Unexpected losses at two hotels could hit $30m
Unexpected losses at two Bermuda hotels were predicted to hit about $30 million by last spring, the head of the company that owns them told the Government.
Karim Alibhai, the founder and principal of Gencom, apparently attached “pre and post- Covid-19 cash flows” to an e-mail sent to David Burt, the Premier, as well as to some Cabinet ministers.
The Miami-based investment firm owns the Rosewood Bermuda at Tucker’s Point in Hamilton Parish, and the Fairmont Southampton.
Mr Alibhai wrote on June 11, 2020: “As you can see, we will suffer a drastic, and unexpected cash flow loss through Q1 2021 of over $33 million and this excludes the impact of any redundancy payments that may be required.
“Having said that, I (and my partners) am as committed as ever to the people of Bermuda and the future of the tourism sector as a meaningful contributor to the overall economy once again.”
A copy of the email was released to The Royal Gazette as part of a public access to information request.
The cash flow figures were not included in the records supplied. An internal review of the response has been requested.
Mr Alibhai asked for an extension to the timescale for a layoff to become a redundancy – and trigger a severance package – from four months to 12. [see separate story]
He claimed on June 15 last year that an “initial thought to shift the redundancy trigger window from four to eight months” was “not sufficient for hospitality owners given the unique set of circumstances (which we are living and breathing daily on Tucker’s and Fairmont)”.
Mr Alibhai wrote: “The exponential amount of monthly losses at each property with lack of revenue for an extended period is staggering.
“By way of example, on a combined basis, Fairmont and Tucker’s will incur $30m of incremental losses through Q1-2021 based on the adverse forecasts from each property post-pandemic.”
•December 2019: An affiliate of Miami-based investment firm Gencom buys Westend Properties, which owned the Fairmont Southampton. Karim Alibhai, the founder and principal of Gencom, announces plans for an ambitious programme of renovations at the 593-room landmark.
•March 2020: the global coronavirus pandemic hits Bermuda and many island hotels shut their doors temporarily. The Fairmont Southampton lays off staff. The hotel is used as a quarantine centre for returned residents.
•July 2020: Fairmont Southampton management advises up to 150 foreign staff to make arrangements to leave Bermuda.
•September 2020: The hotel’s closure for renovations – projected to last 18 months – is announced for October 23 and it is confirmed most staff will be made redundant.
•October 2020: Gencom fails to meet its first deadline for redundancy payouts to former staff. The firm has already contacted the Bermuda Government for help in meeting its obligations. Curtis Dickinson, the Minister of Finance, says later that the sides have been unable to reach an agreement. The Government starts to come up with plans to bail out staff in advance of Gencom’s November 20 deadline.
•November 2020: With close to 700 staff still unpaid, the Government steps in with its own $11 million bailout. Ex-staff from the Fairmont agree to a class action law suit against Westend Properties so that the Government can recoup its money.
•February 2021: Mr Dickinson confirms that funds from Westend Properties to cover the redundancy payments were wired to Government accounts.
•March 2021: It emerges that the Government was considering a request to provide a multimillion-dollar guarantee in support of the stalled redevelopment at the hotel. It is the second appeal after Gencom failed to meet a number of conditions contained in a letter of intent for a guarantee from the Bermuda Government.
• July 2021: David Burt, the Premier, thanks the Fairmont Southampton resort for opening its premises as one of the Government’s mandatory quarantine centres for unvaccinated travellers during a Covid-19 update. He says later in an interview with The Daily Hour: “We are working with Gencom to secure the funding for the redevelopment of the hotel”.
* To read the e-mails, click on the PDF under “Related Media”. The Royal Gazette has redacted contact details.