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The Adrian Loveridge Column – Implications for Barbados If Sandals is Sold

Originally carried as an ‘Exclusive’ by Reuters on Wednesday 10th May 2017 under the banner headline Caribbean resort operator Sandals explores sale it took barely hours to spread throughout the travel trade and public media. According to Reuters Sandals Resorts International have hired investment bank, Deutsche Bank AG (DBKgn.DE) ‘to explore several options, including a…

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Adrian Loveridge

Originally carried as an ‘Exclusive’ by Reuters on Wednesday 10th May 2017 under the banner headline Caribbean resort operator Sandals explores sale it took barely hours to spread throughout the travel trade and public media.

According to Reuters Sandals Resorts International have hired investment bank, Deutsche Bank AG (DBKgn.DE) ‘to explore several options, including a sale of a majority stake in the company, the people said, asking not to be identified because the deliberations are confidential’. Adding, ‘the valuation of the company could not be learned, but the sources said it could be worth well over US$1 billion, including debt’. As Sandals Resort International and its various associated and subsidiary companies are currently privately held, there is of course no legal obligation to publish actual trading accounts or anything to indicate valuation.

My first question when  heard the news was: in the case of Sandals Barbados, what would happen to the unilateral and unique 40 year tax concessions that this organisation obtained if a sale took place? Would any new owner inherit them, in which case then it would further push down the hill any attempt by the entire remaining tourism industry on Barbados to play catch-up?

Sadly, the vast majority of Barbadian taxpayers has absolutely no idea of the full extent of the concessions and exactly who they were granted to because two holding company’s CPH Property Holdings (CAIPO company registration number 37515) and Grand Cass Management (CAIPO company registration number 37513) were mentioned in the original Memorandum of Understanding (MOU).

There is also widespread speculation about who is the beneficial owner of the land that the two local Sandals are constructed on and again the taxpayer is completely in the dark over this element as well. If there is any increased value of the land would it be passed on to a new owner largely based on the benefits gleaned from the extraordinary concessions, would this be fair and reasonable?

Was there any provision in the MOU signed by Government to allow for this scenario and if not, why?

The Jamaica Gleaner reported a day later in a one-paragraph statement neither confirmed or denied whether Sandals founder, chairman Gordon ‘Butch’ Stewart is exploring a potential sale of the ‘hotel management company’.

‘CEO of Sandals Resorts, Adam Stewart, son of the founder, did not respond to messages regarding the (Reuters) report, while spokesman Stephen Hector requested time to respond’.

The next question we should all be asking, could any possible sale delay or nullify plans to build the proposed Beaches Resort on the former Almond, Heywoods resort?

Has Sandals or the actual beneficial owner already paid Government for this property? What provision has been put in place just in case the construction and resort opening does not take place because this has been heralded by the current administration as an integral part of economic recovery and job creation?

And the reason I raise this question again, if Government or another party has received full payment, why would a separate private company be leasing and operating part of the hotel?

One thing for sure, the travel industry does not thrive on uncertainty and unknowns and almost always it has a severe and immediate effect on forward bookings.

Clarity is needed.

33 responses to “The Adrian Loveridge Column – Implications for Barbados If Sandals is Sold”

  1. CUP/BFP.Violet Beckles Plantation Deeds from 1926-2017 land tax bills and no Deeds,BLPand DLP Massive land Fruad and PONZI Avatar
    CUP/BFP.Violet Beckles Plantation Deeds from 1926-2017 land tax bills and no Deeds,BLPand DLP Massive land Fruad and PONZI

    My first question when heard the news was: in the case of Sandals Barbados, what would happen to the unilateral and unique 40 year tax concessions that this organisation obtained if a sale took place? Would any new owner inherit them, in which case then it would further push down the hill any attempt by the entire remaining tourism industry on Barbados to play catch-up?@@@

    This is what I posted, and what I was thinking? If the lands of Barbados Sandals have no clear title and then who will pass on Fraud? The new company better do their homework before spending their good money on more fraud, Dealing with Barbados all companies better do their homework. A big black eye is coming Barbados way very soon , The JIJ is up. If the DLP hand over land that they never owned nor bought we will see a Massive reaction.

    We will see the government owns no land they never paid for, Their maybe some rich Bajans to be seen soon when an Audit of the records are known, over 40 years type fraud have been going one wit the government taking and not paying,

    Vote Bajan Free Partty/CUP

  2. are-we-there-yet Avatar
    are-we-there-yet

    This article is at the cusp of everything that is of importance at this time including;

    The timing of the next elections.
    The true state of our usable foreign reserves.
    How long can we realistically hold out until the reserves get so low that, despite the normal intransigence of the PM and his Cabinet, there would be no choice but that an election will have to be called forthwith, followed by the imposition of very harsh economic measures whichever party wins the elections.
    The probable insertion of the IMF in the mix given the ineffectiveness of homegrown solutions.
    What the budget box might hold and its likely effects on different portions of the electorate.
    Who are the politicos feathering their alternate nests in northern climes.
    Etc, Etc.

    Surprised at the less than tepid response so far.

  3. Artax Avatar
    Artax

    A very interesting article and it is true that the tourism industry, as Loveridge would obviously know, “does not thrive on uncertainty and unknowns and almost always it has a severe and immediate effect on forward bookings.”

    The sale of Sandals would also have implications on other Caribbean islands such as Antigua and Grenada, whose governments also offered Butch Stewart a number of concessions.

    In 2012, the Grenadian Tilman Thomas administration offered Stewart a number of concessions to entice him investing in the island. SRI purchased the 100-room LaSource Resort, a Grenada family-owned business that ceased operations on October 15, 2012, allegedly due to a heavy tax burden and accumulated debt from the non-settlement of a hurricane insurance claim resulting from Hurricane Ivan.

    Ironically, under Sandals’ ownership, the property became “tax free.”

    At that time, Stewart confirmed an agreement between Sandals Resort International (SRI) and the government of Grenada, whereby the government agreed to waive the company’s payment of corporate taxes for 29 years; VAT, import duties and customs service charges on capital inputs and property taxes for 25 years. Other concessions included an extension of the duty waiver on alcohol from the usual 15 to 25 years, import duties for 25 years and VAT for 15 years on consumer goods, as well as a “cap” on property taxes and VAT on occupancy for 25 years.

    Concerns raised by Barbadians relative to tax concessions this inept DLP administration offered Sandals are not isolated. Grenadian and Antiguan hoteliers, tourism stakeholders and citizens have also expressed similar concerns as their Barbadian counterparts.

    In Grenada, the then Finance Minister, Nazim Burke, postulated that the approximately 225 jobs displaced by the sale of LaSource, would have been taken up by Sandals. Unfortunately, this was not a reality as the few people who Sandals employed, were recruited at wages lower than their previously employment.

    The new Gaston Browne ALP administration in Antigua has sought to rescind the tax concessions the former Baldwin Spencer UPP administration gave to Sandals.

    Under these circumstances, did the Bermudan government do the correct thing?

  4. David Avatar
    David

    An IMF program for Barbados is not an option unless it is currently being nogotiated with stealth. The reason, it is reported to take 3 to 6 months to negotiate an IMF program. Let the record show that Barbados is obligated to repay 300 plus million in loans.

  5. David Avatar
    David

    @Artax

    On the subject of concessions have we forgotten Karin Cable that received concessions to operate in Barbados and the company was quickly snapped up by Columbus which followed interesting consolidation in the communications sector. How quickly we forget…

  6. Alvin Cummins Avatar
    Alvin Cummins

    Sandals has not even finished its construction program yet and you are talking about “if it is sold…?

  7. Artax Avatar
    Artax

    Alvin Cummins May 22, 2017 at 11:36 AM #

    “Sandals has not even finished its construction program yet and you are talking about “if it is sold…?”

    @ Alvin Cummins

    What does Sandals not completing construction have to do with the owner, as revealed in the press, contemplating selling SRI?

    Perhaps you should not confine your reading to the DLP’s website.

  8. Artax Avatar
    Artax

    @ David

    I do not want to change the focus from this article, but had to do so based on AWTY and your comments relative to the IMF.

    I am amazed that, in the absence of the necessary research to avail themselves of information relative to the IMF, many people are of the misguided opinion that periods of adjustments are associated with austerity, Hence, their belief that all IMF programmes impose unnecessary austerity and hardship on countries seeking those options.

    This is far from the truth and could be verified if people take the time to visit the IMF’s website to read about the different adjustment programs offered by that organization.

    Believe it or not, Barbados’ present economic circumstances satisfies the “general requirements” to qualify for assistance from the IMF.

    Recall former Central Bank Governor, Dr. Delisle Worrell said that government’s domestic policies, (e.g. the Medium Term Fiscal and Medium Term Development Strategies 2010-2014) have all failed to achieve the desired objectives. This led to an increase in the island’s economic imbalances and vulnerabilities, as evidenced by an unsustainable budget deficit, been financed through the “printing of money” by the Central Bank, which has led to a decline in our foreign exchange reserves.

    The government must make certain harsh decisions and adjustments, (such as significantly decreasing government spending or increasing the price of foreign exchange), to address these “shocks and imbalances. Under these circumstances, the IMF offer countries financial assistance to provide a “cushion of support” thereby easing the impact on citizens, while giving government additional time to address underlying economic problems.

    In the absence of IMF financing, government would continue relying on the NIS and Central Bank to finance the deficit, which would make the process of economic adjustment much more difficult. And the evidence is there to substantiate this fact.

    We are all aware that investors are not too keen on purchasing government bonds, which obviously resulted in government having to reduce expenditure, either by reduce spending, increasing revenue through taxes or finance the deficit by “printing money.” IMF loan funding could reduce the impact of economic adjustment and inflation on the most vulnerable, while facilitating a more gradual and carefully considered adjustment.

  9. Vincent Haynes Avatar
    Vincent Haynes

    Artax May 22, 2017 at 11:51 AM #

    Well stated and on point according to all the known facts.

    Which begs the follow up question.

    ….as a fully paid up member of the IMF entitled to certain assistance that would make economic adjustment less difficult.

    ……why is the govt continuing to be hesitant about approaching the IMF…..what other reason can exist??

  10. angela Skeete Avatar
    angela Skeete

    Bunch of baloney and horse sh.it all bundled together.As if Adrian does not have enough problems of his own with Peach and quiet

  11. Hal Austin Avatar
    Hal Austin

    Who carried out due diligence on Sandals before the awful agreement was made?

  12. are-we-there-yet Avatar
    are-we-there-yet

    Artax;

    Thanks for your illuminating comments re. the IMF.

    Your underlying point that the IMF is not necessarily an evil institution, waiting to pounce on and pauperize third world countries who run into self inflicted economic problems is well taken. There are several examples of positive assistance by the IMF to a number of our Caribbean neighbours in the recent past.

    The IMF can assist us in this time of peril but possibly at a political cost related to a general Bajan perception that whichever version of Tweedledum or Tweedledee requests and accept the conditionalities of their assistance especially if such assistance might require us taking a sip of devaluation. Thus my implicit suggestion that this topic could benefit from comments by the BU family related to the timing of our elections if our foreign reserves are nearing a level that could trigger the IMF being brought on board to facilitate an urgent release of FX, especially if expected FX from Sandals is not immediately forthcoming because of the intricacies of the possible sale referred to by Adrian Loveridge above.

  13. are-we-there-yet Avatar
    are-we-there-yet

    Vincent Haynes, re. your 2:24 pm post.

    Good question.

    Quixotic tilting at consistently failing home-grown solutions and inability to pivot. In addition fear of being labelled as the Government that called in an IMF that might still be seeing devaluation as a viable option and a solid conditionality and the resultant losing of several seats in the next Elections might explain the reluctance of the Government to grasp the nettle.

  14. David Avatar
    David

    @Artax

    As you know to participate in an IMF program it requires adherence to a disciplined behaviour as it relates to managing the public finances. Before we sign on the dotted line however there must be agreement to the criteria. Why would this government box itself by signing an IMF agreement with a general election on the horizon?

  15. millertheanunnaki Avatar
    millertheanunnaki

    @ Vincent Haynes May 22, 2017 at 12:24 PM
    “ why is the govt continuing to be hesitant about approaching the IMF…..what other reason can exist??.”

    Just only to prove OSA’s 90 days prediction wrong’.

    Well, why not add another 3 months onto the timeline and make it September so that all can remember that an IMF programme is nothing novel to a DLP administration.

    But there will be no liking or lumping this time around as devaluation will be a sine qua non to ensure across-the-board adjustment in conspicuous consumption and to force Bajans to higher levels of productivity and forex earning/saving activities.

    The longer this administration tries to dodge the inevitable bitter medicine of economic adjustment the longer will be the radical surgery required to save the economic life of the patient called Barbados.

    ‘How long will be too long if it is bad’ should be the next election slogan.

  16. David Avatar
    David

    @Miller

    Surely you noted there was an increase in the forex over quarter 4 based mainly on increased arrivals.

  17. millertheanunnaki Avatar
    millertheanunnaki

    @ David May 22, 2017 at 2:46 PM

    Surely you know the expression “lies, damned lies and statistics”!

    If you depend on those massaged numbers coming from the CB now headed by another puppet guv you would believe that the real rate of unemployment in Barbados is less than 10%.

    The CB has been so politicized for narrow partisan purposes that it will take the IMF bean counters to give a ‘true and fair view’ of the financial state of the Bajan economy.
    How can a third world country be ‘enjoying’ less than 10 % unemployment and still be suffering the economic ravages and stringencies that depressed Barbados has been enduring for the last 5 years?

    The day that $300 million in forex went missing just after the 2013 elections was the day that any ethical commitment to reporting ‘data facts’ flew out the window in that building in the Church Village green.

  18. David Avatar
    David

    @Miller

    Why would you blame the central bank for taking the unemployment number from the BSS? We all are aware how that number is computed read how bodies will drop from the dataset based on inactivity. And you are aware the hullabaloo when acting Governor Worrell conducted his survey?

    You must be aware also the feedback from the IMF and world Bank questioning the integrity of our data?

  19. millertheanunnaki Avatar
    millertheanunnaki

    @ David May 22, 2017 at 3:32 PM

    And you can alarmingly project what is in store for the social integrity of Barbados where such a large figure (both absolute and percentage wise) of its working age population is either ‘productively’ inactive in the formal economy or participating in the underground economy where there are no formal tax rolls or tax points.

    What would be the financial viability of the NIS in the next 10 years when your ‘good-citizen’ generation steps up to the plate for your old age safety net?

    What the journalists in Barbados should be doing is demanding a breakdown of that foreign reserves figure published by the CB for further analysis.

    Such a drilling down might just open a can of worms that even Hal Austin- the ace in the world of financial journalism- might not be able to fathom and be forced to close the Pandora’s box of shock and horror.

    But then there is always ‘Hope’ remaining in the Maloney genie of the Hyatt erection, n’est-ce pas?

  20. Artax Avatar
    Artax

    Vincent asked: “Why is the govt continuing to be hesitant about approaching the IMF…..what other reason can exist??

    David asked: “Why would this government box itself by signing an IMF agreement with a general election on the horizon?”

    AWTY made an interesting comment relative to “the IMF being brought on board to facilitate an urgent release of FX.”

    ++++++++++++++++++++++++++++++++++++++++++++

    A country’s government is essentially responsible for developing its own policies to deal with social and economic challenges. These policies could be either “home grown” or variations of policies, developed by other countries undergoing similar economic challenges, which were successful in achieving specific objectives.

    Governments seeking financial assistance from the IMF are required to submit these policies to the IMF’s Executive Board for approval and policy support from the Fund. The policies must also be shared within the country to solicit “broad support” of special interest groups, citizens, stakeholders, etc.

    The IMF will NOT make FINANCING AVAILABLE under circumstances where a government’s economic policies are CONSISTENTLY not ACHIEVING the DESIRED OBJECTIVES.

    Taking the above comments into consideration, it is a known fact that this DLP administration’s economic policies:

    1) Are not shared publicly for support.

    2) Suffer from “chronic implementation deficit.”

    3) Have been consistent in not achieving the desired objectives.

    Perhaps these are some of the reasons why government cannot approach the Fund.

  21. David Avatar
    David

    @Artax

    Surely fired former Governor Worrell would have been privy to info to support your assertion that the IMF doesn’t have the appetite to entertain an application from Barbados? Afterall he was an advocate in his last days!

  22. Artax Avatar
    Artax

    It is also interesting to note that, in its October 2012 World Economic Outlook report, the IMF’s chief economist, Olivier Blanchard, admitted that austerity measures are much worse for economies than they had originally thought.

    Additionally, in 2016, three IMF research department economists, Jonathan Ostry, Prakash Loungani and Davide Furceri have concluded that austerity does more harm than good.

    Since the IMF seems to be moving away from the type of austerity policies George Osbourne imposed on the UK in 2010, what does Barbados and the Caribbean have to fear in seeking IMF assistance?

  23. Artax Avatar
    Artax

    @ David

    Perhaps I should have offered a disclaimer as it relates to my personal opinion.

  24. Prodigal Son Avatar
    Prodigal Son

    @ Vincent Haynes May 22, 2017 at 12:24 PM #

    “……why is the govt continuing to be hesitant about approaching the IMF…..what other reason can exist??”

    ……………………………………..

    Shame, Vincent, shame.

    Stinkliar kept saying “we are not going to the IMF now nor in the near future”.

    So as Bajans would say…… he shame to go to the IMF.

  25. Well Well & Consequences Observing Blogger Avatar
    Well Well & Consequences Observing Blogger

    “The new Gaston Browne ALP administration in Antigua has sought to rescind the tax concessions the former Baldwin Spencer UPP administration gave to Sandals.”

    And this is what should happen to Sandals…a real government should rescind that unfair to raxpayers 40 year tax concession to Sandals…tax concessions to hotels should only be REWARDED in 5 year increments when it can be proven that the island and not the hotel owners benefits significantly also.

  26. NorthernObserver Avatar
    NorthernObserver

    @AL
    the separation into a myriad of companies is SOP (Standard Operating Procedure). They are multiple reasons, taxes being one, ownership another, liability etc etc.

    Without the specific documents, everything is guesswork.

    Butch may also be contemplating “going public” and this would be another reason to assess value. The IPO market has been improving.

  27. Gabriel Avatar
    Gabriel

    WW&C
    Barbados need to tighten up its laws to protect its taxpayers from the excesses of ignorant and careless Ministers of government who can only see a 5 million deposit in their mothers’ hitherto penny bank account.There must be laws to prevent the type of tax giveaways Freundel Stuart has saddled future generations with in that Sandals 40 year tax giveaway.It is equivalent to financial mismanagement and ties the hands and the ability of future governments.Sandals is no better than Baloney,Cow and such like raiders of the people’s tax monies.Stewart,Mr Top Investor inveigled the Jamaican authorities to turn over Air Jamaica to him to run.They did and he in typical buccaneer style management increased the debt portfolio of the airline meanwhile making sure that all the losses are government’s liabilities while utilizing the revenue generation capability of the airline to feed his hotels with asses in seats= bods in beds,as they refer to it in the industry.The IMF made sure Air Jamaica was removed from that arrangement.Similarly the Antigua government wrestled Stewart to the ground,accusing Sandals of selling an all inclusive product including the Sales Tax component and then with holding 65% of the tax and paying the government only 35%.PM Brown considered the full tax was due and payable to the government.Sandals countered that the government was in ‘blatant breach’ of their agreement and threatened to sue.When Brown welcomed the suit and wrote that Sandals would have to make full disclosure of its financial dealings,”including monies collected and retained abroad”,cooler heads prevailed and Sandals quietly made agreement to pay the full sales tax to the government in 2017.It would be interesting to know whether the agreement made by the GOB contained provisos in the event of a transfer of ownership.If our negotiating skills with the baloneys are anything to go by,one doesn’t hold out too much hope for the GOB covering its proverbial ass against such possibilities.

  28. Hants Avatar
    Hants

    “the Cuban government was forced to accept the builders bringing hundreds of qualified workers from India, ”

    https://www.barbadostoday.bb/2017/05/23/first-ultra-luxury-hotel-in-cuba/

  29. Alvin Cummins Avatar
    Alvin Cummins

    Miller and Artax;
    Will you commit to making devaluation one of your planks in the coming election? Will you make it clear to all and sundry, that an elected BLP administration WILL devalue the Barbados, Dollar, whatever the economic status of the country; whatever the growth path, and whatever the level of foreign exchange? You are both adamant that an IMF program and devaluation are the solutions to the country’s financial problems.Tell the people that you plan to do this immediately if elected.

  30. Alvin Cummins Avatar
    Alvin Cummins

    Well,
    “It would be interesting to know whether the agreement made by the GOB contained provisos in the event of a transfer of ownership.”..So all those people; including you, making all this talk about whAT WOULD HAPPEN “IF” SANDALS WERE SOLD, DO NOT KNOW. THEY ARE JUST LIKE THE LAST MAN IN A CRICKET MATCH; JUST SWIPING.

  31. Artax Avatar
    Artax

    Alvin Cummins May 25, 2017 at 9:07 PM #

    “Will you commit to making devaluation one of your planks in the coming election? Will you make it clear to all and sundry, that an elected BLP administration WILL devalue the Barbados, Dollar, whatever the economic status of the country; whatever the growth path, and whatever the level of foreign exchange?”
    “You are both adamant that an IMF program and devaluation are the solutions to the country’s financial problems.
    Tell the people that you plan to do this immediately if elected.”

    @ Alvin Cummins

    I cannot reply on behalf of Miller. But, in my opinion, you should address your first and third questions to Mia Mottley or any other member of the BLP, since they are better equipped to respond.

    Because I may be critical of this inept DLP administration, does not signify I am a supporter or member of the BLP.

    To your second question, perhaps you would care to highlight where in any of my contributions I am “ADAMANT that an IMF program and DEVALUATION are the SOLUTIONS to the country’s financial problems.”

    Mr. Cummins, are you dyslexic? You have this UNIQUE ability to (in one action) “misread, misinterpret, misapprehend, misconstrue, misconceive and misunderstand” other people’s contributions and then arrive at a misconception, as a result of your incorrect thinking and flawed understanding of what was actually written.

  32. Vincent Haynes Avatar
    Vincent Haynes

    Alvin

    Why are you and your party members so afraid of dealing with objective criticism….why are you looking for a bee in every corner….why do you think that you and your limited amount of cohorts have all the answers…..when will you realise that many of your own have offered advice that you rejected…..as I said elsewhere you lot only have yourself to blame.

  33. Hants Avatar
    Hants

    BARBADOS FREENESS IN TORONTO

    http://www.harbourfrontcentre.com/festivals/barbadosonthewater/

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