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Sandals Whitehouse: How a dream turned into a nightmare

For 'Butch' Stewart it was never about the money

By Desmond Allen Executive Editor - Operations allend@jamaicaobserver.com

Sunday, February 06, 2011    

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GORDON 'Butch' Stewart was once quoted as telling an interviewer that "money means very little to me". In a bet with a People's National Party (PNP) politico, the multi-billionaire put up the princely sum of J$500. "It's not about the money," he told a baffled enquirer.

It's the reason Stewart could so easily withdraw his US$28.8 million lawsuit against the state agencies he blamed for the debacle over the Westmoreland-based Sandals Whitehouse Hotel. It was never about the money.

Stewart has a knack of looking at what to most ordinary people seem to be barren wasteland and visualising an oasis with spectacular hotels reaching to the blue skies, beckoning droves of tourists to come cavort on sun-drenched beaches or laze away the days in the shadow of majestic hills.

On one of his many treks across Jamaica, he remarked how virginal and untouched the rustic south coast seemed, its lush vegetation, the serenity of its rolling plains, the aroma of fresh country air alluring and irresistible. It was love at first sight.

Stewart saw the possibilities of what could emerge from a thriving hotel driving south coast development and, most of all, creating jobs for Jamaicans. His world-famous Sandals/Beaches brand had done it over and over. The visionary had started to dream...again. He couldn't know it then, but it was a dream that would become a nightmare.

In 1999, Gorstew, Stewart's holding company — named from his Christian name Gor(don) and his surname Stew(art) - the state-run Urban Development Corporation (UDC) and the then-National Investment Bank of Jamaica (NIBJ), came together in a joint venture to build a 400-room hotel, or 360 keys in hotel language, on the Ackendown property, Westmoreland. They chose the magical Beaches Turks & Caicos as the benchmark.

The UDC, then under the chairmanship of Dr Vin Lawrence, was responsible for building the hotel and contracted Nevalco Consultants, owned by Alston Stewart, to be project manager. Gorstew, using its Sandals brand would operate the hotel on a 20-year lease. The joint venture was called Ackendown Newtown Development Limited and incorporated on July 18, 2001.

On October, 2001, the board of Ackendown Newtown held its first meeting, against the backdrop of a massive disaster in Jamaica's primary tourist market. Terrorists had flown two commercial jets into the World Trade Center in New York and a third into the Pentagon in Washington, killing hundreds of people.

The tourist industry was badly hit as Americans and tourists in general stayed home. The Beaches family brand was particularly hard hit, but the Sandals brand, which lured couples in love, was better able to withstand the battering.

The board decided that it would change the design from a Beaches to a Sandals brand. That would also end up costing less to build by eliminating things like water parks and adjoining bedrooms. The plan was to complete and open the hotel in 2003.

By May 2002, the second sign of trouble emerged. The board was forced to revise the initial US$60 million cost for building the hotel by a substantial US$10 million.

But time was slipping away. Gorstew, which had already started to market and book the hotel, began to complain about the slow progress of the work. Ashtrom, the builders contracted by the UDC, asked for an extension of 5 1/4 months. On December 12, 2002, the completion date was revised from September 2003 to January 29, 2004.

By March, 2003, the builders said they needed a further 10-month extension. Sandals, getting increasingly worried about its hard-earned reputation, planned a soft opening for the summer of 2004.

That was not to be.

Up to the July 10, 2003 Quantity Surveyor's Report, no increase in the development budget of US$70M was foreseen. But by October 2004 the ANDCO Board was advised to brace for cost overruns. They would be massive.

As the construction dragged on, even the board of Ackendown Newtown Development could not find the energy to meet. In fact, between October 20, 2003 and January 3, 2005, no meetings were held, although board members discussed issues informally.

At its January 4, 2005 meeting, the chairman of ANDCO indicated project costs were showing overruns of US$15 million.

Based on the assurances from the project manager, Sandals had the hotel fully booked for the winter of 2004-2005. But the hotel was unable to start operations before February 10, 2005.

Even then, Stewart did so reluctantly. There were so many defects that Sandals was forced to offer free vacations to ward off claims of false advertisement, heavily discount the rooms, purchase emergency furniture and improve landscaping to Sandals standard

The company had spent US$28 million, the sum for which it would later sue ANDCO to recover damages to its brand.

As the controversy swirled around the hotel, then-Prime Minister P J Patterson stepped in to respond to questions in Parliament on Sandals Whitehouse project cost overruns.

On June 1, 2005, Patterson appointed the veteran Noel Hylton to head up a committee involving representatives of UDC, NIBJ, Gorstew, among others, to undertake "a full and detailed review of all costs, revenue and occupancy levels to determine and get an appreciation of any operational losses in this interim period".

By November 2005, word came that the cost overruns had now jumped to a huge US$39 million. An audit team was tasked with reviewing all contract documentation, including the methodology of selection and the contract provisions; reviewing the impact of external influencies on the project; the standard of the completed hotel against the benchmarked hotels and hotel facilities; the specific mechanical and engineering standards; the project costs and final accounts; the performance of the contracted parties, and the quality of the final product and value of the completed project.

Near month's end, the Hylton Report was submitted but was immediately shrouded in controversy. The report exonerated Gorstew of any responsibility for the cost overruns. Unable to get answers and still fuming, Gorstew filed a lawsuit against Ackendown Newtown.

The Contractor General, who had entered the picture earlier, reported to the Parliament in June 2006. The waters became muddier on June 20 when the Jamaica Labour Party (JLP) Opposition's Karl Samuda disclosed in Parliament contents of the Hylton Report, for which his impeachment was sought. The report had not been made public up to that point.

A Motion of Censure moved by the PNP's Danny Buchanan (now deceased) was passed against Samuda in the House on October 3, 2006 and referred to the Committee of Privileges.

Patterson stepped down as prime minister in March 2006, setting off a leadership tussle that brought Portia Simpson Miller as the first woman to assume the position of prime minister of Jamaica. She went on to lose the September 2007 elections to the Bruce Golding-led JLP.

The new government then found itself with the Whitehouse hotel as an albatross around its neck. In opposition, it had clamoured for answers to the cost overruns, delays and defects. Now the problems were theirs.

The cost overruns, eventually estimated at US$43 million, had thrown everything out of whack and set the hotel on course for bankruptcy. The US$4 million annual rental could not carry the debt. Sandals Whitehouse hotel was bleeding red ink and the defects had forced Gorstew to continue to spend, in order to deliver the promised five-star hotel. It was Stewart's worst nightmare.

In 2009, Stewart exercised his right of first refusal in his bid to buy and save the hotel. He planned to go further and expand it with a Beaches family hotel; golf course, park, entertainment facilities and a third party-run aerodrome. But no sooner had Stewart had got up from the drawing table than the critics struck, saying the purchase talks had been going on in secret and claiming the agreed US$40 million price was too low.

Critics are known to ignore facts that don't suit their argument and this was no exception.

At one stage, Stewart wondered out loud whether he should continue. He certainly didn't need the money.

But Gordon Cyril Arthur 'Butch' Stewart is a stubborn man. He needed only to watch the waiters and waitresses at work; the groundsmen tending the plants; the taxicabs and buses running back and forth; the smartly dressed front desk clerks; the farmers supplying their products, in short, the ordinary people whom he loved, happily at work.

The dream is, indeed, hard to die.

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