Head of the National Industrial and Commercial Investments Limited (NICIL), Winston Brassington is denying that the final value of the Marriott Hotel Project could balloon to around US$100 million as recently suggested by former Auditor General Anand Goolsarran.
Brassington in a recent interview on the National Communi-cations Network said that Goolsarran was inaccurate with his figures and facts when he criticised the terms of the deal in his column in the Monday June 9th edition of the Stabroek News.
Brassington said that Goolsarran’s methodology was flawed and that the figures used had no evidential basis such as Goolsarran’s projection that the 6.3 acres of land the hotel is being built on is valued at US$20 million.
Brassington did not state what the land was valued at during the NCN broadcast but instead said that the land was tied to the project and could have been purchased for US$1 million. He himself does not give a breakdown on how Atlantic Hotel Inc (AHI), which currently leases the land from the government for US$120 per month, had the land valued.
In defence of the sums that are not factored into the Marriott Hotel Project’s US$58M price tag, Brassington said those were routine and that investors rarely attached themselves to developmental and design costs. He acknowledged that NICIL was responsible for an additional US$2M which was spent during the development and design phase, but did not answer specifically whether NICIL footed the bill for the US$2.7M for rerouting the Georgetown sewerage system. He glazed over the matter by stating that the sewerage system was now owned and operated by Guyana Water Incorporated. These were some of the additional costs that Goolsarran computed in his US$100M price tag.
Brassington defended the cost of the hotel, contending that the price per room during the construction phase of a Marriott would be approximately US$250,000 instead of the figure estimated by Goolsarran of US100,000. The head of NICIL, interviewed by public relations consultant, Kit Nascimento, noted that his estimate was provided by the Marriott. He said that if anything the current construction cost of US$58M was on the lower end for a Marriott construction and Goolsarran’s notion that a same-sized hotel would cost just under US$20M was misleading.
“Our hotel is on the lower end of what Marriott would see as the average cost per key so not only are our numbers pretty much in line in…but our numbers were also determined by an international tender”, Brassington stated.
Brassington accepted that under the equity and debt financing arrangement, the deal was more beneficial to the debt financers. He said that debt would be repaid as priority and acknowledged that NICIL was third in line to be repaid after Republic Bank Ltd and the operators of the entertainment complex which will be putting up US$27M and US$4M respectively compared to NICIL’s US$15.5M.
Goolsarran had stated that “there are no interest charges nor is there any indication when the loan will be repaid. NICIL will therefore be subsidizing the project to the extent of interest charges foregone. In addition, the NICIL loan is subordinate to that of the syndicated loan of US$27 million facilitated by the Republic Bank of Trinidad and Tobago. This means that should the project run into financial difficulties, the latter gets preference over the former in terms of the repayment of the loans. Since NICIL is a state-owned company, it means that it is the Government, and hence taxpayers, who stand to lose.”
Brassington was not able to counter this argument, but did note that the Hong Kong investors, ACE Square Investments Ltd who are injecting US$8M into the project for 67% of the equity in the hotel, would lose their investment if the project was not to pan out.
While stating that the Marriott Hotel was practical and necessary and that it was a good investment he did acknowledge that it took a long time to attract a private investor and ACE Square Investments Ltd ended up being the only investor to approach the project. Critics of the project have said this is perfect evidence that there is little attractiveness in it and that financial feasibility is doubtful. Thus far no information has been provided on the track record of the Hong Kong investors in relation to the hotel business. There is also a belief that the Hong Kong investors will hedge their investment in the Marriott by participation in projects here in the mining and lottery sectors.
The head of NICIL did not tackle Goolsarran’s criticism concerning the debt servicing in detail. Goolsarran had stated that with 20.5 per cent financing through equity and 79.5 per cent through loans, the project’s finance charges are costly as was the case of the aborted Amaila Falls Hydro Project. He had said that annually funds would need to be put aside to pay interest prior to profits being determined. “Assuming an interest rate of 10 per cent, interest charges over the three-year period of construction will amount to approximately US$6.2 million, if the loan resources of US$31 million (excluding NICIL’s loan) are drawn evenly during the construction phase. This will increase the construction cost to a minimum of US$69.4 million”, Goolsarran said.
Brassington has stated that “private investors will not get back their original investment for the first nine years based on the projection…so they are looking long term”. Continuing on the private investor angle in the interview, Brassington said that it was not unusual to have an investor named after all of the financing was secured. “The release of the investor’s name was conditional on the confirmation by Republic Bank that they had completed the raising of the US$27 million dollars and agreement on all the financing documents, so it was a condition that we should not state who the investor was until that was confirmed”, Brassington said. Goolsarran pointed out that information on the investor had not been disclosed for over a year and the issue of transparency hinged on the fact that AHI and NICIL had routinely promised to name the private investor.
On May 24 it was finally revealed in a joint AHI/Republic Bank press release that two Hong Kong businessmen, Victor How Chung Chan and Xu Han, would be fronting the US$8M deal. Through a subsidiary, Ace Square Management Ltd would be also but putting up the US$4M for the Entertainment Complex.
The current hotel situation
Brassington contended that currently Guyana was without a good quality hotel and that persons conducting business in Guyana were forced to travel to Trinidad and Tobago because they are unsatisfied with the hotels here. He said that “the last branded hotel to come to Guyana, which was the Pegasus, over 40 years ago since that time we have not had any major international branded hotel come to Guyana…we are speaking of Pegasus being the premier hotel in Guyana being in such a state that when you are having a dinner for the chamber of commerce and the President of Guyana is speaking the roof is falling in and the president of the chamber of commerce exclaims this is why we need the Marriott.”
Brassington did not mention that the Princess Hotel had first been branded under the Turkish Princess Group and has now been rebranded under the Ramada chain of hotels.
Brassington argued that there was an “acute shortage of hotels,” in Guyana and berated Goolsarran for claiming low occupancy levels. In the same breath that Brassington is making such a statement Hotel Tower, for a long time the number two hotel in Guyana, remains closed due to financial difficulties caused by the inability to fill rooms. Brassington noted that Goolsarran provided no statistics on the low occupancy levels of hotels in Guyana but Brassington himself did not provide any.
A manager was recently appointed for the Marriott Hotel and it is expected to open sometime later this year.
