Fairmont Southampton conundrum: trust but verify
I am supportive of the redevelopment of the Fairmont Southampton hotel property. I am very aware of the desperate economic situation in which Bermuda finds itself, and that so many Bermudians are in need of these hospitality jobs to support themselves and their families. While the hospitality sector may not be the economic revenue producer that international business is, it most certainly is a valuable part of our economy for jobs — and the Fairmont Southampton is a huge player in that sector.
I do have concerns regarding the terms of the new 2023 special development order, which I list below:
1, The early negotiating history between the Government and Gencom regarding this proposed redevelopment has had more than its share of controversy, not the least of which was the resignation in February 2022 of our former finance minister, Curtis Dickinson, over the proposed terms for this project. His concerns included: the delay by Gencom in fulfilment of its legal obligation to pay Fairmont employees who were made redundant; the proposed extended time period — and fiscal ramifications for government — of the tax concessions to the hoteliers to last beyond ten years; the inherent risks associated with government financial guarantees; and the lack of clarity by Gencom regarding its fully funded capital structure for the project. Just by itself, the former finance minister’s resignation suggests extreme reservation about the deal structure and the financial exposure to the Government, which by extension, means the people of Bermuda. What, if anything, has materially changed since that time in the contract terms, which allays these concerns? If the developers fail to complete the project as per the SDO, what is the Government’s liability and what is its recourse? Trust but verify.
2, From the recent pictures circulated to the public, the amount of additional development that is now being proposed around the hotel grounds is visually shocking and appears to overtake the hotel itself, with the addition of 261 units comprising many buildings, some six storeys high, which I strenuously object to. I am supportive of the 2009 approved SDO, which allowed for 130 units on the surrounding hotel land. I am aware that final 2023 designs have not been released to the public and therefore I can make comments on only those rough drawn illustrations available to me.
3, We have heard that Gencom says the hotel itself was only “breaking even” and it must expand the development, with the addition of 261 units built around the hotel property — twice the number approved in the 2009 SDO — in order to make the development viable. We have also been promised that the hotel renovations would be completed first before starting the surrounding condos. I would like to know why our government, in the interest of transparency, has not provided the public with the data supporting the contention that the hotel, by itself, is not financially viable? Trust but verify.
4, In the interests of government best practices and due diligence, I would like to know whether the terms of this project/SDO have been reviewed by an independent body to determine if it is in the best interests of Bermuda. If this has been done, why has this not been shared with the public? If the Government has not sought an independent review of the contract terms, I ask, why not? Trust but verify.
5, Why should the public feel confident about going forward with this massive project, when Gencom did not live up to its legal, financial obligation with regard to employee redundancy payments, as per the Bermuda Employment Act of 2000? Those payments totalled almost $11 million, which the Government had to then loan to employees until such time that Gencom chose/was able to pay back the funds. So, going forward, what makes this business “partner” trustworthy in the execution of one of the largest development projects Bermuda has ever seen, with a partnership that could last up to 20 years? Trust but verify.
We have been told objections could be made to the Department of Planning with a deadline of May 3, after which the application would be then presented to the Development Applications Board for review, before being passed on to the Minister of Home Affairs for consideration. Recent legislation amendments passed in 2021 now allow the minister to approve or reject applications before they move to Parliament. So it is clear to me that this is a done deal — and I think most know that!
In closing, I will say that from the public’s perspective, Gencom looks to be getting a very lucrative deal — congratulations on their “art of the deal” — and Bermuda seems to have bent over backwards to accommodate it. You should all know that Gencom, at the minimum, is about to receive a government loan/financial guarantee of $75 million, up to 15 years worth of tax concessions and an approval for double the original approved number of holiday/rental units. And what is Bermuda getting? A threat: “Take the deal, or Gencom walks away”.
The former finance minister, with 30 years of investment banking experience, should have been sitting at the negotiating table going to bat for us. Instead, what we got was a broker who seemed more like a representative for Gencom than one for Bermuda.
Enjoy the attached aerial shot of the Fairmont Southampton land as it is now because soon it will be just a memory.
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