AHI, the special purpose company set up to operate the Marriott Hotel registered a loss of $0.5m for 2013 and by contrast paid $491,800 in rates and taxes, according to its annual report dated October, 2014 and circulated in parliament on Thursday.
Major construction was still underway in 2013 and therefore the profit figure would have been of little consequence. The US$58m hotel finally opened in May of this year after a series of delays and there has been great interest in its current operating cost and occupancy rate.
With the change in government, questions have been raised about what the APNU+AFC administration will do with the Marriott Hotel whose construction it had raised many concerns over. The APNU+AFC government says it is presently doing an audit of the financing of the hotel after which it will make a decision on the way forward.
The loss of $0.5m came against the backdrop of a profit of $1.2m for 2013. The report of the Director of the company, Winston Brassington said that he was satisfied that the company has adequate resources to continue to operate for the foreseeable future and for this reason the “going concern” basis was used for the preparation of the accounts. The new government has since said it has no confidence in Brassington and that it won’t be retaining him.
Fixed assets of AHI at the end of 2013 totalled $6.8b. Current assets amounted to $89.4m while current liabilities stood at $2.4b. Of this amount, $1.255b was due to the parent company National Industrial and Commercial Investments Limited (NICIL) and $1.244b to the contractor, Shanghai Construction Group.
For the acreage occupied in the ward of Kingston, AHI paid $983,600 in rates and taxes for 2012 while the figure in 2013 was $491,800. Questions were raised earlier this year by the Mayor and City Council about how much rates and taxes the hotel had been paying and who had worked this figure out.
Lease fees to the Guyana Lands and Surveys Commission (GLSC) pertaining to the land on which the intended five-star hotel is sited totalled $100,000 in 2012 and $50,000 in 2013. A note to the accounts said that AHI had entered into a lease agreement on March 16th, 2011 with the GLSC for Tract `P’ comprising 1.264 acres and Tract `R’ comprising 1.162 acres. The term of the lease is for 99 years beginning October 12, 2010. The lessee is liable for the payment of rates and taxes.
Meanwhile, the Option to Purchase a third tract under a sale agreement between NICIL and the company on January 28th, 2010 was exercised on July 15, 2013, a note to the accounts said. The note said that the company has acquired exclusive freehold title to Block Alpha via Vesting Order No. 15 of 2013. Block Alpha comprises 6.88 acres and had been leased at an annual rent of $1 per square foot. The option to purchase which was exercised was valued at US$1m. Here again, AHI was responsible for the rates and taxes.
Former APNU MP Desmond Trotman had moved to the court in June 2013 to block the then PPP/C government’s planned transfer of the land at Kingston arguing that the public trust has been abused. Trotman in his notice of opposition argued that the public trust reposed in the President and his Cabinet has been misused and abused by the wrongful disposing of public property. Further, he said that the intended lease by NICIL to AHI would result in an infringement of the fundamental right of citizens to equality before the law and equal protection as guaranteed by articles 149, 149D and 142 of the constitution and the rule of law.
Trotman also argued that it is not proper for NICIL to convey by way of lease the property in question. Trotman’s legal action is said to have caused uncertainty in the minds of the reputed investors in the hotel.
The notes to the accounts also disclosed that on April 11th, 2013, AHI created 155,000 subordinated bonds in the company at US$100 each to be issued as consideration for NICIL’s provision of US$15.5m in debt financing. The bonds carry an interest rate of 0%. The maturity date is 60 days after the ending date of the 15th full financial year after the opening date. Critics would see this as a significant loss to the state. The company’s subordinate bond threshold was also increased by the shareholder’s resolution on July 15th, 2013, creating 25,125 additional subordinated bonds of US$100 each.
Two Hong Kong businessmen who were reportedly going to take up 67% of the equity in the hotel for US$8m have pulled out of the deal, Stabroek News was told. They had been announced as the interested investors last May after a long delay. Critics had lambasted the terms of this deal.
The Marriott-managed hotel has been mired in years of controversy over whether it is feasible, its financing, its cost, its location, the almost exclusive use of Chinese labour in its construction and what its future will be.
