Bush: Ritz purchase price ‘artificially low’

The US$177.5 million purchase price for The Ritz-Carlton, Grand Cayman hotel property during a recent auction may have been at an “artificially low” value, according to statements made in the Legislative Assembly by Cayman Islands Premier McKeeva Bush.  

Mr. Bush’s comments came in response to criticisms from opposition members of the Legislative Assembly that his government had apparently missed out on the opportunity to collect $6 million in deferred stamp duty owed by the receivership companies formerly controlled by Ritz developer Michael Ryan.  

“They know, that the real value of The Ritz-Carlton as we were told … as recently as 2007, the hotel and land was valued by a third-party quantity surveyor at over $468 million,” Mr. Bush said. “In a caucus meeting in the Cabinet room, held to discuss the value of The Ritz-Carlton hotel and property, Mr. Uche Obi of the Lands and Survey Department said that in his opinion the hotel and property was worth more than $500 million … that’s the lands people.”  

Mr. Bush earlier told the Caymanian Compass that discussions were continuing between the government and the Ritz owners about the $6 million in deferred duty obligations government has claimed it was owed and also regarding the stamp duty on the purchase price of the Ritz property by 
RC Cayman Holdings. 

“I suspect that the new owners will live up to the contract. It’s a legal document, and the government cannot afford to wipe it out,” Mr. Bush said at the time.  

Last week, the law firm Conyers Dill & Pearman, representing RC Cayman, released the statement contradicting Mr. Bush.  

“RC Cayman Holdings LLC and its subsidiaries RC Cayman Hotel Holdings Ltd. and RC Cayman Property Holdings Ltd., new owners of The Ritz-Carlton Grand Cayman, are not engaged in any discussions or negotiations with the Cayman Islands government in connection with the deferred stamp duty payments allegedly owed to the government,” according to the statement.  

According to the statement, RC Cayman – the secured creditor on the Ritz property – “approached the Premier’s Office with a range of proposals” concerning the resort on 23 April, including payment of the outstanding stamp obligations.  

RC Cayman sent a formal letter to the premier 14 June “setting out in detail each of the proposals to facilitate payment of the outstanding duty”, according to the statement, and subsequently notified the premier that the sale would take place 31 October.  

According to the statement, “To date, no reply – formal or otherwise – has been received by RC Cayman Holdings from the premier, his office, or the Cabinet. This is despite many subsequent attempts over several months to contact the Premier’s Office by direct and indirect means. The opportunity for government to resolve the matter of the deferred duty was lost with the October sale.” Mr. Bush told lawmakers Wednesday of this week that it would not have been advantageous for the territory to accept the proposals set out by RC Cayman in the 14 June communication. According to Mr. Bush, those proposals included “massive concessions”.  

The premier said government was asked to agree to an “artificially low value” for the hotel and entire property of US$150 million. Mr. Bush said RC Cayman representatives wanted a lower stamp duty of 5 per cent charged on the lowered value and that US$7.5 million stamp duty arising from those calculations be paid over five years with government getting US$1.5 million upon the property transfer.  

In addition, other concessions requested were the reduction of hotel work permit fees by 50 per cent, the reduction of utility costs by allowing the hotel complex to produce its own water, discussions to sell the freehold interest in the entire property of the hotel “along the same lines that we had previously rejected from the former owner”, Mr. Bush said; and that government provide new duty deferrals for five years, reducing import duties from 22 per cent to 10 per cent.  

“The offer from [RC Cayman Holdings] through [Conyers’ director in Cayman Rick] Finlay to pay the outstanding deferred duty … came with many strings attached; strings that could add up to over $70 million and set dangerous precedents for future governments in dealing with investors,” Mr. Bush said. “I told them so in my response of 5 October. 

“We want to be good partners, but it requires both sides to give and take. This government does not give into threats and ultimatums and they were told so in my letter. Now they say I didn’t say anything, but I wrote to them on 5 October, a fact conveniently omitted if they knew,” Mr. Bush said.  

The premier also said he met with officials from Five Mile Partners in September 2011 and then three more times between February and April of this year regarding a number of issues including payment of deferred stamp duty and certain concessions for the hotel’s new owners. 

Of the last face-to-face meeting held in Conyers’ offices, Mr. Bush said: “I again reiterated government’s position regarding the deferred duty and also that government did not relish that they were pursuing all these legal proceedings in earnest and that government could not get caught in the middle. It was bad for Cayman and bad for the hotel, but I was willing to be a good partner.”  

“Despite them getting the support from the Leader of the Opposition, this government does not give into threats and ultimatums …” Mr. Bush said. 

He was interrupted after this statement by political opposition leader Alden McLaughlin.  

“The Honourable Premier must really stop making these unfounded allegations,” Mr. McLaughlin said. “I have offered no support to anyone.  

“[The premier] let Mike Ryan get away with not paying $6 million to this country and he’s now making him get away again. He needs to explain to this country his personal relationship with Mike Ryan and why the country has gone down the road it has.”  

“I have not accused the member of anything,” Mr. Bush replied.  

After Speaker of the House Mary Lawrence stepped in to calm things down, Mr. Bush continued, stating that his government would continue to demand the $6 million in deferred duty owed.  

“Government will continue to demand its due payment of the deferred stamp duty and will expect it to be paid before any consideration is given to any request for any licenses, work permits or anything that government does on a day to day basis in relation to the operation of the hotel,” he said. 

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12 COMMENTS

  1. We have missed out on the duty payment? Wrong! If the best the opposition can do in support is to point fingers to discredit the Premiere, they should understand it will be at the expense of the Cayman Islands. If all of you high paid officials cannot get together and collect a pass due bill, you beg for relief.

    All fingers should be pointing to the treasury; evidently someone has lost their way with the islands money.

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  2. Mr. Bush fails to comprehend the extent of economic decline in world wide real estate values and socio-economic conditions.

    Of course I would not expect anyone who has continued unabated to collect his generous Friday paycheck to have empathy for those who are struggling.

    Perhaps if the Government had their paychecks tied to performance rather than tenure, then I’m sure things would improve dramatically.

    Ask not when things will improve but rather who’s next to fail, how long will we maintain this course toward the eve of destruction?

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  3. Bush’s hindsight is as usual 20/20.

    Unfortunately when it comes to business matters, where he is out of his league, he is legally blind.

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  4. Wrong. The Ritz price is artificially high, just like the dollar and the euro and just about every asset class in existence. Central bankers are doing their best to hold up the house of cards but ultimately they will fail. Only then will a true market price be found.

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  5. Wasnt McKeeva one of the clients who purchased a Ritz Carlton unit? Wow…

    If so, I too would want the purchasing price over 177.5 million! That would be a lost for McKeeva.

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  6. Happens all the time when real estate goes into forclosure.. They were just lucky noone else was interested in buying it…People regularly by forclosed properties at a fraction of the cost and value..But any tax debt usually stay with the property when it is sold, I guess that’s the difference when you call it stamp duty. I do find it funny that the new owners can say that the government missed thier chance to collect. I’d like to see someone try that with the IRS..

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  7. 177.5 MILLIONS, LOL, IT IS WORTHS 4 TIMES THAT PRICE. YOU DON’T NEED TO BE AN EXPERT TO UNDERSTAND WHAT REALLY IS GOING ON. SOMEONE IT’S TRYING TO PAY LOWER STAMP DUTIES, THAT’S ALL! REMEMBER THE SO-CALLED EXPERTS WERE RESPONSIBLE FOR WALL STREET MARKET CRISIS; I AM THE WISEST MAN ALIVE, FOR I KNOW ONE THING, AND THAT IS THAT I KNOW NOTHING ‘Socrates’

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  8. The downward spiral is now accelerating and the CIG will do it’s level best to drive the Ritz into the ground with work permit issues and any other ways to impede operations. Won’t that empty hulk on the beach look attractive in future tourism articles?

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