Michelle Rollins, chair of Rose Hall Development Limited, a principal shareholder of the Ritz-Carlton Rose Hall. - File photos
The Urban Development Corporation's US$3 million investment in the luxury Ritz-Carlton Golf Resort and Spa has reaped no dividends in six years, though the state agency claims the hotel, principally owned by the Rollins, is turning a profit.
UDC, however, did not stipulate whether the 430-room property's earnings related to operations or net profit, but it is unlikely to be the latter, since dividends are normally paid out from net income.
"The hotel is making a profit, however, there is no surplus cash due to the payment of its debt obligations," said the state developer, in emailed responses to Financial Gleaner queries on the performance of its investment.
"The operating results of the company have not allowed for any dividend payments to be made to the shareholders to date."
Another government agency and even bigger investor in the hotel than the UDC, the National Investment Bank of Jamaica, now merged with Development Bank of Jamaica (DBJ) since September 1, did not respond to similar queries sent a week ago, but its returns to date should be at minimum US$4.1 million on the equity portion of its total investment of US$11.7 million.
A loan of US$5.7 million secured by convertible debenture should have been generating net yields of a fixed 12 per cent per annum, according to information long tabled in Parliament; while the US$6 million NIBJ injected in the form of preference shares could be earning returns of about 7.5 per cent, based on similar investments made by the state investment bank in other public/private sector hotel projects.
Ritz-Carlton Hotel Company (RCHC), a subsidiary of Marriott Corp, is managing the hotel under a 20-year lease, six of which have already elapsed.
6.5 per cent ownership
UDC's equity injection in the luxury property, which took the form of shares in payment for fees incurred during its development phase, gave the state developer 6.5 per cent ownership of RCRH - built 1998-2000 for US$113.2 million - and its former executive chairman Dr. Vincent Lawrence, once considered Jamaica's most powerful man next to the prime minister, a position on the hotel's board.
It was unclear up to Thursday - the agency did not respond immediately to a request for clarification made Wednesday - who from the UDC had replaced Lawrence who earlier this year resigned all his board positions and retired from the public service.
RCRH opened for business in 2000 on a portion of the 2,728 acres of prime coastal land on the outskirts of Montego Bay bought by the Rollins under what was considered a sweetheart deal for the developer.
Turbulence in RCRH's early years of operation, stemming from a fall-out in leisure travel after the September 2001 terror attacks on the United States, and later flood waters that at one time shut down the seaside resort for weeks, had dampened the hotel's financial performance, said tourism players.
"The hotel has been through rough times," said one government official. "But it is now going through better times."
Marriott redirected queries about the hotel's financial health to RCHC, whose PR department responded with claims that the property was performing 'exceptionally' but provided no details to back the assertion, saying such information is provided to shareholders only.
RCHC, however, did deny long-running speculation that the property was to be rebranded a Marriott amid rumours that the Rose Hall property was impacting the goodwill wrapped up in the Ritz-Carlton brand.
"The Ritz-Carlton Rose Hall will indeed continue to be a flagship Ritz-Carlton hotel," said area director of public relations for the Caribbean, Verona Carter, by email from Miami.
"The company has no plans to change the status of the resort."
UDC said it had got similar assurances.
The hotel's construction was financed by a mixture of debt and equity - including a $60 million loan from OPIC and the US$5.7 million debenture from NIBJ; and US$9 million of equity from NIBJ and UDC, and US$39.6 million from the principal investors, chiefly the late Texan John Rollins.
Reports of plans to sell
Still unconfirmed are reports that Rollins' widow, Michelle, has plans to sell the property, and that at least one purchaser had backed away from the deal because the asking price was too high.
Rollins did not return calls for comment left at the Rose Hall Development Limited office in Montego Bay, while the current manager of the company Stanley Nanson said the matter was outside his remit.
"I can't comment on that," he told the Financial Gleaner by telephone. "I am not a spokesman for the company."
It is understood that senior government officials have discreetly raised the issue with Rollins, and were assured 'some time ago' that the rumours then were baseless.
The hotel, meantime, in line with the vibrancy that the tourism market is experiencing - is also said to be doing good business.
RCRH is often the pick for big meetings and functions, and important events, such as the signing of the PetroCaribe oil deal in September 2005 between Hugo Chavez's Venezuela and CARICOM heads of government whose countries subscribe to the agreement to supply 200,000 barrels of oil per day to the region on concessionary terms.
RCHC itself says the property has built out a niche in "group-based business," has a high ratio for guest returns, and is "viewed as one of the top resorts for group travel," according to Carter.
But this also suggests that the hotel has not quite snagged its target top end luxury market of big spenders, and consequently has not been the driver of the luxury hospitality market for Jamaica as tourism officials had hoped when the deal for the hotel was sealed.
The hotel was built at a cost of US$113.2 million - one Gleaner report claimed a US$12 million overrun and a final price tag of US$125 million - with government, through the UDC and NIBJ financing 13 per cent of the development cost.
- lavern.clarke@gleanerjm.com
