State of the Nation: Dart, government reach agreement

Hotel tax rebate voided; Dart to get freehold of SafeHaven property

Premier-Alden-McLaughlin-L

  The government has reached a resolution in the lingering negotiations over an agreement between Cayman’s National Roads Authority and Dart Realty, with each side getting something it wanted. 

In his State of the Nation address at the annual Fidelity Cayman Economic Outlook conference at The Ritz-Carlton, Grand Cayman on Thursday, Premier Alden McLaughlin said the government had been working to finalize the third amendment to the NRA deal, particularly renegotiating a provision that would have effectively waived half of the tourism accommodation tax for all of Dart’s hotels for an extended period of time. 

“My government listened to our tourism industry, our investors and to our constituents,” he said. “Dart Realty, always an engaged corporate citizen, listened to us. The tax rebate is gone; the tourism playing field remains level.” 

The 50 percent hotel tax rebate was proposed in the agreement as a way of enabling Dart to recover some of the infrastructure investments made under the NRA agreement, which was originally signed in December 2011, and formed part of a larger ForCayman Investment Alliance agreement. The latter was never completed, primarily because it involved closing the George Town Landfill and establishing a new landfill in Bodden Town, something that current government administration has said it will not do. 

The NRA agreement, however, did involve having a section of West Bay Road closed from Public Beach going north, the expansion and improvements to Public Beach; the extension of the Esterley Tibbetts Highway from Raleigh Quay to Batabano Road in West Bay; and a new leg of Reverend Blackman Road to Willie Farrington Drive.  

A second amendment to the NRA deal was signed in September 2012 and a third amendment, which at one time widened the scope of roadworks Dart would construct considerably, was discussed. 

Soon after the Progressives-led government took office in May 2013, it stated that it wanted to renegotiate the third amendment, particularly the 50 percent hotel tax rebate element. Since then, the government has stated on several occasions that it was hopeful of a speedy resolution. In the end, the government allowed Dart to recover some of its infrastructure investments made as a result of the NRA agreement – which through the end of 2014 amounted to more than US$106 million – in another way.  

“In place of the tax rebate, Dart will receive an increase in the NRA Agreement recovery cap, as well as duty abatements and waivers for 30 years,” Mr. McLaughlin said. “This will serve both to incentivize development and provide a means to recover investment made through the agreement.” 

Dart Realty subsequently gave some details about the increase in recovery cap. 

“The third amendment to the NRA agreement includes a $13.1 million increase in the development duty waiver cap already in place through the NRA agreement, as well as other duty abatements and waivers related to Camana Bay development over the next 30 years,” said Dart Chief Operating Officer Jackie Doak, noting that the $13.1 million was the estimated value of the tourism accommodation tax rebate on the Kimpton hotel alone for its first 10 years of operation, according to a report by PwC. Those calculations were based on a 10 percent tourism accommodation tax, which was since increased to 13 percent, meaning the government will save even more than the $13.1 million estimated.” Dart CEO Mark VanDevelde said his company understood the government’s desire to replace the 50 percent hotel room tax. 

“At government’s request, we were open to alternative recovery and incentive methods, and feel this has been achieved in the agreed third amendment,” he said. 

Freehold ownership  

The third amendment of the NRA agreement also includes a provision that will allow Dart to purchase freehold title to the SafeHaven property currently held on a 99-year lease, Mr. McLaughlin said Thursday. 

“Dart already holds the leasehold to the former SafeHaven property and subject to compliance with legal requirements with respect to the disposition of Crown Land, Government has agreed to the sale of freehold title to this property, inclusive of the North Sound Golf Club.” 

When Dart confirmed it had “invested” in the North Sound Club in 2012, it did not discuss to what level or if it had also invested in the rest of the SafeHaven property, which at the time was known as Dragon Bay. However, former Dragon Bay developer Mike Ryan confirmed on Thursday afternoon at he was no longer involved in the property and had not been “for a number of years.” 

Speaking on Thursday, Mr. McLaughlin said the result of the sale of freehold title to the SafeHaven property would provide revenue to help fund government’s much-needed infrastructure projects.  

“It will also deliver long-term economic benefit from direct investment in real estate, the associated stamp duty revenues from a new source and the future cycle of land sales,” he said.  

In an interview with the Compass in 2011, Mr. McLaughlin conceded that it was unlikely the government would ever get developed Crown land back from lessees, but at the time he said he thought there was still a benefit of holding the leases because of the revenue injections lessees would make “every 40 or 50 years” when they wanted to extend the term back to 99 years. 

Mr. McLaughlin was speaking about the entire Dragon Bay development, which at the time included The Ritz-Carlton, Grand Cayman, since acquired by Five Mile Capital.  

Commenting after the conference on Thursday, Mr. McLaughlin said the government wasn’t in any discussions with Five Mile Capital about the purchase of freehold title to the Ritz property. 

“There is a real distinction,” he said. “The property on which The Ritz-Carlton is built is, well self-evidently, developed. The SafeHaven property has been stagnant for 25 years, principally because potential residential owners would not buy homes there on leasehold property.” 

Dart did not discuss immediate development plans for the property, but acknowledged that freehold title will be useful when it is eventually developed. 

“The real estate market has proven that both international investors and local purchasers can be hesitant to buy leasehold property, no matter how long the lease period,” Mrs. Doak said. “By agreeing to buy the property outright at fair market value, we will not only provide government with a revenue injection from the initial purchase price, but also improve government’s opportunity for ongoing revenue from the real estate activity that will result from eventual residential developments.” 

The bigger picture  

Mr. McLaughlin now sees a developer that is ready to invest, according to Dart, an additional US$1.3 billion over the next 20 years, in its Camana Bay development alone. In addition, in the northern part of the Seven Mile Beach corridor, Dart owns about 300 acres of land it bought from distressed developer Stan Thomas in 2011, about 220 acres that comprise the SafeHaven lands, plus a number of smaller properties it has purchased over the past four years. 

“Development will … extend into Dart lands in other areas of Cayman, filling a pipeline with continuous economic stimulus, work for local companies and employment opportunities for the Caymanian people,” Mr. McLaughlin said.  

Addressing another concern expressed by the public as a result of the closure of a section of West Bay Road, Mr. McLaughlin said Dart had committed to construct, at its own expense, an emergency access ro
ad passing through the Kimpton property to allow public vehicle access in the event of an emergency that closes the Esterley Tibbetts Highway.  

“This is necessary because of the closure of the remaining part of West Bay Road, as agreed in the original NRA agreement,” he said. 

Because Dart Realty plans to develop Camana Bay on an “elevated plane” that will pass overhead of sections of West Bay Road and the realigned Esterley Tibbetts Highway, Mr. McLaughlin said the government would draft new legislation to allow Dart Realty to buy the land over the two roads that pass through Camana Bay, something known as “air rights.” 

“By agreeing to draft legislation for air rights,” Mrs. Doak said, “government has proven that it is prepared to be innovative and flexible in offering solutions to the committed investors that are contributing to Cayman’s long-term success.” 

Premier-Alden-McLaughlin

Premier Alden McLaughlin delivers his State of the Nation address on Thursday.
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  1. Dart still gets to recoup the money they invested into infrastructure upgrades. It was going to be over a long period of time estimate to be up to 20 years through the 50 percent room tax rebate once everything was built and people started to come. Now they get their money back through duty concessions during construction, which mean they get it back a heck of a lot quicker. He also gets to call more crown land Dart Land. As far as the access road, if you look at the plan Dart created for the Kimpton site there was already a boardwalk type walking path and bike trail through the property that they said could be used for emergency access.

    I my bigger picture what I see is that Dart still get his money back, just faster, He also gets a much bigger piece of the Seven Mile Beach Corridor to call his own, which he couldn’t have owned previously, I am sure this made then extremely happy and was worth the negotiations itself . Government gets an access point that was already planned and they get to collect the full amount of room tax when they start to rent.

    This was meticulously handled in a way that allowed the CIG to still give Dart what they were promised while saving their faces politically. But in the end Dart came out with more than they had before and we still have to deal with the dump. However I am sure Dart feels that they will eventually have to do something about it themselves.

    I don’t see where the big accomplishment is or what the premier is so proud of.

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  2. What M. Davis said……they are standing on the shoulders of those before them. A face saving move if there ever was one…..

    What they really should have done was let Dart deal with the dump but then they would lose the all important BT vote…

    I mean which politician is going to put the welfare of all our people and tourism product over votes??!!

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  3. State of the Nation Dart was the headline, now changed to State of the Nation: Dart etc.
    Ok, its pedantic to pick at the detail, but the first was probably nearer the truth!
    Dart is steadily gaining powers akin to ownership of the Island, does it matter? Well yes, there have been other cases of a mega wealthy owner bagging so much of a nations real estate and business that he ends up owning its politicians. I suggest that he already has more than is healthy for the Island as a whole.

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  4. Looking at the state of the nation, Dart, Government reach agreement. Why are we not more outraged by the man that is put in the position to represent us and the Islands. To do a deal like what he did, and feel proud about his accomplishments, make you wonder who he was really representing in this negotiations ? To give away rights to Government property, Government revenues, without a date to do what the other side supposed to do. Why are we not paying more attention to the law makers /politicians that are making these kind of deals for the for the feature of the Islands, and the feature generation. This is why the Islands is broke and has no money for infrastructure. More money going out of GOVERNMENT than coming in, this is how Governments fail. People should be outraged by Government selling out the Islands to any person for his/her own profit and play ground.

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  5. I was so happy to have been able to go to Government with many other charter boat captains off Cayman to get permission to use Government owned property , for those charter captains that were just starting out in the water sports. Mr Benson Ebanks gave us permission to use the property, with the condition, that if we trashed the property up he would have it taken away from us. The property was kept clean except one dock space which was used by a developer of Cayman . The garbage that was at his dock, was 2 drums of used oil, old carpet from his boat , beer cans/bottles. I learned that this was happening, I went to the environment protection agency of Cayman about this environmental disaster of the oil on the shore next to the water. I was told that he would have to be put in court to get it cleaned up, I told them that would be long and the oil would be in the water and the land by then . I went back to my office called the developer that the property where his boat is docked had to be cleaned up within 24 hours, no action was taken 23 hours and 45 minutes, I showed up with the TV crew and the place was cleaned up in 1 hour. Would I be able to this today with this property? No I would be sued for trespassing on private property .

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  6. I must say that yes it would make me feel uncomfortable with one entity owning so much of the island and controlling so much of the commerce that they actually have a major impact on the stability the islands economy if I didn’t believer that this responsibility is better off in the hands of Dart than it is in the hands of the Cayman Islands Government.

    Alden completely blasted Bush for trading away government land to Dart yet he turns around and changes the law that only allows developers to lease land allowing Dart or own his leased land outright. This is a law that was obviously put in place to retain ownership of government lands but Alden doesn’t seem to think that very important now that he’s in the big seat, how’s that any different then Mac’s dealing with Dart. If Mac had of even hinted at this Alden would have been all over him and PPM groupies would be accusing him of selling out the country. For someone that was such an opponent of anything Dart when he was the opposition he certainly seems to be warm and comfy with them now that he’s in the big seat. This doesn’t surprise me at all, the whole lot of them know that Dart is the answer to a lot of Caymans Issues and they hate to see someone else standing next to Jackie Doak in those photo shots..

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  7. I must agree with Michael comment.This is a very healthy subject for us to stay on for the future of the Islands. Knowing that the government leased this property for 99 years, and this leased property was able to developed with hotels , condominiums, and be bought and sold up to now , and why do Alden say today that people don’t want to buy property that is on leased property. Why?

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  8. Mr Michael after I agreed with your comment I wondered who you are . I have read over 2,000 of the comments published in the Cayman Compass, and found your comment dated 1/29/2015 on the article residency applications plummet . I really see who you are . If you would like to know more about Mr Dart, go to Wikipedia and put in Kenneth Dart and read the history of this man. Very interesting, and go to Kenneth Dart Argentina .

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  9. Mr Ebanks, All anyone that want to know who I am has to do is ask. I am quite familiar the history of the Ken Dart and the Dart Family. As far as Argentina VS Ken Dart goes. They are basically gripping because he asked them to hold up their end of a deal they made with him and a bunch of other investors to help save their failing economy, how does that make him a bad person. If your bank asked to you pay your Mortgage or Car Note does that make them bad ? Demonize the Dart group all you want but they are doing great things for Cayman.

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