening.
“It has been a whirlwind since we missed our much-awaited soft opening this past March 27. Like all the hurdles over Baha Mar’s life, it is filled with lessons to be learned, and learn we have,” Mr Dunlap wrote. “First, I want to say that the buck stops with me. I assume full responsibility for not recognising soon enough that we were not far enough along to be ready to open on March 27.
“It is my job to gather facts and make informed decisions. There were many smart individuals advising that we were not going to make it. I believe that I fell into the trap of seeing what would be, and not what was actually there. For this I apologise to all of you and to our guests whose plans were displaced.
“Baha Mar has been a dream for nearly a decade, of which half of that time has been spent building that dream. From foundations in the ground to concrete towers to a golf course to the colorful facades we see today. Inside and out, that dream evolved daily. Suffice to say, I was mesmerised by its beauty and the thought of it finally coming to fruition (or near fruition as was the case).”
However, Mr Bould’s report to the China Export-Import Bank and its agent, Citicorp, goes directly to why the March 27, 2015, opening was missed in its first line. “CCA do not appear to be achieving the revised targets that were agreed during meetings in Beijing on 17 and 18 November, 2014. This puts the agreed revised date of substantial completion of March 27, 2015, in jeopardy,” he wrote.
“Very limited information has been provided to Rider, Levett, Bucknall to allow it to understand and assess the basis of this new agreement, particularly what is excluded from the targeted date. From the limited information provided and from its direct observations, the project monitor considers progress remains slower than the current schedule/s and thus, without acceleration, completion is likely to be later than the dates in the current schedule/s.
“In the absence of further information, Rider, Levett, Bucknall remains of the view that the earliest realistic date for a partial soft opening to the public would be June 1, 2015, with the earliest full opening of all areas by August 2015,” Mr Bould continued.
“The introduction of additional direct Baha Mar contractors/resources to undertake final punch list rectification may improve upon this assessment, but we are still of the view that, based on CCA’s consistent failure to meet a current schedule, there is a strong likelihood of an even greater delay to the contract date, in the order of one year, to substantial completion of all core works.”
Baha Mar’s own report, meanwhile, contrasted the strong performance of Bahamian workers as compared to their Chinese counterparts. “Regardless of the veracity of the CCA claimed labor count (CCA currently claiming just under 2,600 Chinese workers onsite complemented by over 1,200 local and other expat workers), the fact remains that what Chinese labour is allocated to the project remain extremely unproductive due to the fact that they are inadequately supervised, badly organised and poorly motivated (evidenced by large swathes of the workforce actually sitting around during normal working hours and the extended break times),whereas the local labour managed by CCA sub-contractors is well organised, motivated and efficient.”
And, bizarrely, in seeking to prove its assertion that Mr Izmirlian and his team knew March 27, 2015, could not be met, CCA is relying on a letter Baha Mar’s original developer wrote to Yuan Xingyong, the China Export-Import Bank’s vice-president, in which he stated he had been “clear for years that CCA’s underperformance would lead to exactly the delays and quality issues the project is now experiencing”.