News

in     12-10-2015
 
 
Editor’s Note: Negotiations to resume work on the stalled resort complex start anew. Hotel News Now will continue to update this page as new developments occur. 

GLOBAL REPORT—The road to Baha Mar’s opening continues to grow longer and more complicated as the developer, Chinese financier and construction crews, and the Bahamian government continue in a power struggle for the resort’s future.
 
Plans to build the 1,000-acre megaresort began over a decade ago. Baha Mar encompasses multiple properties, including a 1,000-room casino hotel, a 300-room SLS Lux, a 200-room Rosewood and a 700-room Grand Hyatt. The resort also features a golf course designed by Jack Nicklaus and a 30,000-square-foot spa.
 
Since its inception, the project has been billed as an economic engine for the Bahamas, with projections that it could grow the country’s gross domestic product by 12%.
 
Those promises of economic growth have so far gone unfulfilled as the resort complex has missed multiple expected opening dates and now sits at an apparent standstill, even as developers say it is roughly 97% completed. 
 
Who are the major players?

Sarkis Izmirlian: CEO and chairman of Baha Mar Limited. He purchased the property that would eventually become Baha Mar in 2005. Izmirlian is the son of billionaire Dikran Izmirlian.
Baha Mar Limited: The development company behind the 1,000-acre, $3.5-billion Baha Mar megaresort.
China State Construction Engineering Corporation: A Chinese state-owned construction company. Its subsidiaries China Construction America and CCA Bahamas serve as contractor for Baha Mar.
The Export-Import Bank of China: The Chinese institutional bank that has loaned the developers more than $2 billion for the project.
 
Here’s a rundown of the twists and turns of the megaresort’s windy road.



8 October 2015
 – Negotiations to resume work on the stalled resort complex start anew between Baha Mar Limited, CCA Bahamas, the Export Import Bank of China, the Bahamian government and government-appointed liquidators. The firms appointed as liquidators, Krys Global and AlixPartner Services UK, describe the talks as “another important step on the road to resolution.”

24 September 2015 – Claiming a “much anticipated breakthrough” on the project, the appointed liquidators announce that CCA has returned to the project’s construction site to assess the work necessary to complete the project.
 
22 September 2015 – CCA Bahamas faces a lawsuit from the American company that demolished the former Nassau Beach Hotel. Controlled Demolition claims Baha Mar’s contractor never finished paying the full $7.6 million for the demolition, with an outstanding balance of $754,704.
 
15 September 2015 – The U.S. Bankruptcy Court dismisses Baha Mar Limited’s Chapter 11 case. Judge Kevin Carey says he “perceived no greater good” could come from allowing the case to proceed.
 
Carey allowed a small portion of the case to continue in the U.S., however, dealing with Orlando, Florida-based Northshore Mainland Services.
 
CCA Bahamas issued a statement soon after the decision saying it “protects the interests of all principal stakeholders and provides greatest certainty to the future of the Baha Mar Resort.”
 
11 September 2015 – The newly appointed liquidators pen a letter to the U.S. Bankruptcy Court saying they will not recognize its jurisdiction over the resort. They instead will defer to the Bahamian Supreme Court supervision to restructuring.
 
At this point, the liquidators say they have control of Baha Mar’s financial and real estate assets. 

4 September 2015 – Judge Ian Winder of the Supreme Court of the Bahamas approves the Bahamian government’s petition to appoint a liquidator to oversee the project while simultaneously setting limits to the liquidator’s power to prevent the depletion of the $3.5-billion resort’s assets. 
 
In a statement, CCA Bahamas, a wholly owned indirect subsidiary of China State Construction Engineering Corporation Limited and the construction manager/general contractor for Baha Mar, said: 
 
“CCA Bahamas welcomes The Bahamian Supreme Court's ruling to appoint provisional liquidators, which marks an important step forward towards addressing the challenges relating to the completion and opening of the Baha Mar resort.”

28 August 2015 – A U.S. judge says the Baha Mar bankruptcy proceedings could go a number of directions, but the continuation of the case depends on a Bahamian court approving the bankruptcy plan. 
 
The bankruptcy plan put forth by Baha Mar officials would remove CCA from the project.
 
27 August 2015 – Baha Mar officials announced the filing of a Chapter 11 reorganization plan in U.S. bankruptcy court.
 
26 August 2015 – China Construction America’s Bahamas officials accuse Sarkis Izmirlian, chairman and CEO of Baha Mar Limited, of transferring monies into U.S. accounts in an attempt to manufacture a U.S. connection to bolster his claim that the U.S. bankruptcy court has jurisdiction over Baha Mar. This is a claim that has been disputed by both the contractors and the Bahamian Supreme Court.
 
20 August 2015 – Rosewood Hotels and Resorts seeks to end its association with Baha Mar, saying the megaresort is tarnishing the hotel company’s brand. Rosewood officials said they hope to use Baha Mar’s U.S. bankruptcy proceedings as an out.
 
At this point, no realistic opening date is on the horizon.
 
19 August 2015 – The hearing in Bahamian court on the government’s request to appoint a liquidator took place on 19 August through 21 August. Bahamian Supreme Court Justice Ian Winder is expected to issue a decision on 4 September.
 
31 July 2015 – An important hearing in Bahamian court on the government’s request to appoint a liquidator is postponed.
 
22 July 2015 – The Bahamian Supreme Court refuses to recognize Baha Mar’s U.S. bankruptcy proceedings. 
 
17 July 2015 – The Bahamian government moves to seize and liquidate Baha Mar.
 
30 June 2015 – Baha Mar files a claim in English High Court seeking “financial remedies” from China State Construction Engineering Corporation and subsidiary China Construction America related to construction delays.
 
29 June 2015 – With the resort estimated to be roughly 97% completed, Baha Mar Limited voluntarily files for Chapter 11 bankruptcy in the U.S. In a news release, the company blames “the financial consequences of the repeated delays by the general contractor, and the resulting loss of revenue” as the reason for the bankruptcy.
 
The court filing detailed a series of accusations of stealing potentially damning documents made by Baha Mar officials against China Construction America, including a female CCA employee trying to sneak out documents under her clothing and CCA subcontractors trying to take computers hidden in luggage and suitcases.
 
May 2015 – Baha Mar’s May opening dates are missed. Soon after, Bahamian officials suggest that Baha Mar executives shouldn’t announce any more potential opening dates.
 
March 2015 – Baha Mar’s soft opening is pushed back from 27 March to some point in May.  Rosewood Hotel Group confirmed plans to open the 200-room Rosewood at Baha Mar on 7 May, and the 700-room Grand Hyatt at Baha Mar was slated for a 1 May opening.
 
July 2014 – Baha Mar officials confirm the resort won’t be ready to open in December as planned. A new opening is slated for late spring 2015.

A look at construction on Baha Mar as of March 2013 (Photo: Baha Mar)

2011-2014 – With construction underway, resentment grows among Bahamians as roughly 4,000 Chinese workers are flown in to serve as construction crews on the resort. The project was sold as an economic driver for the Bahamas, so many in the country are unhappy to see a 70% foreign workforce building the resort complex while the Bahamas struggles with a unemployment rate of roughly 15%.

21 February 2011 – Construction crews break ground on Baha Mar, almost six years after Sarkis Izmirlian purchased the property and months after developers had originally hoped to have it open and operating. The work is funded through a 20-year, $2.45-billion loan from the Export-Import Bank. That loan, along with $150 million from the contractor and $900 million from Baha Mar Limited, brings the project’s total investment to $3.5 billion. The resort is now expected to open by the end of 2014.

At the groundbreaking of Baha Mar with senior officials of the Bahamian government and Chinese government, dignitaries, delegates of the Export-Import Bank of China, China State Construction Engineering Corporation and the design and construction teams. (Photo: China Construction America) 

March 2009 – Baha Mar Resorts signs a formal agreement with the China State Construction Engineering Corporation to build the resort complex through its American subsidiary, China Construction America. The developers also sign a memorandum of understanding with the Export-Import Bank of China to potentially fund the project.

November 2008 – Baha Mar Resorts Limited files suit in New York claiming Harrah’s Entertainment was secretly planning to delay or quash the project to avoid paying a $212-million equity share. That suit was thrown out in early 2010 when a New York State Supreme Court judge declares Harrah’s was within its rights to terminate the joint-venture agreement.
 
March 2008 – Just a month after developers secured a new deal with the Bahamian government, Harrah’s backs out of the project, citing concerns that Baha Mar could not be completed as “originally contemplated” and that it would “prove more harmful for all to move forward.” Izmirlian’s group describes the move as a “breach of faith.”
 
January 2007 – Baha Mar Resorts Limited and Harrah’s Entertainment announce a finalized joint-venture agreement for Baha Mar with the planned cost of the project now growing to $2.6 billion. The finished resort complex would be 57% owned by Baha Mar Resorts and 43% by Harrah’s. The JV also signs a management agreement with Starwood Hotels & Resorts Worldwide. The megaresort now is expected to open in early 2011.
 
October 2006 – The developers managed to reach a deal with the Bahamian government in 2005 that would provide for deferred taxes, a $20-million contribution to the project and various infrastructure improvements but are unable to meet several financing and planning benchmarks for the deal by the October 2006 deadline. That includes falling short of their goal to raise $400 million in capital.
 
November 2005 – The Baha Mar development is officially announced as a $1.6-billion joint project with Izmirlian’s group, Harrah’s and Starwood Hotels & Resorts Worldwide. Ground is set to break in 2007 with an expected opening in 2010.
 
April 2005 – Sarkis Izmirlian, the son of billionaire Dikran Izmirlian, uses a $200-million loan from Scotiabank to fund the purchase of a group of properties including the Nassau Beach Hotel, which was later rebranded as Sheraton Nassau, and the Crystal Palace Casino. It would take five years for the Baha Mar group to settle that debt. It was eventually resolved with a debt-for-equity swap, but the bank ended up taking a $75-million net loss on the deal.
 
Early 2000s – After talking American investor Phil Ruffin into buying a large swathe of Cable Beach in Nassau, Bahamas, in the 1990s, new Bahamian Prime Minister Perry Christie convinces Ruffin to sell off the land, including multiple hotels, to a development group called the Baha Mar Development Company, which is led by Sarkis Izmirlian.
 

Compiled by Sean McCracken.