Royal Watler tenants want rent cut

Tenants at the Royal Water Cruise Terminal in George Town want their rents reduced.

President of Tortuga Rum Co. Robert Hamaty, who is on the Royal Watler tenant committee, said a tremendous decline of cruise passenger arrivals and logistical problems of the terminal are crippling some tenants, especially when cruise passengers aren’t spending disposable income.

Mr. Hamaty said he believes some stores will close if things don’t improve.

‘Some of the tenants will probably just end up working to pay the rent, which is not good business. You have to be making a profit,’ he said.

The first units opened at the terminal in March 2007.

Mr. Hamaty pointed out that from 2006 to 2008 there was a decrease of 370,554 cruise tourists in the Cayman Islands.

‘Now it has even gotten worse because we’re now faced with a situation where the people on the cruise ships just don’t have the spending dollars anymore. Although the cruise lines cut the fare to keep the ships full or partially full, the disposable income is not there,’ he said.

Mr. Hamaty believes the economic climate is going to get tougher in Cayman.

‘Cayman is just beginning to feel the outer bands of the economic storm,’ he said. ‘We’re facing some very rough times.’

Terminal tenants believe they are paying the highest commercial rents in George Town – an average of $150 per square foot per year.

Mr. Hamaty said it is in the interest of the Port Authority to work with the tenants and compromise.

‘The Port Authority has met with us many times. I’m sure they’re concerned because they are the landlord and we are the tenants and in today’s environment if some of those shops close there’s nobody that’s going to jump in there and pay that rent,’ said Mr. Hamaty.

He emphasised that the Port Authority has made efforts to work with the tenants to solve logistical issues.

Mr. Hamaty said tenants agreed the rents were high when they signed their leases.

‘Everybody felt that if the cruise business was as active as it was and we were getting the number of passengers that we were promised that it was workable,’ he said.

Port Authority Board Chairman Wayne Panton said the rents reduction is under review and discussions with individual tenants continues.

He said a considerable amount of effort was put into selection of tenants, including a review of their detailed business plans, to ensure there was the right product mix and that the business model was appropriate to allow them to succeed and remain in good standing.

‘Clearly despite best efforts not all businesses will be viable for a variety of reasons, but in relation to the Royal Watler Cruise Terminal tenants, the Port Authority has been supportive to an unusual degree in not aggressively pursuing its legal rights when it can.

‘The Port Authority has to operate as a business as well. We have obligations as any other business does and we have to remember that there is a considerable investment in the region of $20 million dollars in the Royal Watler Cruise Terminal, which the Port Authority has to repay the financing on.

‘Having said that; clearly our objective is not to maximise profits as a purely private company might do. We are looking to achieve the right balance of interests and we are certainly listening to tenants’ representations, taking advice from experts and considering what approach to take.’

Mr. Panton said the process is not straightforward and is against a background of conflicting evidence.

‘For example whilst we have some tenants saying they are having difficulties, we have others indicating that they are doing well. We have to take the time to ensure that we make the appropriate decisions, which reflect the interests of the Port Authority and inherently that must reflect at least in part, the interests of tenants of the Royal Watler Cruise Terminal as well.’

Lack of visits to the area from the public is another problem for tenants. The front of the area is fenced and tenants said that sends the wrong message to residents and stayover visitors.

‘It sends a message that it’s only for cruise ship people when it is not; a major blunder on the Port Authority’s part,’ Mr. Hamaty said.

Manager Cruise Operations and Security for the Port Authority Joseph Woods said the issue of the fence is one of security.

‘The port is a port and we have to meet international obligations under the ISPS code and requirements under Transec and our port meets them,’ he said.

‘The shopping complex is a port facility and those [shopping] amenities are included, but we have to meet international requirements.’

He said a fence has to be in front of the area because otherwise if something went wrong, entry to the port could not be controlled.

The tenants are also concerned that the unit designated for a restaurant has not been occupied.

‘The restaurant tenant continues to have some issues with planning approval and in particular certain public objections to having a licensed bar as a part of their proposal,’ said Director of the Port Authority Paul Hurlston. ‘I understand that an appeal has been launched with the Planning Department and is scheduled to be heard today.’

Weather has been hugely disruptive to Royal Watler Cruise Terminal businesses recently.

When there is wave action from the north, the tenders go to Hog Sty Bay or the cruise ships dock at Spotts in bad weather, leaving the Royal Watler Cruise Terminal empty.

‘In November we only had nine days of ships [at the Royal Watler Cruise Terminal],’ said Mr. Hamaty. ‘Now with all due respect to the Port Authority, they try whenever possible that whenever there are three ships and the weather is good they come to the Royal Watler.’

Mr. Woods said disuse of the Royal Watler Cruise Terminal in bad weather is a safety issue and people’s lives come first.

Some tenants believe the rent should be prorated only to the days when the terminal is used.

‘In other words in November we should only have paid for nine days because we got absolutely no business the other days,’ Mr. Hamaty said.

Mr. Panton said the prorating idea is one of a number of proposals being considered.

‘There are no immediately obvious answers and for example a counter to this proposal is the fact that the facility is also open to the public and we have invested time and resources in working along with representatives of the tenants to attract more business from the general public in addition to our cruise visitors,’ he said.

Another logistical problem Mr. Hamaty points to is the three exits. While two face onto the main street, one is a gate off to the side where the pre-booked tours exit.

‘So visitors to the Island arrive in at the port and have three exits. The shops are not getting 100 per cent traffic through,’ he said.

‘What we’re doing is we’re actually creating the situation for the people to avoid the kiosks and the shops by having the pre-booked tours through that gate. The same thing when they come back, some of them come back through the same gate and go straight on the ship, never seeing a shop.’

Tenants want the pre-booked tours be closed. Passengers could then go through the Royal Watler Cruise Terminal and stores before going onto the street.

Mr. Woods said the cruise lines are looking for the most efficient way to get their passengers on tours. He said the cruise lines want their passengers to walk a shorter distance to the buses.

‘We have to find a compromise and balance,’ said Mr. Woods.

The Port Authority has signed an agreement with the cruise lines to promote the Royal Watler Cruise Terminal as a shopping area.

Mr. Woods explained the Port Authority has initiated some onboard advertising with the cruise lines in print and video media. The Port Authority has paid for the advertising, which is good for a year.

The Port Authority is also working with a signage company to enhance the facility.

Meanwhile Mr. Hamaty said he believes other landlords in the area have made concessions.

‘I have heard they worked along with their tenants realising the difficult [economic] situation.’

Another major issue is the lack of berthing facilities.

‘In today’s cruise business and the big ships that are coming if you don’t have berthing facilities you’re going to be out of business,’ said Mr. Hamaty.