Baha Mar is officially for sale. The firm handling the receivership of the beleaguered Baha Mar resort in the Bahamas has appointed Canadian firm Colliers International to find a buyer for the unfinished .5 billion project, the largest construction project in the history of the island nation.
The project was placed in receivership by the Bahamian government after founder and former owner Sarkis Izmirlian stopped paying the Chinese state-owned contractor over construction delays, causing the six-hotel resort project to grind to a halt at 97 percent complete. It has sat idle for more than a year, as the government of Bahamas Prime Minister Perry Christie has attempted and failed to resolve all the issues between Izmirlian and the contractor, China Construction America (CCA).
Main financier Export-Import Bank of China (Exim), also owned by the People’s Republic of China, foreclosed on the property last June.
According to a report in the Bahamas Tribune, although the project was 97 percent complete when construction halted, estimates show any buyer would have to invest an additional $600 million to $1 billion to restart and complete construction, and to market the property sufficiently to eliminate the “whiff of failure” associated with Baha Mar. Additionally, Exim is demanding to be made whole for the $2.45 billion it invested in the project—another potential roadblock, since the final purchase price is estimated to, at best, amount to 50 cents to 60 cents on the dollar.
But bidders interested in acquiring the unfinished Bahamas super-resort Baha Mar have been banned from seeking information from the founder and developer of the $3.5 billion project and its principal contractor.
The ban is contained in a non-disclosure agreement all prospective purchasers are required to sign and which explicitly prohibits them from contacting either Sarkis Izmirlian, chairman and CEO of Baha Mar Ltd., the development company, or China Construction America, a division of Chinese government-owned China State Construction. That includes their respective executive teams, employees and advisors and creditors and suppliers, including a host of unhappy subcontractors who claim they are owed millions.
Completion of the four-hotel luxury megaresort on Cable Beach slowed in 2014 and then stalled last year as Izmirlian and CCA feuded over mutual allegations that financial commitments and performance guarantees were not being honored. Though reportedly “97 percent” complete, construction was suspended last spring while Baha Mar Ltd. attempted to file for Chapter 11 protection in the United States and CCA sued the company in London.
Raymond Winder, manager partner for Deloitte & Touche (Bahamas), one of three receivers for the resort, which was ordered into liquidation by Bahamas authorities last summer, didn’t address those problems in describing the ban as designed to ensure a “level playing field” for all prospective purchasers. In this way, he said, all bidders will have access to the same information and no one could gain a competitive advantage by obtaining insider data from Izmirlian and/or CCA.
However, the belief among many observers, according to local media, is that Baha Mar is being reserved for a Chinese buyer, such as prospective bidder Fosun Group, given that the resort’s principal backer, Export Import Bank of China, is demanding recovery of its entire $2.45 billion investment.
Seen in this light the ban has prompted one ex-Baha Mar director to question the “transparency” surrounding the sales process.
Dionisio D’Aguilar also questioned how bidders would be able to conduct “proper due diligence” if they were blocked from speaking to the two parties who knew most about Baha Mar’s current condition.
“Is this really an open sales process? Is this really value maximizing for all creditors?” he told local newspaper The Tribune. “If you’re going to buy a product, you go to the person selling it, but you also want to speak to the people involved. Why would the court approve this?”
He added, “You would be crazy to buy this without talking to the original developer.”
Winder denied the existence of any “back room deal” for Baha Mar and countered that the receivers will constantly be adding information to an “electronic data room” that will be made available to all bidders so that they can conduct full due diligence.
Bidders who qualify—provided they disclose “financial capability and company background” and offer proof of funding and industry expertise—must pay a $50,000 fee for access to the data room. They will be free to conduct their own investigations and analysis, apart from the restrictions on speaking to Izmirlian and CCA.
Those who dispute the ban say that Izmirlian and CCA are in the best position to provide bidders with what they need to know. CCA, as the project’s main contractor, will have intimate knowledge about what is necessary to complete Baha Mar’s construction, plus any flaws in the existing structure that need to be fixed. While Izmirlian and his former team possess first-hand knowledge of key operational details, including contracts with hotel and casino operators, retail and restaurant tenants and suppliers.
Either way, the process involved in bringing Baha Mar to an eventual opening will be “amongst the most complex undertaken in a single phase anywhere,” said Andrew Farkas, who is expected to bid in partnership with Sol Kerzner.
He told The Tribune, “The amount of homework necessary to fully understand the programs that bring the project to profitability is enormous. Just to do the homework properly will cost millions of dollars.”
Meanwhile, Izmirlian, who invested nearly $1 billion of his family’s money in the project, has asked the Bahamas Supreme Court for permission to pursue a $192 million claim against CCA, without involving Exim. He claims CCA dropped the ball on Baha Mar “at a crucial time” to focus on other projects in the Caribbean, resulting in shoddy work and construction delays that ultimately caused the project to fail.
