GORSTEW Limited has pledged to co-operate with the contractor general’s probe of the negotiations for the sale of the Sandals Whitehouse hotel in Westmoreland and has made public a 24-point statement of facts on the project.

In a statement published in today’s Sunday Observer, Gorstew, Gordon ‘Butch’ Stewart’s holding company, said it “welcomes and will co-operate with any investigation mounted by the contractor general in relation to the sale of Sandals Whitehouse”.

Gorstew’s statement comes amidst swirling controversy over the sale talks which the company has insisted are not secret, contrary to a Sunday Herald story a few weeks ago.

The Office of the Contractor General (OCG) said it intended to probe the issue based on the Herald report.

Contractor General Greg Christie, in a news release, said he had requested from the cabinet secretary information on the talks, adding that “In the event that the allegations are true, the OCG’s letter of enquiry has also sought to obtain a broad range of information and documentation regarding the proposed divestment”.

However, the key personalities involved in the negotiations dismissed the Sunday Herald allegation and Gorstew has maintained that the talks could not have been held in secret, given the involvement of the boards of the hotel’s stakeholders and the Government.

“Secret? What secret talks? We have had numerous meetings but we have not yet come to any decision. Nobody has said to me this is being done in secret. There is no need for that,” R Danvers ‘Danny’ Williams, the man who was called in by the parties to chaperone what have been difficult year-long negotiations, told the Daily Observer last month.

Williams said it was impossible to keep talks secret when all the board members of the three entities which own the hotel “are fully in the loop”.

That point was emphasised by Urban Development Corporation (UDC) chairman Wayne Chen and Gorstew spokeswoman Rachel McLarty in separate interviews with the Observer, which is owned by Stewart.

“A secret from whom?” Chen asked, adding that he wouldn’t know what the newspaper meant by saying “secret” because all the shareholders were aware of the discussions on the possibility of divesting the Government’s shares in the hotel.

“There have been no secret talks, nothing clandestine, nothing irregular in any way,” McLarty told the Observer. “The full boards and chairmen of the Urban Development Corporation, Development Bank of Jamaica, and Ackendown Newtown Development (ANDCO) knew of the negotiations and the Government was fully in the picture.”

Stewart had conceived of the hotel on Jamaica’s rustic and undeveloped south coast as another opportunity to spur development and provide jobs for Jamaicans. But his dream rapidly became a nightmare when construction of the hotel went awry, with delays, defects and eventually a US$43-million cost overrun over which Gorstew had sued the then Vin Lawrence-run UDC to recover money lost and reputation damaged.

In its statement published in today’s newspaper, Gorstew addressed the issue of the cost overruns as well as the US$40-million which it has offered to acquire the hotel but which has been the subject of controversy.

“In early 2009 ANDCO requested a valuation report from Ernst & Young so that the market value of the resort would be reflected in the audited financial statements,” the company said. “The report, dated October 2009, stated that the market value of the hotel was US$52 million.

“However, on December 4, 2009 ANDCO issued a draft Memorandum of Understanding (MOU) which contemplated a sale of the hotel and its Furniture Fittings & Equipment (FF&E) to Gorstew for a purchase price comprised of three elements:

a. $74 million for the hotel and FF&E;

b. Assumption of the equivalent amount of existing third-party Loans;

c. Abandonment by Gorstew of certain arbitration claims including a claim for US$28 million for damages relating to opening the hotel in an incomplete manner.”

Gorstew said it rejected the MOU, which was effectively 42 per cent more than the Ernst & Young valuation and, in addition, required Gorstew to abandon its US$28-million claim. The company said that in order to continue the negotiations “in an orderly and professional manner”, Williams was appointed as the ‘facilitator’, whose primary objective was to negotiate the sale of the hotel at a fair market value, taking all issues of the parties into account as well as the Ernst & Young valuation of US$52 million.

“Gorstew objected to the US$52 million on the basis that it did not take into account the landlord’s obligations for annual expenditure for:

a. Property insurance; and

b. FF&E reserves to provide for cyclical upgrading of the hotel facilities.

The company said that Ernst & Young subsequently amended the valuation to account for the landlord costs and reissued the report, stating the market value as US$40.2 million.

But Gorstew said it objected to that valuation on the basis that the forecast hotel revenues used to determine the market value were substantially higher than what the hotel had historically earned and were completely out of step with the Sandals forecasts.

The company also said that the Ernst & Young valuation ignored the fact that the Jamaican hotel industry was struggling with the worldwide recession and had to heavily discount room rates in order to get bookings.

However, Gorstew said that in the protracted negotiations with Williams, it agreed to proceed with the purchase of the hotel for US$40 million and to accept a vendor’s mortgage of US$32.5 million being offered at an interest rate of six per cent which was substantially above Sandals’ existing loans of four per cent and below.

“Gorstew made the concession in the interest of moving forward and protecting the Sandals brand against the impact of a further delay

concluding the sale of property,” the company said.