Sandals Whitehouse deal would be good for the government and Jamaica — Part II

BY AL EDWARDS

Friday, February 04, 2011

THE sale of the Sandals Whitehouse hotel in Westmoreland to the Gordon 'Butch' Stewart- controlled Gorstew Limited has attracted much attention, with the Contractor General Greg Christie deeming it the subject of a thorough investigation which is no doubt underway.

Nevertheless, if Gorstew were not to purchase it then Whitehouse would remain bankrupt with a slew of ill-fitting suitors looking to pick it up on the cheap in some kind of fire sale. It would not be inconceivable to countenance the government having to consider offers of between US$10 million and US$20 million and perhaps even more derisory proposals. Make no mistake, this is a good deal for all parties concerned: it is a sweet deal for the government and Gorstew paid a premium for a hotel that was plagued with problems but now gets an opportunity to be rectified by the best hotelier in the region. Should this deal go through, Gorstew will be unencumbered by partners that do not know the business or what they are doing, for that matter.

Last year, Sandals acquired the Four Seasons in Emerald Bay, Exumar, for US$25 million which is a prized asset sitting on some 500 acres. It has already spent some US$15 million refurbishing and 'Sandalising' it. Gorstew will have to go through a similar exercise with Whitehouse. The onus is now on the company to correct previous mistakes and make Whitehouse one of the best hotels in the country.

The Pegasus Hotel in New Kingston is the largest corporate hotel of its kind in the country and was put up for sale in what proved to be a protracted affair. It was eventually sold for US$11 million in what was generally considered a cut price sale, yet it did not elicit the level of controversy that the Whitehouse sale did.

Caribbean Business Report understands there are plans afoot to further develop the land the Sandals Whitehouse hotel sits on. An 18-hole Greg Norman golf course, one of the finest in the Caribbean, may well become a possibility. Sandals already has a working arrangement with legendary Australian golfer Greg Norman who has developed a golf course at Sandals Emerald Bay, Exumar.

Gorstew owns the land across the road from the hotel, where there are historic heritage sites, which it intends to restore and develop into an attraction. There are plans to add another Beaches hotel on the lands there. The company is also considering developing a shopping and entertainment complex that will have a cinema and restaurants. These additional developments are expected to come to around US$200 million for Gorstew.

The vision is to see the south coast as a tourist haven that attracts a more discerning high-end visitor, yet pays attention to the uniqueness of the environment. It is hoped that the lessons learnt and mistakes made in the development of the north coast will be brought to bear on this dream.

The chairman of Gorstew, Gordon 'Butch' Stewart, sees the possibility of developing an aerodrome at Holland Estates which, if it could bring in 50,000 people a year, could be self-sustaining and not be a burden to the government and hoteliers. He notes the splendid job Chris Blackwell and Jason Henzell have done with the aerodrome at Treasure Beach and points to it as to what can be achieved.

But before undertaking further development of the south coast it is imperative that Gorstew concentrates on putting right the wrongs of the Whitehouse hotel. That has to be its immediate priority. Whitehouse will be the first step and will provide the impetus for Gordon 'Butch' Stewart's grand vision for the south coast.

For years there has been talk of British billionaire Joe Lewis of the Tavistock Group developing Harmony Cove in Trelawny into the biggest tourism project ever undertaken in Jamaica. The plan was to build a 1,200-room hotel, with 11 manor homes on five-acre lots, 88 villas and 60 condominiums in a luxury resort in the home parish of Usain Bolt. The first phase was projected to cost US$1 billion, while the entire project, which is expected to take 10 years, should come in at US$2 billion. However Lewis, who was the second largest shareholder in Bear Stearns, is reported to have lost close to US$900 million when the investment house crashed at the end of 2008, putting the Harmony Cove project in serious doubt or at the very least delaying it for some time to come.

Whitehouse is a reality and the development of the south coast can get underway with the plans Gorstew has for that area. It will provide much- needed jobs and help to elevate the entire locale.

There are those who contend that someone other than Gorstew could have acquired Whitehouse and that it should have gone to tender. The Prime Minister, aware of the government's desperate revenue position and its need to divest itself of draining financial obligations, astutely outlines the reasons for going with Gorstew -- reasons that are pragmatic and make sense. Most reasonable and non-partisan observers will no doubt understand the government's rationale for going this route.

Addressing parliament, the Prime Minister said: "Because of the particular arrangements regarding this property, the normal procedures for divestment, that is, by way of advertisement and competitive bidding, were not considered appropriate for the following reasons:

(1) Gorstew is already part-owner of the property through its shareholding in ANDCo, and under the terms of the 2005 lease, Gorstew has a right of first refusal in the event that ANDCo disposes of the property;

(2) The property is the subject of a long-term lease to Gorstew which has 14.5 years left to run, and which would make it unattractive to a prospective third-party strategic purchaser, who would naturally wish vacant possession;

(3) The terms of the lease and the projected rental income were unlikely to attract financial investors at a price satisfactory to the government shareholders;

(4) Gorstew, having the right of first refusal referred to above, would be placed in an advantageous position in such a bidding process;

(5) The location of the property "off the beaten track" would make it a "hard sell", especially in a period of economic recession.

The Government, therefore, decided to enter into negotiations with Gorstew for the sale of its interest in the property.

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Sandals Whitehouse deal would be good for the government and Jamaica — Part II