Proposed Mandarin site up for auction

The East End site earmarked for a proposed Mandarin Oriental hotel is going on the auction block Friday, 16 December. The public auction ordered by HSBC Bank (Cayman) is the largest such event in the Cayman Islands since the November 2010 auction of luxury home Casa Coyaba, which was nixed due to ongoing legal wrangling.

The 19.3-acre “Barefoot Beach” property sits on about 1,900-feet of beach front along the Queen’s Highway on the northeast side of Grand Cayman. The listed sales price for the property, according to the Cayman Islands Real Estate Brokers Association’s database, is CI$14.8 million. (Comparatively, Casa Coyaba is listed at CI$10.5 million.)

Coldwell Banker broker J.C. Calhoun, who originally sold the property to Florida-based developers Barefoot Resorts Ltd., expressed doubts the auction will fetch a comparable price for the property. However, he said the bank has made the decision to go to auction in hopes of recouping some of its investment into the property after developers have failed to make loan payments.

“The interest clock is ticking on the owners, and the bank really wants to get this settled one way or another,” he said. “In order for them to get paid, they want to take it to auction.”

Mr. Calhoun said there was a sealed bid process several weeks ago that attracted several bidders, but none of the offers were “up to the level the bank felt comfortable in taking”.

Barefoot woes

In September 2010, the Caymanian Compass reported that Mandarin resort development plans had been ‘scrapped’, citing Mr. Calhoun, who said the global economic downturn was the “nail in the coffin” for the project. The developers immediately responded, protesting that plans had not been cancelled, and that they had spent more than US$10 million thus far in what was envisioned to be a US$200 million-plus project. They wrote in a letter to the editor, “The directors can confirm that they are actively in discussions with a number of qualified investors and hope to be able soon to make an announcement concerning the future of the project.”

Prior to the article, the property had been listed by the bank for sale at CI$18.8 million.

In April, Florida-based CNLBank won a US$10.3 million foreclosure judgment against Cypress of Southwest LLC, a company managed by Jeffrey Cotter and Stuart Wood, the directors of Barefoot Resorts. The company had borrowed the money to develop 12 acres of Florida land, which was to be auctioned off shortly after the foreclosure judgment, according to the Sarasota Herald-Tribune.

Regarding the Grand Cayman property, Mr. Calhoun said the Florida developers entered the scene just as he was going through the process of subdividing the site into 19 oceanfront lots of about one acre each. They offered to buy the property as a whole and then proceeded with their original intent of putting in a development comprising cul-de-sacs and fractionally owned houses – two of which were built.

“The concept didn’t go. Of course it wouldn’t go. There’s so much Cayman beach front you can buy and have a house facing right on the ocean for a lot less than what they were trying to do,” he said. “The concept was poorly suited to the site, and the timing was bad. It wasn’t until that failed that they said, ‘Gosh, do something else’. That’s when they got a hold of the Mandarin hotel.”

Property potential

Mr. Calhoun said the Barefoot Beach site is special in that it is a deep property bounded by a nice highway and a good stretch of sand, the eastern half of which is of the highest quality Grand Cayman has to offer. “It’s about as good as it gets in Cayman off Seven Mile Beach,” he said.

“It is very unique to get a site which is bordered by the road and the sea because then you can secure it and turn it into a very private resort. There’s nobody else that can really get on that property once you own it. You could turn it into one heckuva private resort,” Mr. Calhoun said. “The beach quality is so good on the eastern section. It does make it likely to be a very good destination resort location.

“It’s just that right now the market is soft, and it’s hard for people to see around the corner to what might be going around in Cayman two, three, four years from now,” he said, referring to proposed developments for the eastern half of Grand Cayman, including Dr. Shetty’s medical tourism hospital and Cayman Enterprise City.

Although the Florida developers will no longer have a role, that does not mean the Mandarin has been cut out of the picture. The persistent interest of the Hong Kong-based luxury hotel brand is indicative of the site’s development value, Mr. Calhoun said.

“Mandarin Oriental is still interested in managing a hotel that would be built on that property,” he said. “And those folks run a first-class operation.”

Auction details

Friday’s auction is open to qualified bidders only at the offices of Conyers Dill and Pearman in Cricket Square. The bank has set a minimum bid level and does not have to sell the property if the highest bid does not exceed that threshold.

Mr. Calhoun predicted the auction winner will probably get a good deal, considering the bank has invested less money into the property than the listed price of CI$14.8 million.

“Somebody will get it for less than the bank has in it probably, but exactly how much less is kind of the bank’s decision,” he said.

If the property is sold at auction, then the new owner could be known quickly afterward.

“Within a couple of weeks probably of the auction, there’d be a formal contract signed by the successful bidder who could be announced,” Mr. Calhoun said.

It is not clear the auction of the property will set a precedent in Cayman, which has few bank-ordered auctions compared to the United States, due to the greater proportion of down payment typically required to secure a loan in Cayman. However, he said, “If there’s any time that you’re going to see fellas in trouble then now is the time.”