‘Theoretical programme’ in PwC review
Dart Realty [Cayman] Ltd. had – at the time an October 2012 value for money review was completed – plans to build five new hotels in the West Bay Road, Seven Mile Beach and Barkers areas.
In addition to the hotel development, condominiums adjacent to those hotel properties, separate housing developments and two new commercial and retail developments were proposed.
The details of the planned developments are contained in the recently released value for money review done by PricewaterhouseCoopers at the request of the Cayman Islands government. The review evaluates the National Roads Authority agreement entered into by Dart Realty and government. It seeks to define a monetary value for what Cayman is putting into the deal, versus what it’s receiving.
The hotels and other developments were included in the PwC review to estimate how much potential value the NRA agreement might produce within a 25-year period. However, the NRA agreement does not bind Dart Realty to the completion of any of the construction projects except for one four- to five-star hotel along Seven Mile Beach.
The entire plan, if it were carried out, would increase the number of available hotel rooms in Grand Cayman by 53 per cent.
“They are therefore predicated on the assumption that there will be sufficient US and other international demand for the additional hotel accommodation, as well as adequate air transport capacity,” the PwC review states. “Current economic trends suggest the plans are challenging.”
The first hotel listed in the development programme has already started construction at the location of the old Courtyard Marriott in the Public Beach area on West Bay Road.
It is envisioned as a four- to five-star hotel with 265 rooms [including 20 condominiums]. When completed, the company estimated it would sustain occupancy of around 65 per cent.
Three other hotels listed on the plan are simply defined as “WB hotels 2, 3, and 4”. They have between 150 and 300 rooms apiece and are expected to average 70 per cent occupancy.
The “WB hotel No. 2” has an anticipated start date of December 2015. It would be the largest of the five, with 300 rooms available.
The smallest hotel on the plan, with 100 rooms, is listed as an Eco-tourism hotel proposed in the Barkers area in West Bay.
None of the hotels, save the one at the old Courtyard Marriott site, are mandated by the NRA agreement.
The PwC report speculates that some projects, like the Health City Cayman Islands complex in East End or the Enterprise City development, may be needed to support additional demand for hotel capacity.
An upgrade to Owen Roberts International Airport in Grand Cayman would also be needed, reviewers noted, since additional travel capacity to fill all these hotels would be required.
Attached to the proposed hotels are condominium properties identified as “WB Lands Condo 1, 2, 3, 4 and 5”.
The developments have between 50 and 100 units apiece and are all fairly high-end, with a stated development cost of between $660,000 and $1.1 million excluding land costs. Average sales per unit are anticipated at between $800,000 and $1.2 million, according to the PwC report.
In addition, housing developments again in the upper-scale of the market, are slated for development under the long-term Dart Realty plan.
Two of those developments – “Crymble Landholdings” and “CIYCAM Lands” – are identified in the report. The Crymble development is a massive project with 838 units to be sold at an estimated $1.1 million per unit. CIYCAM is a more modest 171 units with an average sale price of $900,000.
Two commercial centres of roughly 50,000 square feet apiece are also listed in the development plan. Starting rent per square foot within these developments is estimated at $45 per square foot.
PricewaterhouseCoopers did not seek to estimate a return on investment from these potential real estate projects to Dart Realty.
“PwC did note, however, that, on the face of it, Dart Realty’s projected returns from real estate development and hotel operation appear low,” the evaluation stated.