2015 has arrived with questions continuing to swirl around the financing deal for the government’s controversial Marriott Hotel and whether it will be ready for its new announced opening date next month.
Over the last five years or so, the government and its special purposes company Atlantic Hotel Inc (AHI), have been pilloried by commentators for using taxpayer funds for what has been seen as a project of dubious value and being unable to attract investors and finalise the deal.
After years of stalling on who the investor would be, in May last year the government announced that two Hong Kong businessmen would take up the 67% equity at US$8 million in the US$58 million project. However, since then there has been no further word about the investors and whether they would still be putting money into the project.
The major development since May last year has been the mortgaging of around seven acres of Kingston land in four plots to Republic Bank Limited (RBL) of Trinidad and Tobago for US$27 million. While this deal is still to be signed, it had not been clear that it would be underpinned by a mortgage which would effectively give control of the hotel to the bank were it to encounter financial difficulties in making repayments. Observers say this arrangement may be unpalatable to the Hong Kong investors who would be at risk of losing their equity investment if the project failed.
In December of last year, Director of AHI Winston Brassington had told Stabroek News that the agreement between AHI and RBL had always anticipated that the syndicated loan would be facilitated through a US$27 million mortgage on the buildings to be constructed under the project.
The notice of debenture for the mortgage appeared in the November 29, 2014 edition of the Official Gazette. Brassington and Natalia Seepersaud, the in-house legal counsel for government holding company NICIL and authorised signatory for the AHI Board signed the agreement on October 14, 2014.
According to AHI, the special purposes group incorporated in 2009 for the Marriott project, the publication of the mortgages in the November 22, 2014 Official Gazette of Guyana and the debentures a week later constituted “concrete evidence that the financial arrangements with RBL are being concluded and that the funding has been committed by the bank. The publication of these mortgages are consistent with standard procedures for the security of a loan agreement and are in line with the financial arrangements published in the feasibility studies for the construction of the hotel project.”
Brassington told Stabroek News last month that the mortgages were part of the venture agreement, adding that it was not specifically the land that was being mortgaged but the assets/s being erected on the land.
The HVS Consulting and Valuation Division of CHR Consulting Services which conducted the feasibility study for the Marriott project in 2012 had done so inclusive of the US$27 million round 1 debt financing through the mortgage to RBL.
Brassington stated that the option has always been in place for the land to be leased or purchased and that RBL as the number one secured creditor to the project was invoking that option. He told Stabroek News that “publication of the mortgages and debenture are the final steps required to conclude the financial arrangements with Republic Bank we had contemplated from inception of the project.”
He noted that the two mortgages on the Alpha blocks were “originally leased but (were) converted to title under the lease agreement since mid-2013; (the) matter was a public record”. He clarified that the additional mortgages were on a lease of state land for the purpose of commercial use, such as the construction of a hotel and does not equate to ownership of the property.
According to the November 22, 2014 Official Gazette the mortgage pertains to the “the mortgagor’s right, title and interest in and to a Lease of State Lands for Commercial Purposes (Establishing a Hotel) issued under section 3(b) of the State Lands Act, Chapter 62:01 for the term of 99 years.”
The mortgage commenced December 10, 2010 and was executed on July 14, 2014.
AHI has since been challenged in court by Desmond Trotman over the arrangements for the land and other matters.
While Brassington stated that all the processes were above board and all steps undertaken in the constructing and financing of the hotel were publicly vetted, Stabroek News was unable to locate when in July of 2013 the conversion to titled land occurred.
The transforming of the arrangement from leasing the over seven acres of land that the hotel will sit on to now mortgaging the land had not been presented by the government for public discussion.
Brassington told Stabroek News that when AHI and RBL had revealed that they needed to complete the financial arrangements for the syndicated borrowing of the US$27 million, it was inclusive of the mortgages for Tract Alpha “2” and “3” as well as Tract lettered “P” and “R” of state lands situated at the North Western part of Kingston, Georgetown.
He re-emphasised that the mortgages were in relation to everything on the land and given that the land was worth US$1 million it is always in the best interest to have a long term tenure as security. He noted that leases would regularly last 99 years.
Former Auditor General Anand Goolsarran also raised the issue of the value of the land in the past noting that the AHI value attached to the land was significantly lower than its true value. Goolsarran had criticized the deal noting that under the lease arrangement AHI was leasing the land for US$120 a month.
The intended five-star hotel was originally scheduled for opening in August last year but this was shifted to December. The opening was later moved to February this year but with a week in January already finished there is no sign that it will meet this date. Marriott has already assigned a general manager for the local operations and he has been overseeing training of staff.
