Ritz owners meet the press

Ritz-Carlton Grand Cayman main

The new owners of The Ritz-Carlton, Grand Cayman, visited Grand Cayman and met with members of the media Wednesday morning.

James Glasgow and David Lattimer of US-based Five Mile Capital Partners reiterated the company’s position that it does not owe government $6 million in deferred duty payments, and that the US$177.5 million auction price of the resort property was based on an impartial valuation agreed to by government.

“We do not owe the duty that Mr. Ryan owes,” said Mr. Glasgow, referring to the deferred duty payments that government alleged it was owed by receivership companies formerly controlled by Ritz developer Mike Ryan.

Private equity firm Five Mile is the owner of local company RC Cayman Holdings, which purchased the Ritz at auction 31 October.

Mr. Glasgow and Mr. Lattimer said local firm Chartlerland pegged the value of the property at US$177.5 million, and that value was OK’d in writing by the government’s Valuation and Estates Office.

Last week in Legislative Assembly, Premier McKeeva Bush said the auction price was far lower than the US$468 million value assigned by a valuer in 2007, apparently referring to a January 2007 valuation performed by property consulting firm BCQS.

Saying that 2007 valuation may have been used to obtain the US$232 million in credit from Credit Suisse that was eventually acquired by Five Mile, Mr. Lattimer said, “At some point, someone believed that was the value.”

However, in today’s situation, Mr. Lattimer said an attempt by the government to collect stamp duty on the Ritz sale based on a US$468 million value, rather than the US$177.5 million price, could lead to litigation and might cripple the company’s plans for the Ritz.

“The hotel might shut down,” he said.

The Ritz owners later sought to clarify that remark in the following statement sent to the Caymanian Compass on Thursday.

“Five Mile Capital LLC have no intention of shutting the Ritz-Carlton Grand Cayman down. Nor does the company want to imply in any way that this is the case.

“To clarify, Five Mile’s objective is to direct capital investment into the asset so that its current Five Diamond rating can be maintained. Five Mile has been advised that the loss of the Five Diamond rating would be damaging to the Resort and its overall value and global standing. Without the necessary capital investment the Five Diamond rating would be in jeopardy.

“Five Mile is prepared to pay the requisite stamp duty based on the current appraised value of the hotel. It fears, however, that a tax based on a 2007 valuation, premised on projected revenues that never occurred, will negate the ability to make the necessary capital improvements to preserve the Five Diamond rating.”*
 

On island from Monday to Wednesday, Mr. Glasgow and Mr. Lattimer visited with the Ritz management company, toured Grand Cayman by helicopter and met with the press at the office of the firm’s legal representatives Conyers, Dill and Pearman. They also planned to meet with Governor Duncan Taylor and perhaps Deputy Governor Franz Manderson – but not with the premier or members of his government.

For more on this story, please see Friday’s edition of the Caymanian Compass.

 

Editor’s note: This story has been changed from the original to include the clarification indicated.
 

Ritz-Carlton Grand Cayman

The Ritz-Carlton Grand Cayman
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9 COMMENTS

  1. How can a going concern of a business affected by personal tax liability of the owners which is distinct and separate?

    coercion, threats, intimidation to sabotage the economy is unacceptable.

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  2. If the Government does not accept the current valuation based upon its assertion that the price paid was below market then the Government should step-up and buy the over valued Hotel with the peoples money for 468 million.

    Pay all the creditors what they’re owed, then collect the duty owed from both the deffered and the new sale and then try to figure out how to run a plutocratic hotel at a profit.

    Seems to me that is what you want someone else to do.

    Otherwise get out of the way and let the market operate in a free and unfettered manner.

    Just maybe the new owners can save this mess and keep 8oo people employed and their families fed.

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  3. A owner offers his house for sale at 1 million. The real estate agent lists the house for 1 million. I offer to pay 500,000 for it and the offer is accepted by the owners because the owners want to leave the island. I pay stamp duty on the purchase price. How’s this any different?

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  4. Does the Cayman Isalnds Government know what they are doing? Why was this not sorted out years ago ? Why is Ryan off the hook? Some red flags here don’t you think !

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  5. I would like to believe that when the previous owner of the Ritz was negotiating concessions he did so for the Ritz – not for himself personally, and therefore the Ritz, and not the previous owner personally owes the Duty.

    This appears to be nothing other than large investors trying to bully a small country into having things their way.

    In addition to the above, I see where it appears they want the Stamp Duty charged on what they paid, and not its fair market value. Again this concept of Governments charging based on the fair market value seems alien to them. Perhaps they needed to take legal advice on that before the purchase.

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  6. Further to my previous post, and as legal information (not legal advice), perhaps the current owners of the Ritz should look carefully at Pg. 19 of the Stamp Duty Law (2011 Revision) which states under CONVEYANCE OR TRANSFER of any immovable property:

    (3) For the purposes of this head of duty, the consideration shall be deemed to be the consideration recited in the instrument effecting conveyance or transfer or THE MARKET VALUE OF THE PROPERTY CONVEYED OR TRANSFERRED, WHICHEVER IS HIGHER.. (Emphasis added)

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  7. Market values are not static numbers, the market value of a property must be considered in the context of current evaluation not arbitrary assertions.

    Moreover, if the current Government were to contest the free market value as applies here then it would be characterised as politically motivated and heavy handed.

    Try getting international investment and confidence in an economy when the Government can apply sole and arbitrary proclamation without due process or rightful justification.

    One can always look to the bottom of the ocean and find the single cell Amoeba, right below that you will find the Lawyers that argue this stuff.

    Consider the carnage if every sale made in the last 2 years was suddenly subject to higher duty enforced because the Government thought you should have paid more for the property.

    Good luck maintaining a healthy real estate market and a viable economy.

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  8. In assessing the fair market value of property it is not necessary to use arbitrary assertions (each party cuold hire their own valuators and arive at a sensible fair market value), and if, as they should, the Lands Survey Department apply the fair market value in determining the stamp duty payable, this would not be politically motivated or heavy handed, but rather applying the laws of the land (which most democratic countries do), namely the Stamp Duty Law.

    Legitimate international investment and confidence should be encouraged by following the laws of the land (as opposed to one that allows some investors to play at different rules and suspend operation of laws) and please note there is an adjudication process under the Stamp Duty law if a person disagrees with the value – please read the Stamp Duty law, as whilst ignorance of the law can be bliss – its seldom helpful.

    If the Government is not able to use the fair market value on certain sales that some individuals would abuse that system by lying about the sale price (and it would be difficult for the CIG to prove they were lying).

    The Cayman Islands real estate market has thrived and grown from strength to strength – starting at where beach front property was sold for credit in a local grocery store to as much as 12500 per sq foot precisely because as a country the laws of the land have been applied.

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  9. Atticus – the Stamp Duty Law says the higher of purchase price or the market value (I’m not sure what fair is supposed to add to this). It doesn’t seem that the dispute is about whether the market value should be applied but rather what the market value is. The premier believes that it is more than double the value which was apparently assessed by an independent valuer, and, according to the new owners, the govt. valuation office, and the price paid at a public auction.

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