Government holding company, NICIL has injected an additional US$16 million into the Marriott Hotel project after court action halted expected funding from investors.
Director of the National Industrial and Commercial Investments Limited (NICIL), Winston Brassington said yesterday that once the legal challenges are concluded, the money would be reimbursed. During a tour of the Kingston hotel yesterday, Brassington repeatedly emphasised that the funds are “not derived from taxes.” The NICIL director said that the money is from proceeds from the sale of properties owned by NICIL or dividends from NICIL investments. He said that one such source was the sale of NICIL’s 20% stake in the Guyana Telephone and Telegraph company.
“The alternative to the temporary investment of additional funding from NICIL would have been the halting of the construction of the hotel with the consequential and probable loss of Marriott’s engagement with the project, the risk (of) the contractor taking legal action and substantial escalation of costs to complete the project,” Brassington said.
Critics have said that NICIL is operating like a parallel treasury in the use of funds that it has accrued.
NICIL had already invested US$20M to jumpstart the project. As it stands, the state entity currently owns 100 percent of the hotel’s equity and the cost of the hotel thus far is roughly US$52M. Brassington noted that this figure was inclusive of US$15.25M already received from Republic Bank Ltd of Trinidad.
During the tour yesterday, it was revealed that work is still ongoing and the hotel is now slated to be opened on April 17. The hotel has missed a series of prospective opening dates going as far back as July last year.
Brassington blamed the opposition for the delay in the completion of the project. He said that financing from Republic Bank of US$27 million and from the Hong Kong equity investors of US$8 million remains committed but financial disbursement has been partially delayed due to legal actions filed by the opposition. Former Member of Parliament Desmond Trotman had filed a legal action last year opposing the passage of the mortgages from Atlantic Hotel Inc to Republic Bank.
Critics have flayed government plans to hand over 67% of the equity in the hotel to the proposed Hong Kong investors for US$8M. They point out that NICIL has already spent US$20M on the controversial hotel.
According to the NICIL director, the opposition to the mortgages has served to partially delay the disbursement of the US$27 million financing from the syndicated group of lenders led by Republic Bank. He noted that the mortgages are only part of the security structure and other parts include a debenture that has been registered resulting in Republic Bank disbursing US$15.25 million of the US$27 million that has been committed. The remainder awaits resolution of the court matter or alternative resolution, he said.
The injection of US$8 million by the private equity investor – Ace Square Management Ltd – has not happened. “It has always been a condition that the injection of the equity was contingent on the conclusion of the commitments with Republic Bank for the US$27M debt financing…the injection of the US$8M by the investor group, therefore continues to be delayed, if not jeopardised as a result of the legal actions filed by the opposition,” Brassington said.
He said that as a result of the continued legal and other attacks to delay the project, NICIL has had to fund “on an interim basis,” a portion of the expected private financing. This was necessary to avoid negative repercussions for the project. He emphasised that the US$16 million will be reimbursed once the legal challenge to the mortgages is discharged.
Meantime, it was also revealed that the Hong Kong investors through Ace Square Management Ltd, an affiliate company of ACE Square Investments Ltd, have pulled out of operating the casino. According to Brassington, the private investor “has opted not to operate the casino due to the risk of being both joint investor (in the hotel) and operator in a casino in a country where anti-money laundering legislation is absent.” He added that the principals of ACE Square Management are also directors of publicly traded companies in Hong Kong who were hesitant to take on the responsibility of operating the casino.
He said that while the investors were concerned for their international reputation, the Marriott was able to take over the operation of the casino due to its global reputation. He added that the Marriott would not be associated with anything unless it followed best practices. The Entertainment and Casino Complex will not be operational for the opening of the hotel and is expected to open before the end of the year.
Brassington also said that the Chinese contractors Shanghai Construction Group (SCG), are expected to hand over the hotel for the opening and afterwards, the earnings of the hotel would have to meet the operational costs. He did not disclose what the projected monthly operating costs would be.
Brassington did not evince any concern that the May 11 general elections may impact the occupancy rate of the hotel. He said that the Marriott operates on an annual average occupancy rate as opposed to a day-to-day or month-to-month basis. He noted that the projection was in the low 40 percentile but added that those were conservative estimates.
The NICIL director said that the 197-room hotel provides a venue for large scale events and international conferences. He highlighted that while HVS International conducted a feasibility study in October 2012 which showed an overall rate of return of 11 percent, Marriott International has also conducted its own studies. The hotel has already applied for a five star rating which is expected to be awarded one month after opening following an inspection.
Brassington noted that the hotel is being completed despite facing major criticism. “In my twenty plus years in government I have never seen a project exposed to such consistent and deliberate attacks,” he said. He added that currently, 230 Guyanese have been employed while the hotel is being completed on budget.
Brassington’s presentation also severely criticised Stabroek News and Kaieteur News for their coverage on the hotel. He circulated a dossier entitled Challenges to Development of the Guyana Marriott Project which listed the headlines of stories about the Marriott Hotel in the two newspapers.
The Marriott Hotel had been mentioned as far back as 2007 but there were numerous difficulties in attracting an investor. This prompted the government move to invest upfront via NICIL. The Chinese contractor for the project, Shanghai Construction also engendered controversy when only imported Chinese labour was utilised on the project.