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‘Putting circle in a triangle’: Why developments fail


Tribune Business Editor

A Bahamian environmental consultant yesterday argued that the main non-financial reason that major development projects fail is because their principals “try to put a circle into a triangle”.

Carlos Palacious, managing principal with BRON Ltd, told a webinar held to mark World Tourism Day that it was “fascinating” to understand why investment projects failed and understand the reasons why. Besides financing issues, he said the explanation often stemmed from the fact developers selected locations incompatible with their plans.

“Many, rather than financing issues, are because the developer was trying to put a circle in a triangle,” he said, “trying to put a beachfront development somewhere where there is no beach, which costs you so much money to just try and maintain that with coastal structures.

“We can engineer it, but at a certain point we just remind them that the opex - the operational expenditure - that it takes just to sustain this. Other developments, they’re building on the rough side of the island, let’s say, and they want to build a big marina. So to build that big marina, that may cost four to five times’ what it would be to select the other side. Maybe it’s a bit more sheltered, and doesn’t have coral reefs that need to be relocated and mangroves that have to be replanted.”

Pointing out that “site selection is everything” for developers, especially given The Bahamas fragile environment and ecosystems, Mr Palacious said raising a property to ensure adequate protection against flooding and storm surge can “cost you so much money” from having to excavate sufficient fill and transport it to the project site.

Also warning developers against taking short-cuts, he added: “There are many factors that we often find are not part of the early decision-making. We have found, as an example, there are times when developers may make budgetary cuts but, when it’s time for them to get an insurance policy for their project, they can’t qualify because they may have reduced the site by a foot or two but, in actuality, the insurer is going to require them to be up to a certain height to get the insurance policy.”

Mr Palacious added that for every one development project that succeeds there are another five that fail. However, he argued that tourism’s impact more than justifies its standing as the country’s leading industry and why The Bahamas has chosen to base its economic model on the industry.

“The trickle down impact from foreign investment, especially in the tourism sector, is phenomenal,” he said. “The global studies are all out there. I don’t think The Bahamas has to validate why tourism is our model. I think we have to continue to be progressive. What is the right model for the future of tourism in The Bahamas? The future of The Bahamas is to make the model for the future of tourism align with the future of The Bahamas.”

The BRON principal said this meant avoiding projects that are incompatible with an island’s scale and size, such as a mega resort on Crooked Island or Acklins. He added that The Bahamas needs to develop a National Airbnb programme to enable more Bahamians to become entrepreneurs and own a part of the tourism industry, thus growing and spreading wealth..

And Mr Palacious also said that domestic tourism, involving locals, Bahamian and expatriate second homeowners and seasonal residents, is vital to the success of “mid-range” projects typically valued in the $75m to $100m range. BRON, he added, usually works for developments valued between $50m and $500m.