Barbados Government GEMS Hotels folly continues. Where did all our money go? Three remaining GEMS hotels valued at only $74 million!

How much money is missing: Two Hundred Million? More?

by Adrian Loveridge, Peach & Quiet hotel owner

According to an article carried in the Midweek Nation Wednesday 24th February, 2010 ‘the book value of the (GEMS) properties was only $74 million’.

How is this figure arrived at?

 Reading from their own website, Savannah has 98 rooms, Time Out at the Gap, 76 and Blue Horizon 70.

So a total of 244 rooms or a stated ‘book value’ of $303,278 per room with ‘accumulated debt of $229 million’.

Put that in context to our little hotel of 22 rooms and it would value us at around $6.672 million. One big difference of course, we have no outstanding debt and have been profitable for a consistent number of years.

Both Time Out at the Gap and Blue Horizon need extensive refurbishment, if they are going to live-up to their stated ‘3star’ rating.

No private sector in their right mind would take on the massive debt burden over the equity value, so where does Government go from here?

While the taxpayer is beginning to get some idea of the folly of this entire ‘ill-conceived project’, including the predatory pricing which has contributed to the closure of over 30 private sector hotels, there are still questions to be answered.

Where did the proceeds of the sale of Eastry House and Silver Rock Hotel go?

Predatory Pricing by Government… upon privately-owned hotels!

Prior to the closure of Silver Rock, the refurbishment and building of another 40 rooms, that property’s lowest published rate was US$118.
$40 million later and it re-opened as a GEMS property with room rates as low as US$80 per night.

Clearly intended to systematically undermine all the other private sector hotels in the area!

Perhaps most the most appalling revelation of this whole saga is the statement by Minister Estwick, that Hotels and Resorts Limited ‘could not carry out any audited financials because of the patchy nature of its accounting’.

What a terrible indictment of the GEMS Chairman, Board of Directors and management at that time and their absolute dereliction of duty to perform due diligence.

I can understand the current Government’s reluctance to put yet more money ($3 million) into this seemingly bottomless pit, but when will this end, and at what cost to the private sector that in many cases are hanging on by its coat tails?

Adrian Loveridge
24th February 2010

Article title and bold subtitles by BFP editor

Comment by Barbados Free Press

The most damning reference in The Nation article is the following…

“(Minister of Economic Affairs) Estwick also said HRL, which was created to bailout all of the non-performing assets of Barbados Labour Party Party families and friends, could not carry out any audited financials because of the patchy nature of its accounting.”

… from The Nation article Let Go of Gems!

Our questions for Minister Estwick and also Prime Minister David Thompson…

1/ What laws were broken by the BLP government in creating the GEMS scheme “to bailout all the non-performing assets of Barbados Labour Party families and friends,” ?

2/ When will the DLP government launch legal action to recover the ill-gotten money from “Barbados Labour Party families and friends” ?

3/ It took the Thompson Government over two years to figure this out? Really? You just found out about this even though everyone on the island knew for at least five or six years? Really? What were you doing in Opposition… sleeping?

4/ Which DLP family members and friends have done business with the government since the David Thompson became Prime Minister over two years ago?

Further Reading

Here is the full Nation News article Let Go of GEMS! published here because The Nation has re-written history in the past by selectively removing and modifying online news articles.

Let Go of GEMS!

by ALBERT BRANDFORD

SELL THEM!

That’s the “bold” advice from Minister of Economic Affairs Dr David Estwick to Prime Minister David Thompson on the future of the remaining properties within the controversial GEMS hotel chain.

Estwick supported his advice with the revelation yesterday that the GEMS parent, Hotel & Resorts Ltd., which has benefited from Government loans totalling $145 million, now had accumulated debt of $229 million, while the book value of the properties was only $74 million.

That debt, he added, comprised a principal of $160 million and accumulated interest of $69 million, while it also owed the Barbados National Bank (BNB) another $2.3 million.

“Even Gearbox [the late popular street character] would know what to do,” Estwick said, “because if you don’t [sell the properties], it will continue to be a drain on the Treasury.”

The minister was speaking in the House of Assembly during debate on a $9.014 million supplementary resolution, of which the largest portion – $3 million – would be used to provide assistance to HRL.

Estwick disclosed that HRL had requested $6 million in support from Government for this year because of the dire financial situation of what he termed “an ill-conceived project”.

In a time of crisis, he noted, this administration has to look for $6 million – $3 million in this supplementary resolution and another $3 million in the next financial year starting April 1.

Estwick recalled that it was the Barbados Labour Party (BLP) which, during a time when there was no crisis, started to sell off the GEMS properties, including Silver Rock, Worthing Court and Eastry House in 2005, and was looking for a buyer for the Savannah Hotel, Time Out and the Hilton Hotel.

The St Philip West MP said if this Government does not pump $3 million into HRL this financial year, it would not be able to meet wages or pay creditors.

“To come here for $3 million to keep HRL afloat,” he added, “is a clear indication why Government should get rid of HRL. I will not back off my advice to the Prime Minister.”

Estwick also said HRL, which was created to bailout all of the non-performing assets of Barbados Labour Party Party families and friends, could not carry out any audited financials because of the patchy nature of its accounting.

In March 2009, he noted, HRL requested $3.5 million because it was out of cash and, by June, it was facing the possibility of forced closures and widescale layoffs if Government did not bail it out after it had been given millions of dollars. (AB)

11 Comments

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11 responses to “Barbados Government GEMS Hotels folly continues. Where did all our money go? Three remaining GEMS hotels valued at only $74 million!

  1. 119

    Only a group of geniuses could have pulled off what happened with Gems. On top of all the folly with conceiving and operating this project we are now told of patchy accounting.

    Accountants were heavily involved in the management and operations of Gems, also for the rebuilding of Kensington Oval. If we cannot get good accounts from these organization what would you expect from places like RDC and UDC

  2. 120

    @ 119 Is David Shorey and accountant and where and when did he receive his training?

  3. X

    BFP, the title of the article is a bit misleading. Please note that the $74 million is a book value, while saying that something was valued at $X suggests a current valuation performed by a professional valuer.

    I have no idea what the market value of the properties would be, or whether there would be a willing buyer at all. In the case of the latter the problem could be even worse than what is painted above.

  4. X

    Conversely, if somehow the current market value is greater than book value, the the problem is much smaller or perhaps not even a problem at all.

    It will certainly be difficult to find a willing buyer for a hotel property (far less multiple hotel properties) during the current economic climate. But depending on how long ago the properties were purchased (at which point the book value would be been based) then it is possible that the value of the properties has appreciated.

    The critical question right now is, how much are the properties worth? A real estate person might be able to guess. Anyone?

  5. BadBob

    I’ll trade three cases of whisky, 50 Cuban cigars and two nights of bliss with a Shanghai hooker for the lot.

  6. BFP

    Hi X

    Take a walk past or into Time Out at the Gap and you’ll see that the concept of preventative maintenance and refurbishment is unknown. The place has rooms that are in such poor state that they are permanently closed. The hotel is best described by the dozens of poor reviews online at Trip Advisor and similar websites. I can’t imagine any serious business group purchasing the place with the intention of running it as is. It is not a “fixer upper”, it is a “tear down and rebuilder”.

  7. Pingback: What Happened To The Money From Hotel and Resorts Ltd’s Assets Sale? How Much Went Into David Shorey’s Pocket? « Barbados Free Press

  8. as bad as the previous regime, and may get worse

    “I’ve got a buyer for GEMS. Let’s sell it to ourselves at a low but seemingly reasonable price, pass it on, and pocket the difference.”

    Where have you heard that before? Or have you never heard? Well, I have.

    You’ll never even suspect what your family did.

    Unless you/we pass the laws to prevent it easily happening.

  9. reality check

    X

    One of the most conservative methods of assessing a hotel property is to take the net revenue after all expenses, taxes etc and proper reserves for maintenance and replacement with a multiplification factor of 5 to ten times depending on location and some other factors.

    Since these properties unlikely have much if any net revenue they are not likely worth anything and may even be negative in which case the government is truly
    pouring money down the drain.

    Since Adrian Loveridge apparently knows how to run a hotel, perhaps the government should sell them to him for $1 along with some repair money. That way government might get a piece of the upside if Adrian can turn the Hotels around and the government can stop burning taxpayers money.

    Alternatively, they can work out a deal with David Shorey, as he undoubtedly has money. The real question in that scenario is whether Mr Shorey can actually run a business without access to a government printing press and whether that would be too much hard work and chump change for him?

  10. BadBob

    My offer still stands; but I’ll kick it up to three cases of whiskey, 50 Cuban cigars, a 50 US$ Wal-Mart gift card, two pair flip-flops, a Shanghai hooker & one Ukrainian masseuse (talent unlimited).

  11. Pingback: GEMS of Barbados website slickly deceptive | Barbados Free Press