Nearly seven years after it was inaugurated in a blaze of publicity, serious questions persist on the financial viability of the Guyana Marriott Hotel in Kingston and it is a matter that the administration and government holding company, NICIL should speak forthrightly on.
Ordinarily, the performance of this hotel would have been of little interest to the public except for the fact that taxpayers’/state money was used in its construction and substantial debt financing has created an annual burden that has to be met from the budget.
There is an even more important reason why there should be full transparency about this project. When the Atlantic Hotel Inc (AHI) was established in September 2009 as a wholly owned subsidiary of the National Industrial and Commercial Investments Limited (NICIL) for the development of a five-star (what is its current rating?) hotel it represented one of those gambles peculiar to the Jagdeo administration and then NICIL Executive Director Winston Brassington. As with a number of these projects under the auspices of the then administration, the AHI venture was rife with controversies that included whether a feasibility study had been conducted before a decision was taken to proceed, the terms of the leasing of the land from the Guyana Lands and Surveys Commission and the proposed framework for investment by a Hong Kong duo which was later aborted.
Both Vice President Bharrat Jagdeo and Mr Brassington are also now integrally involved in major decisions about even larger projects such as the gas to shore to energy project and the PPP/C administration is also pursuing a variety of financial models for big-ticket projects such as the new bridge over the Demerara River. Consequently, the Guyanese public should be afforded a clinical evaluation of the then PPP/C administration’s model for this project, whether it succeeded and whether there are many lessons to be absorbed before it proceeds in similar fashion with a clutch of projects in the works.
What little is known of the Marriott’s financials up to 2017 was that it was breaking even and thereabouts but there was little prospect that it could afford to service the loan that was drawn for its construction. Nineteen months after it took office, little has been said by the PPP/C government about the financial performance of the hotel and its future, particularly in light of the expected development of a number of new hotels in the four to five-star category.
NICIL must release to the public the available financial statements for AHI for the years 2015 to 2021 so that the public can evaluate the feasibility of this venture and assess whether Messrs Jagdeo and Brassington were correct in their assessment of the market apart from the wholly unexpected entrance to the oil and gas industry.
When this project was forensically examined by former Auditor General Anand Goolsarran in October 2015, there was a recommendation that a quick sale should be sought for it considering the possibility of a loan default. Without access to the financials for the hotel it is unclear whether conditions have changed in tandem with the development of the oil and gas industry.
Mr Goolsarran’s separate audit of NICIL, which had been commissioned by the former APNU+AFC administration found that NICIL’s financing of the construction of the hotel between 2010-2013 was $5.371 billion, comprising $800 million share capital, $3.316 billion (equivalent to US$15.5 million) in an interest-free loan and $1.255 billion in advances. As at 7 July 2015, he said that NICIL’s advances increased to $4.521 billion, giving a total funding of $8.637 billion, equivalent to US$41.682 million.
According to the forensic audit report, for the period 2007 to 2012 amounts totalling $7.320 billion were transferred from various government agencies to NICIL to effect payment for works undertaken on behalf of the government. Among these was sums for the Marriott Hotel.
The Guyana Forestry Commission transferred $300 million, the Guyana National Cooperative Bank (GNCB) transferred $1 billion and the Guyana Water Inc transferred $353 million to NICIL for the hotel.
“NICIL as well as the above agencies ought to have been aware of the requirement for all public expenditure to be sanctioned by Parliament through the National Budget, as provided for by Article 217(3) of the Constitution,” Mr Goolsarran’s report had said.
In his separate audit of the hotel, Mr Goolsarran had advised the government to “proceed with haste” to sell the Marriott Hotel in light of uncertainty about the financial viability of its operations and rising costs that could take the final price tag for the project to at least US$98 million.
“The Government of Guyana should proceed with haste to advertise for the sale of the hotel, bearing in mind that the Management Agreement with Marriott International is for 30 years renewable for another 10 years. The Agreement does provide for the sale of the hotel to a reputable individual or firm so that it can roll-over to the new owners,” the 2015 report had stated.
“Alternatively, the Government could retain majority interest in the hotel and offer 49% of shares to the public and institutional investors, such as banks and insurance companies. However, the risk still remains in terms of the financial viability of the operations of the hotel,” it added.
Mr Goolsarran had also pointed out that the Republic Bank loan of US$15.25 million for construction had priority to that of NICIL and is secured by “debenture and mortgages.” He said that these conditions have serious implications should AHI default in payment. The loan is repayable at rates of 9.15% and 8.65% during construction and post-construction phases, respectively, via 26 equal, blended, semi-annual payments of principal and interest.
“There is a serious risk of default in the repayment of principal and interest on the Republic Bank loan should the hotel continue to make losses due to the less-than-desirable occupancy rate. In the circumstances, it would be necessary for the loan to be paid off at the earliest opportunity. This is especially so, since the Republic Bank has a lien on the hotel and surrounding area via debenture and mortgages,” Mr Goolsarran said.
With rising revenues from oil and gas filling the coffers, the government may feel no pressure over the repayment of the Republic Bank loan but the project poses a much larger question of whether this public-private gamble worked and whether the country might not have been better off leaving this enterprise to the private sector and employing the then scarce capital and resources elsewhere.
