By Lavern Clarke, Staff Reporter
Stewart
THE Urban Development Corporation (UDC) appears closer to tying up full financing for Beaches Whitehouse and is now chasing after debt to plug the financing gap in the hotel development, now four years in the
making.
"We're borrowing money," said UDC chairman, Dr. Vin Lawrence, adding that his agency was shooting for an approximate 50:50 split in equity and debt to make up the US$70 million that it will now take to build the 360-room property.
So far, the state developer has secured commitments for US$30 million of the US$36.3 million debt being sought, pushing financing for the project to $66.7 million when the equity stakes are
factored in.
"We need another $5-8 million which we are working on, and will close soon," Lawrence said in an interview yesterday, adding, however, that the developers will be spending all equity funds, amounting to US$33.7 million, before dipping into the loans.
Equity shareholders in the property include UDC with a US$10 million stake; Gordon 'Butch' Stewart, through his company, Gorstew Limited, US$8.7 million; and National Investment Bank of Jamaica, US$15 million, US$7 of which will be in the form of preference shares.
The Financial Gleaner has learned further that the UDC has secured the assistance of the Development Bank of Jamaica (DBJ), headed by Kingsley Thomas, and together the two state agencies are moving to tie down the
commitments.
DBJ is helping the UDC access cheap development funds from multilateral agencies, but some of the loans will be coming from commercial sources, at higher interest costs.
Dr. Lawrence said official comment on the investors would be done at a later date. He said, however, that BNS Cayman, originally named as a potential partner in the development, was not yet among the finalised deals.
The UDC boss who is top advisor to Prime Minister P.J. Patterson was brought in by the PM two years to take over the hotel project from Gorstew Limited, after Stewart suspended construction to settle concerns about the financial impact on his company which was then the sole equity investor.
Sandals said at the time that Stewart had spent US$4 million and had completed the infrastructure work, including drainage.
Lawrence said he had no problem seeding the development.
"We thought it very critical to the economic development of the south coast," he said yesterday. "Just as we seeded Ocho Rios and Negril, we think it important to seed the south-west coast."
The hotel is being built in an area more exposed to community-based tourism and locals, and far removed from the airports in Montego Bay and Kingston. It is being built on lush sea front property, far-removed from any night-life. The Government is banking on the all-inclusive property and the Sandals name to propel the sputtering south coast tourism product into the big times. Ground was broken on the project in November 1998 then to cost US$60 million. Lawrence says the increase has been attributed to movements in inflation which, he said, has added US$6 million to the budget, while the other increases arose from expanding the scope of the project to add more facilities.
"We have increased the provision of certain facilities" to engage guests during their stay, said Lawrence, "because it's really a stand-alone facility so we had to provide some extra things."
The majority of the new US$70 million cost, US$45 million, is for construction, while the remainder is for fittings, furnishing and equipment. The hotel is now only about 30 per cent complete, but will be up and running by mid-2004, Lawrence said three years after its original completion deadline. So far, the equity partners have put almost US$10 million into the construction, split 37 per cent, UDC; 33 per cent, Gorstew; and 30 per cent, NIBJ.
The $200 million draw-down from the Capital Development Fund in mid-December was to help the NIBJ meets its obligation to the project. The CDF, the repository of bauxite levy proceeds, is administered out of the NIBJ.
On completion, Stewart's resort chain, Sandals, will manage the Whitehouse property under the Beaches brand. The hotelier also provided the land, a 33-acre property in Prime Minister P.J. Patterson's East Westmoreland constituency.
