Developers hopeful; need investors
A developer of the proposed Mandarin Oriental hotel on Grand Cayman said this week the project might not proceed unless equity investors are found relatively soon.
Jeffrey Cotter of Barefoot Resorts Ltd. said he and his partner Stuart Wood still hoped to get the hotel built on the 950-foot section of beach along the Queen’s Highway on the northeast coast. But he also said the project is running short on time.
‘I can’t give an exact date,’ he said of the deadline to get the project started. ‘But typically, when you have projects that linger on and don’t start for a number of years, they become what I call stale.’
The Mandarin project was just about ready to start when Hurricane Ivan caused extensive damage to Grand Cayman in September 2004.
‘In 2004, we already had our debt and equity in place, but then everything got put on hold,’ he said, noting that recovery from the hurricane understandably became the priority for Grand Cayman.
‘As a result though, we lost our debt and equity because money doesn’t sit around,’ he said. ‘It gets put in other projects.’
Since then, however, the Mandarin has been able to find another source of financing.
‘HSBC really stepped up and said they were willing to fund the project once we bring in the equity side.’
The Mandarin project needs an equity investment of 50 per cent to get the project going, which Mr. Cotter said amounts to some US$97 million.
The fact that the developers have had trouble securing the equity partners is a reflection of the global economic situation, not on the Cayman Islands, Mr. Cotter said.
‘It is definitely the world financial crisis,’ he said. ‘It has nothing to do with the project, the elements of the project, its location, or Grand Cayman.’
Many similar projects around the world have been completely cancelled or put on hold because of the world economy, Mr. Cotter said.
‘But we continue to be bullish about this project because we believe the quality is there.’.
Finding equity locally
Mr. Cotter said his company was looking pretty much everywhere for equity investors, and it was flexible as far terms.
‘Realistically, we’re looking for anything from $15 to $20 million, all the way up to $97 million,’ he said, adding that the investment could be short, medium or long term.
He said many investors have become leery of investing in the current economic climate.
‘They are literally sitting on their hands,’ he said. ‘Capital is on the sidelines and nothing is getting done. We’ve been [United States] developers for more than 30 years, and we’re seeing the exact same thing there as we’re seeing with this project.’
Although Barefoot Resorts continues to seek offshore investors, it is also hoping to attract local investors.
‘The guys who really should be stepping to the plate are the people on Grand Cayman because this is their long-term future,’ he said. ‘Cayman should have people rise to the occasion and say ‘what can I do to help’, especially in the business community.’
When the window of opportunity for the Mandarin will close is a question Mr. Cotter said he couldn’t answer, but he acknowledged that time is running out.
‘This is the time to strike because you never know what is going to happen.’
High-end resort needed
For a variety of reasons, Mr. Cotter believes Grand Cayman not only needs to pursue high-end tourism, but is best suited for it as well. He cited Cayman’s safety, infrastructure and stability as reasons.
‘Those are things you frankly don’t find in other Caribbean islands.’
Because of the pressures on offshore financial centres, Mr. Cotter believes tourism will become increasingly important in Cayman.
‘I think Cayman would much rather position itself upscale; it’s less harsh on the island,’ he said, noting that fewer numbers of high-end tourists could spend just as much money on island as twice as many or more lower-end tourists.
‘There’s less wear and tear on the infrastructure that way,’ he said.
While acknowledging the value of having a RitzCarlton here, Mr. Cotter said opening a Mandarin on Grand Cayman would give the Islands an even higher stature.
‘You don’t have a finer product than the Mandarin in the world.’
With the possibility of Cuba opening up to American tourists in the relatively short term, Mr. Cotter thinks it will be projects like Mandarin that help Cayman hold its own against a stiff new tourism competitor just 90 miles to the north.
‘Business leaders should be doing everything they can to promote projects like this,’ he said. ‘You don’t find Mandarins on everybody’s shores because they are very particular where they go. And they bring instant credibility to a destination.’
Mr. Cotter said he had met with members of the current government as well as the previous government about the project.
‘Both governments have been extremely supportive of this project,’ he said. ‘They’ve been willing to meet and discuss the project.’
But the support has pretty much been limited to talk.
‘I don’t blame them for not wanting to do too many things without knowing the project was going to get built,’ he said. ‘But they haven’t really stepped outside their comfort zone to help us.’
Mr. Cotter said he had hoped for more proactive support from the government, especially with the various challenges facing Cayman tourism.
‘This ‘we’re Grand Cayman and we’re the best in the Caribbean’ idea – I don’t think that flies anymore,’ he said.
Mr. Cotter said he didn’t want to give the impression the government had done nothing.
‘It’s just we haven’t seen much of what I would call proactive support,’ he said. ‘But I guess developers always like to see governments more proactive.’