Controversial Marriott Hotel…Design, architect supervision cost a whopping US$2.8M

Mar 19, 2014 News

Construction of the Marriott Hotel, in Kingston, Georgetown, is continuing despite the fact that the majority of the money required for the US$58.5M project is still to be had.
The project has so far benefitted from US$19.5M from the National Industrial and Commercial Investments Limited (NICIL). NICIL has invested US$4M for one-third ownership of the hotel and has loaned the project another US$15.5M.
According to the extract of the feasibility study for the project, the construction cost minus the Fit out cost, is US$44.7M, the Entertainment Complex US$8.1M and US$200,000 among other associated costs. The subtotal or hard costs for the project, according to the Feasibility Report, will cost Atlantic Hotel Inc (AHI) US$54.5M.

Works ongoing at the Kingston site.

The architect for the project will be paid US$1.8M with architect supervision to cost another US$1M.
Another US$1M will be held in contingency bringing the development cost to US$58.5M.
To date the unnamed private investor is yet to be named.
Chairman of AHI and NICIL, Winston Brassington, last year had expressed optimism that there would be financial closure before the end of the year and which point in time the investor will be named.
Three months into 2014, Brassington is yet to make a public pronouncement on the status of those negotiations.
The money that Republic Bank had been ask to syndicate for the project will only be put in after financial closure with the still to be named private investor.
It is also unclear whether Republic Bank has managed to source the money as there has been no public pronouncement forthcoming from Brassington.
Prior to the NICIL money, Government had given a US$1M contract for the rerouting of the sewerage system in the Kingston locale to a local contractor.
That contract was pulled after more than US$700,000 was paid over. It was then given to an overseas company for a further US$2M.
AHI also leased the prime seven acres of shorefront property on which the Hotel rests for a measly US$120 (G$24,000) per month with the option to buy.
The Food and Drug Department which had a building in the location was removed and that property was dismantled.
According to a feasibility study undertaken for the project by a Miami-based HVS Consulting and Valuation, when the Hotel is up and running the Senior Debt, solicited by Republic Bank will receive payment before the preferred equity, the NICIL equity, and the NICIL debt.
As it relates to the US$15.5M lent to the project by NICIL, this will be repaid “when cash flows enable.”
Incidentally, five years after the hotel begins its operations, it will take on an additional loan.
Repayment of this loan will also take priority over the NICIL loan. The unnamed private investor is scheduled to put in US$8M, in the Georgetown Marriott Hotel, which is projected to rake in approximately US$46M by the end of 10 years.
This is documented in the extract of the feasibility report which was released to the media.
According to reports, during the first three years of the hotel’s operation, AHI will pay the still to be named private investor US$1.3M.
From year four of the hotel’s operation, the unnamed private investor will be paid US$1.2M each year for the next six years.
According to the report, in year 10 of its operation, that unnamed private investor will be paid a whopping US$37.2M, setting the rate of return over the 10 year period at 22.2 per cent.
The feasibility study done for the Marriott Hotel has included in its projections for the success of the Marriott Hotel that “we have assumed that a portion of the nation’s economic development initiatives is realized.”
The report says, “These include but are not limited to the cultivation of a portion of Guyana’s crude oil.”
This would mean that included in the factors that would make the Marriott feasible for the country is the need for Guyana to find oil. This is yet to happen.
Included in the agreement signed, the Hotel will enjoy a 10-year waiver on corporate and property taxes which will commence from the first year of commercial operations.
The Marriott Hotel will also enjoy relief from import duty, VAT, excise tax, and any other import fees, taxes, duties on machinery, equipment, building and other materials, fixtures and fittings and furnishings and non-luxury vehicles required by the developers for the construction of the Project.
During operations, relief will be granted from duty and excise tax on capital repairs or replacements greater than US$10,000 in value within 10 years of operations.