Government tightens grip on Caroline Bay
Insurance titan Brian Duperreault has failed to delay the Government's legal attempt to take control of the beleaguered Caroline Bay resort, The Royal Gazette can reveal.
Lawyers for AIG chief executive tried to convince the Supreme Court on Friday to hold off on putting the assets of George's Bay Limited — the development company behind Caroline Bay — into the hands of provisional liquidators.
However, a Ministry of Finance spokeswoman said last night: “After reading an affidavit filed by Mr Duperreault seeking a delay of the proceedings, the court decided that no delay was warranted and confirmed the appointment of the provisional liquidators.”
The spokeswoman also revealed that the Government balked at a proposal the developers put forward to save the project, involving the creation of a billionaires' village on the 36-acre waterfront site, in part because it included the payment of a $12.5 million fee to a consultant “before any sales or profits and while the Bermuda Government's risk increased”.
She said: “We are now proceeding with plans for urgent remediation of the buildings and have meetings scheduled for Monday, April 6, with the general contractors and provisional liquidators to discuss next steps.
“Now that provisional liquidators have been appointed, we expect to learn more about what happened and why the project failed. Our continuing intention is to protect the interests of the people of Bermuda.”
Caroline Bay, on the former Naval Annex in Southampton, was initially planned as a $2 billion luxury resort, featuring hotels, residential units and a marina.
However, it has been beset with financial problems and the plans have been gradually scaled back over the years.
In 2016, the former One Bermuda Alliance government signed a guarantee of $165 million on the project.
Work on the hotel stopped in March 2018 after costs overtook financing.
Last September, after the developers defaulted on loan payments for the project, the Government stepped in and acquired the interest on the loans.
Curtis Dickinson, the Minister of Finance, tabled legislation to raise Bermuda's debt ceiling by $250 million, allowing the Government to pay $165 million to lenders and $11 million to contractors who had not been compensated for work done.
Last week, the Government filed the winding-up petition in the Supreme Court.
Mr Duperreault told The Royal Gazette that the Government's attempt to take control of Caroline Bay meant Bermuda would miss out on a “wonderful plan” to create an exclusive billionaires' paradise on the Morgan's Point peninsula.
He said he and his partners, including consultant Tom Lawrence, believed they could refinance the $165 million loan, plus the $11 million paid to contractors, take back on the debt and entice up to 375 billionaires to relocate to Bermuda and set up family offices here.
Mr Duperreault said Mr Lawrence, a British businessman, came up with the idea of the “single family office” scheme for the ultra-wealthy at Caroline Bay and that three sales were already agreed, providing the Government passed legislation to give permanent residency to the billionaires who bought homes there.
But the Ministry of Finance scotched the idea yesterday.
The spokeswoman said: “Mr Duperreault's new plan for a billionaire village of 375 families has only three potential sales in the pipeline, would require the Bermuda Government to increase its guarantee to $185 million and be subordinated to a further $250 million in borrowing.
“Even if the existing debt, which is currently held by the Bermuda Government, was acquired by his new lenders, the people of Bermuda would still be liable for the risk of failure under the guarantee.
“Having paid taxpayers' funds for one failed project backed by Mr Duperreault, the public now knows that guarantees represent real risk of loss.
“Further, in the first drawdown of $75 million of new debt, the developer planned to use some of these proceeds to pay his consultant, Tom Lawrence, $12.5 million as a fee for raising the capital, before any sales or profits, and while the Bermuda Government's risk increased.
“We thought it was a bad idea and we declined to support it.”
Mr Duperreault said the developers' plan was to scrap the luxury Ritz Carlton Reserve hotel and condos planned for Caroline Bay and focus solely on the billionaires' village.
“The idea would be that the family office principals would come, they'd get permanent residency — not status or citizenship or anything like that, just permanent residency — and that would be beneficial to them. In most countries in the world that would be beneficial to them, from an inheritance tax point of view, primarily.”
Mr Duperreault, the chairman and principal beneficial owner of George's Bay, said the idea was still on the table less than a month ago and that the developers hoped to hammer out a deal, before the Government filed the winding-up petition.
That court action here was immediately followed by a Chapter 15 petition at federal bankruptcy court in New York for recognition of the Bermuda proceedings.
“Since then, they have done what they've done,” said Mr Duperreault. “They did it without telling us anything in advance.”
He said: “I thought we had a great plan. It's a wonderful plan for the country. There are benefits way beyond the immediate benefits you would get in resurrecting the development at Caroline Bay. There are far-reaching benefits for the country.”
Mr Duperreault said the developers believed the lenders who were owed money would have given George's Bay until the end of last year to make the payments, but the Government opted to step in instead.
“I am not questioning their decision,” he said. “They made their decision. They heard all the facts and they made a call.”
He said: “This is not an attack on the Government.”
Mr Duperreault said the single family office idea was well received by the Government and he noted that Mr Dickinson mentioned such legislation in his Budget speech.
He claimed allowing George's Bay to continue with the project and take back on the debt would give the Government much needed immediate liquidity as the island's economy looked set to collapse because of the coronavirus.
But he said certain statements in the court documents filed by the Government last week “gave us clear indication that they weren't interested in pursuing our idea”.
Mr Duperreault said Mr Lawrence's fee was negotiated and was “appropriate” for the “difficulty of trying to get financing for a project like ours”.
He added: “Tom is not an owner of the property ... We have discussed at some time bringing him in as an owner, but the plan has to be in operation for that. I call him a partner because he has been with us through thick and thin through this whole thing.”