By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Grand Lucayan’s chairman is “moving on to November 15”, the targeted closing date for the hotel’s $100m sale, although he was tight-lipped on whether a binding sales contract has been signed and a deposit paid.
Julian Russell told Tribune Business he was “bound” by a confidentiality agreement, and could disclose few to no details on the status of negotiations with Electra America Hospitality Group, when this newspaper asked whether the potential buyer had paid the $5m deposit towards the purchase price as set out in the two sides’ May Memorandum of Understanding (MoU).
Also asked whether a sales agreement has now been signed, he replied: “I’m still bound by confidentiality so that’s why I really can’t say anything. We we will be coming out with a future statement. We’re going to move on to November 15.”
That is the date, announced in Lucayan Renewal Holdings’ Friday press statement, when the final closing of the resort’s sale to Electra America is supposed to be sealed. The press release said negotiations “remain on track” and are “progressing towards closure” although few details were provided.
“The Board of Lucayan Renewal Holdings (LRHL) advises that negotiations towards a successful deal on the Grand Lucayan resort continue to progress satisfactorily,” it said. “It was announced in the first week of August in a joint statement with Electra America Hospitality Group that the due diligence period was extended by 45 days to September 15. By virtue of this, the final closing date was also extended to November 15, 2022.....
“We anticipate that the sales process will be completed consistent with our revised timelines. The Board of Lucayan Renewal Holdings remains committed to ensuring that a credible plan and shared vision for the resort is realised - a plan that will provide jobs, entrepreneurial opportunities and strengthen Grand Bahama’s economy.
“We remain on track for a successful purchase and signing of a Heads of Agreement in the best interest of the people of Grand Bahama. There are matters connected to the transaction that are still being negotiated. We look forward to briefing the public as soon as negotiations are concluded.”
Little mention was made of the latest seven-day extension to the due diligence period, which came to an end last Thursday, and was granted so that Electra America could assess “outstanding matters” related to the sale transaction. The only reference to it by the Grand Lucayan Board was to say that the seven days did not impact the anticipated November 15 closing.
Given that the sales process is “on track” and talks with Electra America “continue to progress satisfactorily”, it is unclear why a further seven-day due diligence period was granted or what it solved. In the absence of further details, there is growing unease in Freeport and elsewhere as to whether the $100m sale - and promised $300m redevelopment - are on course to close and ultimately take place.
Mr Russell said he was aware of the concerns, but declined to respond when they were raised by Tribune Business. “We’re hearing the same things. No, no. I’m going to stick with the press release,” he added. However, one sceptic, speaking on condition of anonymity, questioned why the Government would let negotiations “drag out” for a further two months before exploring alternatives for the Grand Lucayan.
“Let’s birth the baby and, if it’s stillborn, let’s move on,” they said. “They’re trying to avoid the bad news. The question is do they have a deposit or not. That’s it. If no deposit has been placed, there’s no deal, agreement or anything like that. I tell people that deposits are effectively the signal as to whether you have a ready, willing and capable buyer. It tells you they are able to pay, although they might not close. If you don’t have a deposit, you don’t have a sales agreement.”
However, Magnus Alnebeck, general manager of the nearby Pelican Bay resort, told Tribune Business the release at least showed the two sides are negotiating. Noting that two of the three Grand Lucayan properties have been closed for almost six years since Memories pulled out in Hurricane Matthew’s wake, he branded buying the resort as akin to acquiring “a used car that has not been running for many years and you don’t know what you’re going to get”.
“It’s a hotel that’s been more or less closed for six years, so it’s not an easy sell,” Mr Alnebeck said, “and then added to that is the complication of the airport. There are a lot of variables in the deal. At the same time, we have a world that’s a bit strange and not the most stable macroeconomic environment. It’s just hope for the best. It’s a complicated one.
“This is a destination that is not really functioning, and this [the Grand Lucayan] is the heart of the destination. My view has always been that I don’t really care how much money they get for that hotel; the $1bn lost because it has been closed for six years is far greater than any selling price. Leave it to someone who knows what they are doing and get the deal done.
“Buying it is one thing, and figuring out how much to spend on it, and where to spend it, it’s complicated. It’s buying a used car that has not been running for many years, and it’s difficult to know what you are going to get when you start up the engine. It’s a good sign to know they are still talking to each other.”
Mr Alnebeck suggested the two sides might have released “too much already” on the talks, as this only served to excite the public either way. However, Michael Scott, the former Lucayan Renewal Holdings chairman, urged persons to “read between the lines” of the Lucayan Renewal Holdings statement, which he argued was designed to play for time and avoid having to release negative news.
Reiterating his belief that the Grand Lucayan sale and redevelopment of Grand Bahama International Airport are inextricably linked, and that no investor will spend the $300m that Electra is proposing without “a pathway to return on that investment” as provided by airlift through the airport, Mr Scott said: “It’s papering the file, and trying to head off any public criticism and concerns that people like me and the Opposition will make.
“It’s a public relations waffle. They don’t give any concrete details as to what progress is being made, what are the outstanding issues. There’s no substance behind it. It’s a PR piece. There’s no meat on the bone.”
Besides the Grand Lucayan Board and Electra America closing the hotel’s sale, the purchaser will also have to negotiate a Heads of Agreement for the project with the Government. Besides that document, which functions as the master agreement and sets out the broad terms and conditions of their relationship, Electra America also has to obtain the necessary planning/construction approvals and seal a Hotels Encouragement Act deal for its tax breaks/incentives.
Electra America’s plans involve three resort properties. A four to five-star branded luxury lifestyle hotel, featuring 198 rooms and 24 villas and targeted at corporate and leisure business; a four-star convention hotel with 535 rooms, featuring an amphitheatre and convention centre; and a 257-room condo-hotel style family resort with suites that are double the size of the Grand Lucayan’s existing rooms.