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The act of sweetening a sour deal

Bermudians should pay close attention to the issue of the Government issuing a special development order to Westend Properties Ltd, which is owned by Gencom Ltd. The issuance of this SDO would be giving a green light to Gencom to develop the Fairmont Southampton property according to the terms by the Government, including those made public.

But there could be others that we don’t know about.

There is one thing we all can agree on, and that is reopening of the Fairmont Southampton is key to the revitalisation of our tourism sector.

The critical questions are: how, how many and who?


Clearly, these days, hotel development in Bermuda requires an accompanying condominium component. The sale of these condo units, which can form part of the hotel pool, helps with the financing of the project.

How many?

Well, on the face of it, this is the crucial question, isn’t it? The only thing we know is what has been told to us — and it’s 261 units. And, as per the public meeting recently, the developer has made it clear that it wants what it wants and nothing less.

In fact, many believe it has issued Bermuda tourism an ultimatum. Ultimatums are very serious things. In geopolitics, ultimatums are tantamount to declarations of war. Ultimatums are issued by those who see themselves as having all the cards, with the others having nothing. Ultimatums are certainly not issued to friends; nor are they issued by people wanting to have a lasting partnership with the recipient.

The question remains, how do we know the package encompassed in the SDO is what is financially required for Gencom to make a reasonable rate of return for its investors. Perhaps it is, or perhaps it is way more than what is required for a reasonable return, with the rest being a large helping of gravy.

Put another way, is the proposed scale a question of need or greed? We really don’t know because the deal is 100 per cent opaque — no transparency whatsoever. We’re just supposed to take Westend Properties and Gencom on their word and obey.

That brings us to the third issue:


All transactions, be they simple or highly complex, require a measure of trust. As Ronald Reagan once said: “Trust but verify.”

The amount of trust you have in a person with whom you’re doing a deal depends on who that person is. What do we know? We know that the developer defaulted on a written obligation of $11 million to Fairmont Southampton staff when it closed the hotel and laid them off. It was the Bermuda Government that honoured that commitment to spare hardship for the workers.

It is no wonder that the former Minister of Finance, a 30-year finance and banking veteran, refused the deal.

If you were a lender and you had a client that had recently defaulted on a written obligation, would you then lend that person more money? It defaulted on an $11 million obligation and now wants the Government to guarantee a loan for $75 million — an amount almost seven times greater than what it defaulted on previously.

Here is a quote from the former Minister of Finance: “It is a matter of public record that the employees were paid only after the Bermuda Government stepped in to provide direct financial support to the employees and then supported the pursuit of a statutory demand to recoup those funds. This should be a cause for concern and result in an increased focus on ensuring that the necessary protections are put in place to protect the Government’s and the people of Bermuda’s interest.”

And now, David Burt’s government wants Bermuda to be comfortable with the developer handling a deal valued at more than $400 million. That’s more than 36 times the amount it defaulted on.

Furthermore, there have been so many false start-up dates given for this project that they are too numerous to mention. What Bermuda wants is for the hotel to be built and for more transparency as to why the need for 261 units to justify the start of renovations.

Additionally, it is ironic that the same people that Gencom defaulted on — unionised workers — are content bordering on enthusiastic supporters of this project. They either have very short memories or, in the back of their minds, are confident that the Government would make good on any shortfalls by the developer, as which happened when the hotel was closed. Again, you can tell why the former finance minister said, “No!”

The developer indicated that when it first bought the property that interest rates were extremely low and credit conditions were loose. It points out now that interest rates have risen dramatically and that credit conditions are tight. These facts are used to seek to justify why it apparently needs to build more condos.

But this is a false argument because when interest rates were low, the developer was proposing to spend $200 million; now it proposes to spend more than $400 million, double the initial amount.

The effect of high interest rates and tight credit conditions cause people to borrow less, not more! So, in spite of tight credit conditions, the developer says that it can borrow twice as much as before. How do we make sense of this contradiction? Perhaps the extra condos that it wants the SDO to approve is the sweetener that makes a sour deal palatable.

One also wonders what is the nature of negotiations between the Government and the developers when the application of commonsense financial principles are overruled.

Given the considerable lack of transparency, it is no wonder people are upset. There is a serious trust deficit that needs to be repaired. Bermudians need to continue to question our government and demand more answers.

Craig Cannonier is the Shadow Minister of Works & Engineering and Tourism and the One Bermuda Alliance MP for Devonshire South Central (Constituency 12)

• Craig Cannonier is the Shadow Minister of Works & Engineering and Tourism and the One Bermuda Alliance MP for Devonshire South Central (Constituency 12)

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Published May 17, 2023 at 8:00 am (Updated May 16, 2023 at 1:22 pm)

The act of sweetening a sour deal

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