Speaking for the first time on the shutdown at Morgan’s Point, Finance Minister Curtis Dickinson confirmed that funding for the multi-million dollar Caroline Bay Development is “at a standstill” and Bermuda’s taxpayers could be left on the hook to foot the bill.
At a news conference on Thursday, the Minister was quick to note that it was the former One Bermuda Alliance administration signed on as the guarantor for financing to the tune of $165 million.
“This project has spanned governments of both Parties and Administrations within those governments for over a decade,” he said.
“Should the project go unfunded, we will be on the hook for $165 million,” he said, as “genuine efforts by the developers” to secure financing continues “to fund their obligations mindful of the importance of keeping some work going on at the site”.
“This funding appears to now be at a standstill. As such this accounts for the sums owed to contractors and subcontractors who have, in good faith, done the work required. Understandably, some have now lost their patience,” the Minister said.
“However, in addition to the issues surrounding non-payment to contractors and subcontractors, I have a wider concern based on my responsibility to safeguard the public purse and to avert the risk to which the Bermudian taxpayer has been exposed, first by the former government and now by delays in the project.”
The Ministry of Finance continues to consult with its advisers. Both he and Premier David Burt met with the principals of Caroline Bay Development last Friday to discuss the “advanced” stage of negotiations for funding.
“I made it clear in that meeting that the protection of the Bermudian taxpayer was this Government’s priority and that the terms of any financing deal, subject to the Government’s approval, must reflect that overarching commitment to Bermuda,” he said.
“There has been progress on the financing front and that is for the principals of Caroline Bay to address in due course.
“In the meantime, however, it is not correct that this Government or any of its various agencies is in any way preventing this deal from being finalized.”
“We are doing everything prudent to protect the Government’s position.
But he said: “There is much more to be done, however, to firstly secure financing to complete the project and to ensure a successful conclusion of the construction phase of the project.”
He also moved “set out some facts for the Bermudian taxpayer whose hard-earned tax dollars are pledged in support of this development by way of a government guarantee”.
He recalled the land swap “over ten years ago which saw the owners of Southlands in Warwick receive the former base site known as Morgan’s Point”.
“The development team has been unable to complete the project as intended,” ever since.
Amid concerns back in February on the “forecasted likelihood that work on the site would stop, workers would be laid off and contractors would not be paid” Mr Dickinson noted that the “persistent demand of the Government was that this could not be allowed to happen as this country could not then, and cannot now, afford to see more Bermudians out of work”.
To “shore-up the management of the project and other aspects of the operational control of the development”, the Government “mandated changes to the corporate governance of the development company”.
“The pre-construction units was made the responsibility of a strengthened, more experienced team of realtors,” said the Minister.
“Whilst work continued at the site, the pace and scope consistently reduced to the point where it has now stopped altogether.”
And while “genuine efforts by the developers to secure financing” continue”, he said the principals of the company will continue “to fund their obligations mindful of the importance of keeping some work going on at the site” in the interim.
With funding at a “standstill”, he added: “This accounts for the sums owed to contractors and sub-contractors who have, in good faith, done the work required.
“Understandably, some have now lost their patience.”
But he said: “I have a wider concern based on my responsibility to safeguard the public purse and to avert the risk to which the Bermudian taxpayer has been exposed, first by the former government and now by delays in the project.”
He also stressed that: “We are doing everything prudent to protect the Government’s position.
“There is much more to be done, however, to firstly secure financing to complete the project and to ensure a successful conclusion of the construction phase of the project.”
While noting that “hotel and property development is not easy”, he added: “In the current economic climate, securing traditional, and even non-traditional financing for development projects of this size is even more difficult.”
The Minister concluded: “There is much riding on the latest efforts and the Government’s role, not just as guarantor, but as the representative of the people, is to do what we can to facilitate a successful development at Morgan’s Point and to realize the potential it can play in re-introducing Bermuda as a luxury tourism destination.”
The Minister’s statement triggered a slew of comments by bloggers, expressing both concern and criticism.
One blogger wrote: “From the get go, the land swap (Southlands to US Naval Annex) was insane.
“The idea of swapping a pristine South Shore property for a dump of a land once occupied and polluted by the US Military was absolute folly,” he added.
“One can hardly compare this barren ugly plot of land to the lovely South Shore. But that deal was done…”
The question now is can the Morgan’s Point development be salvaged, or in this blogger’s words: “Will it become a chain around the necks of the Bermuda taxpayer?”
Ultimately, he concluded: “I hope for all concerned this gets resolved and we don’t end up with a proverbial White Elephant”.
Another blogger wrote: “In the current economic climate, securing traditional, and even non-traditional financing for development projects of this size is even more difficult.”
And on another site a blogger said: “Buyers and investors aren’t stupid.
“They know full well the current state of Bermuda’s declining economy and this Government’s ineptness. Ask anyone in real estate and properties are stagnating and value has dropped.”
Others expressed concern that the Caroline Bay development will become an even grander Grand Atlantic, while questioning the current status of that development.
One blogger noted that the last newsflash on Grand Atlantic was in March 2018, when the Government announced that the Grand Atlantic homes were destined to become a boutique hotel.
There has been no update on that venture ever since.