Blockbuster deal made

The government and the Dart Group have signed a Heads of Terms agreement they say will stimulate the economy, provide needed infrastructure and resolve the George Town Landfill problem. 

The deal, the largest ever reached between the government and a private sector entity in Cayman Islands’ history, will cost the Dart Group more than $100 million in cash outlay, not including construction-related investment.  

All together, the Dart Group is committing to US$415 million of direct investment over the next five years, US$200 million of which will be spent in the next two years.  

The Dart Group anticipates spending more than $1.2 billion over the next 20 years.  

There is no debt, sovereign guarantees or cash outlay required by the Cayman Islands Government as a result of the deal. 

Elements of the deal include:  

Dart to give government 110 acres of land for a new solid waste disposal facility in Bodden Town and to construct the first phase of that facility; 

Dart taking ownership of the George Town Landfill, leading to its closure, capping and remediation;  

Dart to extend the Esterley Tibbetts Highway north from its  

terminus at Raleigh Quay to Batabano Road in West Bay and create at least one more feeder road from the highway to West Bay Road; 

Government to give Dart about 2,500 feet of West Bay Road starting around Raleigh Quay Road and going north, leading to the closure of that section of road. 

Dart to give government 26 acres of land for usage on the Esterley Tibbetts Hiqhway; 

Dart to give government 70 acres of land in Barkers for inclusion in the National Park; 

Government to give Dart about 70 acres of land near Salt Creek; 

Dart to give government approximately 150 acres of land in the Central Mangrove wetlands in the middle of Grand Cayman; 

Dart to provide $18 million of funding for community projects, including land for schools, affordable housing, education facilities and district parks;  

Dart to redevelop the former Courtyard Marriott hotel, creating a new four or five star hotel with more rooms, conference facilities and other amenities; 

Dart to commence construction on the first ‘for sale’ residential phase of Camana Bay by the third quarter of 2011; 

Government to rezone certain Dart land holdings, including about 40 acres of mangrove buffer at Camana Bay; 

Dart to get 100 per cent abatement of development fees and import duties in relation to construction activities on its Camana Bay, Starfish Point and West Bay properties, up to a maximum present value of US$44 million, or up to US$54 million if the costs of remediation of the George Town Landfill exceed project estimates. Once the cap is exceeded, Dart to get 50 per cent abatement of development fees and import duties for a further period of 15 years; 

Dart to get a 50 per cent rebate of hotel taxes levied pursuant to the Tourist Accommodation (Taxation) Law for all hotels it develops or acquires and renovates or refurbishes for a period of 10 years after each hotel is opened or renovations or refurbishments are completed for any hotel permitted or acquired within 30 years from the date of execution of the definitive agreement; 

Government to bring environmental tort reform legislation relating to the George Town Landfill; 

Government to provide Dart with assistance in permitting through various boards and agencies, excluding the Immigration boards. 

Expanding deal 

The Dart Group started the ball rolling on the deal by approaching the government in December 2010 with a proposal for a formal development agreement to help stimulate Cayman’s economy starting this year. Dart offered to proceed with another US$200 million worth of investment, but asked for a resolution to the landfill problem and for economic incentives. 

Director and CEO of Dart Realty (Cayman) Ltd. Mark Vandevelde spoke about why Dart approached the government. 

“The Dart Group has been in the Cayman Islands for almost 20 years, with a proven track record of commitment to the country and a long term perspective,” he said. “The unprecedented challenges of the prolonged global recession, coupled with Government’s fiscal constraints, continues to paralyze the local economy. With our strong and stable capital base, as one of the largest local investors and one of the largest employers, we are always open to meet and discuss matters of national importance with the sitting Government.” 

Between December and April, Dart and Government teams – which included multiple Cabinet ministers and back-bench MLAs – met many times to discuss the scope of the deal. The agreement finally reached will facilitate the Dart Group’s $200 million of investment from the third quarter of this year through 2013; create 500 to 600 hundred jobs directly and several hundred more indirectly; and generate tens of millions of dollars in Government revenue. 

The scope of the deal expanded when the government expressed needs beyond just stimulating the economy, including the building of roads, schools and other community-based projects. 

“[We] believe the agreement is an innovative solution,” said Mr. Vandevelde, “a solution that reflects our Company’s ongoing commitment to helping create and maintain a thriving, sustainable Cayman Islands as a great place to live, work, visit and invest for the present and future generations.” 

Landfill 

The key element of the deal for the Dart Group focused on resolving the George Town Landfill situation. Without resolution, Dart said it could not move forward with further residential build-out of Camana Bay. The Dart Group said the landfill was the “single most commonly stated hurdle for potential purchasers of various residential units at Camana Bay” and that the proposed hotel on the site was negatively impacted the same way. 

Premier McKeeva Bush announced in January that the Dart Group would acquire the George Town Landfill and provide a site and foundation for a new, modern solid waste disposal management facility elsewhere on Grand Cayman. That site will be in Bodden Town, just east of Midland Acres near an old quarry owned by Justin Bodden. 

Dart will close, cap and remediate the George Town Landfill, converting much of it into a public park. Dart recently purchased the land in Bodden Town and will create a platform for the new ‘eco-park’ solid waste management facility.  

As part of the deal, the Dart Group will complete the first phase of that facility, a properly engineered lined, capped landfill. Dart, however, will not operate the new facility. Operations and implementation of other aspects of the facility such as waste-to-energy and recycling would be up to the government or another private sector entity. 

It is estimated that the cost of doing the necessary environmental investigation, capping, closing and aftercare work on the George Town Landfill will cost the Dart Group $32.5 million. It will cost an additional $26.5 million to plan and build phase one of the new solid waste management facility, including the cost of the land. The balance of the more than $80 million cash outlay from the Dart Group for infrastructure will be in the extension of the road.