Property Matters – Tobago Love

Tobago Love n.

Trinidad & Tobago
1. The act of beating one’s partner to prove one’s love…

from TriniMummy.com [Via http://www.skettel.com/ an online Caribbean dictionary.]

This article uses the threads I have been exploring in relation to the two large-scale Public Private Partnerships (PPPs) in Tobago to discuss the risks which are likely to arise quite soon in that arena.

The case will be made in three parts – the existing two PPPs, with a note on the Tobago Sandals MoU fiasco; the emerging arrangements for new PPPs in Tobago and the perils arising from the failure or refusal to examine the failed PPPs.

Tobago’s PPPs

Magdalena Grand (formerly Tobago Hilton)

magdalena
Magdalena Grand Beach and Golf Resort

This 198-room hotel was built in 2000 on the Tobago Plantations estate by Vanguard Holdings, which comprised Guardian Holdings, Angostura Ltd and the T&T State via e Teck, with Hilton International having a minor shareholding.  The project was financed with a $16.75M USD bond from Citicorp and was soon in difficulty, as in 2008 the State had to bail-out the private shareholders and commit large sums of Public Money to repair the buildings, which were by then badly-damaged by sea-blast.

Here is the testimony to the Joint Select Committee of Parliament on Wednesday 6 April 2016 –

Mr. Karim (Director of Policy & Strategy at the Ministry of Trade & Industry): Well, Hilton had shares in Vanguard Holdings as well as Tobago Plantation. When the Government took the decision in 2008 to purchase the hotel it paid the equivalent of TT$138 million for the shares which Trinidad Hilton had in Vanguard Holdings…then approximately $160 million was the full cost of renovation to get the hotel opened in 2012… (pp. 55-56)

The State paid $138 million to rescue the private shareholders and a further $160 million to fix the building.

I am not aware that there has ever been any serious study into why this PPP effectively collapsed only seven years after the hotel opened. The then Minister of Trade & Industry, Dr Keith Rowley, speaking at the post-Cabinet press briefing on 27th March 2008 to announce those changes was emphatic that the private sector partners had not fulfilled their responsibilities insofar as contributing to the ongoing maintenance of the hotel itself.

That hotel is currently being operated via a Management Agreement with Hospitality Solutions Ltd and was recently stated to be set for operation by Apple Leisure Group –

“…Government will undertake rehabilitation and outfitting work on the hotel and Apple Leisure Group will assume operatorship…”

—Finance Minister, Colm Imbert, speaking on 8 October 2019.

MILSHIRV

milshirv complex
MILSHIRV Complex

In this case, the THA agreed to buy a three-acre parcel of land from private developers for $12M, lease it back to them for 199 years for an 83,000 sf office to be built for leasing by the THA for a 20-year period at a monthly rent of $1.295M.  The THA has the option to buy the property at the end of the lease, with certain options to also do so during that 20-year period.

The THA Divisions identified as users for that office occupied only 28,500sf, which is about one-third the space, and paid an average rent of $7.81 per square foot.  The rental rate for the new building is $15.61 psf, almost exactly twice the former rate. The real financial impact arising from the doubling of the rental rate and the tripling of the required office space is that THA is now paying five times the office rent paid for those Divisions before MILSHIRV.

The central government sued to test MILSHIRV’s legality, but that was soon set aside by agreement and converted to an interpretation case in which the Court was asked to decide if such deals were legal. The Court of Appeal ruled against the THA on 21 October 2019 and the THA has now announced its intention to appeal that ruling to the Privy Council.

TOBAGO SANDALS MoU

sandals-tab-mstrpln

This deal, as outlined in the MoU, was for the State to fund a huge, luxurious resort on valuable public land with further grants of tax, duty and work permit concessions, together with explicit recognition of the hotelier’s right to transfer pricing. Although Sandals are now declared as having withdrawn, we are not told what was the business case for this immense investment, given that all the possible areas for returns appeared to have been given away via concessions.

THA’s emerging approach

In the 2020 Budget Statement, on 7 October 2019, the THA was granted independent borrowing powers for the first time, with an initial limit of $300M being declared. This was stated to be a significant step in the direction of greater autonomy for the THA and it was warmly received by that body.

terrence-farrell3
Dr Terrence Farrell delivers an address at the 13th annual Tobago Economic and Business Outlook Conference at the Magdalena Grand hotel. Photo courtesy Trinidad Express

On 12 November 2019, Dr Terrence Farrell announced proposals from the THA-appointed Committee to recommend a Medium-Term Policy and Planning Framework for Tobago. Dr Farrell, who was Chairman of that Committee stated that those proposals included three new all-inclusive hotels for Tobago adding about 1,800 new rooms. It is important to note that Dr Farrell clearly stated his views that such investments should not be made by the State, but advice can always be rejected or modified.

Joel-Jack_Official
Assemblyman Joel Jack
Deputy Chief Secretary and Secretary of Finance and the Economy

Closely following that, the THA Secretary for Finance, Joel Jack, announced, upon his return from the 27th annual national conference on public-private partnerships, hosted by the Canadian Council for Public-Private Partnerships from November 17-22 –

“…we continue to liaise with a number of professionals and this conference provided an opportunity that would be the catalyst to build on our current momentum, as we seek to discuss the practicality for P3’s for assembly projects and the economic imperative of leveraging private sector financing and expertise for public infrastructure investment here in Tobago…”

The declarations as to current momentum and economic imperative do not sit well with the failure or refusal to study the existing PPPs. This is an emerging aspect which requires our utmost vigilance.

One thought on “Property Matters – Tobago Love

  1. For us here and in Tobago, money matters, not people and certainly not property, unless of course it’s theirs.

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