Marriot’s questionable financing… Shadowy consortium has first claim if hotel goes belly-up

Jan 24, 2016 News

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Less than a year after the Marriott Hotel opened its doors for business, burning questions remain over the

manner in which Marriott Hotel, in Kingston, was financed.
Last September, the facilities which the new David Granger administration says it is now considering selling, collected more than US$27M in a loan raised from a consortium of businesses.
Republic Bank is handling that loan which together with interests and other costs will see the hotel paying back up to US$30M in 26 installments.
It is not known which are the businesses or individuals that comprise the consortium as both the previous Government and the present one have not come out and to share this information.
What is known is that Marriott Hotel, which is reportedly racking up millions of dollars in losses, monthly, and likely to be subsidized by Government if no buyer is found soon, owes US$30M to Republic Bank.
The consortium loan by Republic Bank would be important for Marriott Hotel as the bank through the consortium has first claim on the property. This is despite the more than US$20M plugged in by the Government of Guyana through its company, National Industrial and Commercial Investments Limited (NICIL).
There have been questions also about why NICIL which had over US$5M ($1B) hidden in a bank account, did not plug that money into the hotel construction, thus reducing the need to take the entire US$27M from the bank and the consortium.

Escalating Costs
The direct cost of the hotel will be over US$72M after its critical additional feature- an entertainment complex is completed.
Accountant, Anand Goolsarran, had estimated that when the indirect costs are taken into account, the total project costs will be around US$100M.
It would make Marriott Hotel, per square foot costs, one of the most expensive in the world.
At its opening last April, the previous administration had said that the hotel was constructed to the cost of more than US$50M, all using a mixture of tax dollars and the loan from the consortium.

There have been questions about the consortium and whether the financing structure was deliberately configured to be like the Berbice Bridge Company which handed a few private investors control despite the Government of Guyana guaranteeing the majority of the monies used in that project.
There were protests after it was learnt that two Hong Kong investors were set to invest US$4M, and enjoy a 67 percent control of the equity. The duo pulled out leaving a critical money-making part of the facilities in jeopardy.
The private investors were also given the option of paying just US$12M for a 100 percent ownership for the hotel, that will eventually costs taxpayers US$100M from the construction costs, waived taxes and other expenses.
This would appear much worse when it is taken into consideration that the country would have lost control of the hotel despite footing that estimated US$73M as against the consortium loan of US$27M financed Republic Bank. That entertainment section would have included a casino, restaurant and nightspot.
Marriott International, which is managing the hotel, has announced plans to see the entertainment part of the hotel up and running. However, there has been no word on those plans.
A recent audit report on Marriott found that the hotel is in no position to service the Republic Bank loan which works out to US$2.5M annually (both capital and interest) and there are no reliable indicators as to whether or not the operations of the entertainment section will be a success story.
The hotel itself in the first few months of operations, has been reportedly racking up a $60M monthly fuel bill for its power generators.
Government has been holding a number of functions at the hotel but it is not known whether this is enough to cover costs.
The hotel was officially opened in April, shortly before the May 11General Elections, with the then Opposition missing from among the invitees.
Absent too from the ribbon-cutting ceremony was ex-President Bharrat Jagdeo who had been pushing the project.

Rocky Road
The 197-room Marriott Hotel in Kingston was hailed by the previous Government, under the People’s Progressive Party/Civic, as one of the special projects to boost tourism and hospitality.
But it started off on a rocky road. From the transfer of the lands to the murky details of the financing, there were many questions from the Opposition, leading to clashes even in the National Assembly.
The land transfer is engaging the attention of former Parliamentarian, Desmond Trotman, who went to court, arguing that the land on which Marriott stands cannot be mortgaged.
From the inception of the project, it has been one filled with controversy, as billions of taxpayers’ dollars were spent by Government on the edifice and without the authority of the National Assembly. It was supposed to be a private/public partnership project. In the end, it ended up mostly a Government one.
No big worry, except that Government is now planning to transfer a majority stake to a shadowy Hong Kong investor.
During the hotel’s construction, there was no evidence of the hundreds of jobs for locals as promised.
The Chinese contractor, Shanghai Construction Group, reportedly imported scores of workers.
The still-secret concessions and other benefits of the Marriott Hotel have also been heavily criticized not only by the then Opposition, but by other hotels which said the unfair playing field gave Marriott-brand structure a big advantage and would spell the death knell for them.
The project was run by Winston Brassington, on behalf of the previous Government.
Brassington was sent on leave by the new Government and has been under investigations for his dealings at NICIL.

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