Atlantic Hotel Inc. (AHI) hopes to secure a financier and lessee for the proposed Marriott Hotel Casino by next month end and is adamant that a casino will add financial value to the property, for which the government continues to service a US$15.25 million loan.
“There is an evaluation process and at the completion of that process, when we declare who is the successful bidder, negotiations will then commence and on the successful conclusion of those negotiations we will then have a grand press conference,” Chairman of AHI Hewley Nelson told Stabroek News when contacted.
“That process should be completed by the end of November, all things being equal, and thereafter we will have a press conference to deal with all issues pertaining to the Marriott operations,” he added.
AHI has invited the submission of expressions of interest (EOIs) from firms to complete the construction and outfit and operate its casino, which will be annexed to the hotel, located at Kingston, Georgetown.
“AHI is interested to receive EOIs from either persons or companies, either individually or as part of a joint venture/ consortium. Preference will be given to submissions by applicants who are established in the gaming and entertainment industry,” the advertisement states.
“AHI is looking for lessees who have already established themselves as a brand, regionally or internationally and can demonstrate extensive knowledge of their operations, within applicable legal and regulatory framework. Applicants will be assessed based on suitable criteria, as outlined in the ‘Guidelines for Submission of Expressions of Interest’,” it adds.
The AHI Chairman informed that the advertisement has been published both locally, regionally and internationally and he was confident that by the November 15, 2017 deadline there would be suitable submissions.
The 197-room Marriott hotel was constructed at a cost US$58 million. The majority of the investment was from state funds but a total of US$15.25 million was received from Republic Bank Ltd, as part of the US$27 million debt financing for it.
Government this year said that it was servicing the loan owed by AHI to Republic Bank for the hotel’s construction.
Minister of Finance Winston Jordan had explained that neither AHI nor its loan guarantor, National Industrial and Commercial Investments Limited (NICIL), can afford to service the US$15.25 million loan, thus forcing government to absorb the semi-annual US$1.1 million in non-budgetary expenditure.
The Marriott is just able to cover its operating costs but is not earning enough to service the loan.
A 2015 forensic audit of the hotel had urged government to “proceed with haste” to sell the 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 audit, conducted by former Auditor-General Anand Goolsarran, had noted that there was a “serious risk” of default in relation to the Republic Bank loan used for construction.
In the report, Goolsarran explained that the loan is secured by “debenture and mortgages.” He declared 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. However, there is an 18-month moratorium on interest and a 24-month moratorium on principal from the date of first disbursement.
The report had also said that given the statement by former Executive Director of NICIL Winston Brassington in relation to the absence of market intelligence on the operations of casinos, it was advisable not to proceed with the construction and outfitting of the Entertainment Complex, which was estimated to cost US$12 million.
But Nelson said AHI’s Board understands the long term financial benefits of going ahead with the gambling facility.
“Since we entered into the brand coming to Guyana and all of that, we have always established that the casino will be a major contributor towards the financial packages of the Marriott. You have to understand that the casino was pegged to contribute at least sixty percent of the revenue so that the Marriott could serve its financial commitments. Do you know what sixty percent is? So we have that established,” he said.
“There has always been that link between the hotel and the casino .There are a number of linkages to be established with the casino. They would have more guests…and other activities that would enhance the income generating aspect of the hotel. So that was the cornerstone of the feasibility study. So, it is feasible to go ahead with the casino, making it for the generating of income to enhance its viability,” he added.
Former AHI Chairperson Beverley Harper had last year told this newspaper that following the casino outfitting, it was expected that the hotel would be put up for sale after two years.
And while the current invitation for expressions of interest sets out construction, operation and leasing terms, it did not state how long the lease is expected to last.
Harper had said too at the end of last year that the hotel was “beginning to hold its own” and that the occupancy rate was at a constant 65 percent.
As it pertained to the current operations of the hotel, Nelson informed that the occupancy rate had increased by five percent and it was “doing extremely well.”
“Its occupancy has gone up to about 70 percent and it has become the major hub for all major conventions. The Marriott is doing extremely well. Put this into context: Our Marriott’s rank, in terms of the 365 properties managed by the Marriott within the region, our hotel has been placed 67th on that list. So that tells you that it is holding its own. It has also made a major contribution to VAT and I am talking hundreds of millions of dollars that have gone to VAT…,” Nelson said as he listed other positives of the local hotel chain.
Nelson promised that at the end of November press conference, he will be able to give more specifics as it pertains to the hotel’s operations.