Buyers for stalled Caroline Bay in the pipeline
Potential buyers have been lined up for the stalled Caroline Bay resort complex, the finance minister revealed yesterday.
Curtis Dickinson added Gencom, the owners of the shuttered Fairmont Southampton Hotel, were still trying to raise money for the 18-month planned refurbishment of the resort, which closed its doors last October.
Mr Dickinson told The Royal Gazette said bids for Caroline Bay to the development’s liquidators were in the pipeline “if not this week, then early next week”.
Work at the site at Morgan’s Point in Southampton ground to a halt in 2018 after the developers’ ran out of financing.
The Government was left on the hook for a $165 million guarantee, which Mr Dickinson to raise the debt ceiling by $200 million in September 2019 to buy the project’s debt.
Mr Dickinson said the purchase of the debt “gave us more rights than exercising the guarantees”, as well as leaving the Government with a claim on much of Caroline Bay’s assets.
But he warned that while the liquidators, EY, had prospective buyers, the offers would have to be “sufficient to cover our claim”.
The minister admitted the lack of hotel beds after the closure of the Fairmont, Bermuda’s biggest resort, had “potential to have a serious impact on our revenue”.
He added: “We have fewer beds, but that problem does not manifest itself in a real way because there aren’t people, because planes aren’t coming in.”
Mr Dickinson said the shortage of hotel beds also helped to justify the $10 million government guarantee to the Bermudiana Beach Resort in Warwick.
He defended the decision, despite the cost of the Caroline Bay guarantee.
Mr Dickinson said: “There was a point when there was a view that guarantees don’t get called.
“I’ve never subscribed to that view. We have the classic example of Morgan’s Point.
“Bermudiana Beach Resort represents something very different. One, it is a substantially completed, constructed project.”
He added: “The guarantee helps the development to secure capital at much more attractive prices.
“That wasn’t the case with Morgan’s Point, where the fundamental premise was the Government guarantee was the reason why the investors participated in the first place.
“There’s also a guarantee with the St Regis in St George’s which the former government put in place, and I supported that.
“That was a fully financed project as opposed to one that was speculative on its financing, like Morgan’s Point.”
Mr Dickinson said the decision in the Senate to block Government legislation designed to set up a legal cannabis industry did not affect this year’s Budget.
He added cannabis had not factored into the calculations for 2021-22.
Mr Dickinson said: “Had it passed, it would have been incremental revenue.”
He said he was confident that the Government could stick to the Budget’s tight spending plan and warned of the “severe potential consequences” of more borrowing.
Mr Dickinson added: “The ministries are “clear on what their spending envelopes are.”
The Budget came under fire from the One Bermuda Alliance after it was revealed last Friday.
Cole Simons, the Leader of the Opposition, criticised its “silence” on the Government’s $1.47 billion in pension shortfalls.
But Mr Dickinson highlighted that the pensions problem was “decades old”.
He said he had retained American management consultants McKinsey & Company, which has reviewed the problem for the past five months, with a view to “eliciting views on how we solve the problem”.
The shortfall includes the Public Service Superannuation Fund, the Contributory Pensions Fund, and the Ministers and Members of the Legislature Fund.
Mr Dickinson said: “It has been this Minister of Finance that has taken this bold step to address this problem that has spanned more than this administration.
Mr Simons also criticised the lack of a plan to collect $100 million in back taxes.
Mr Dickinson said some of the old debts might have to be written off and others in the red might be unable to afford them.
He added: “I’m more interested in not introducing new tax but collecting ones already on the books.
“But we can’t send the tax commissioner to a gunfight with a bow and arrow.
“The office has to have the tools, the technology, to do this, and they need the enforcement powers to do their job properly.”
He added that the Office of the Tax Commissioner had hired more people for collections, with outside companies assisting with the backlog.
Mr Dickinson said: “There is bigger work around ensuring that we have an appropriately staffed compliance or enforcement unit. That needs to be joined up with other parts of Government.”
Mr Dickinson added mention of the Internal Revenue Service “elicits a certain reaction” in the United States.
But he added: “We’re not trying to create an environment of fear, but taxes are how the Government funds itself to provide for its citizens.”
Mr Dickinson said construction projects were in the works as part of an economic stimulus plan.
He warned that financing them through the Bermuda Infrastructure Fund would entail using “expensive money”.
The nearly $100 million private equity fund was created by Bermudian-based international insurers in 2018.
But Mr Dickinson said its expected return on investments set a high bar.
He said: “The difficulty has been finding projects that generate a return sufficient to meet the investors’ minimum return criteria.”
Mr Dickinson added he expected to see legislation for family offices, which manage the wealth of the super-rich, to be brought to the House of Assembly later this year.