Peter Ross named Project Manager for Cyril E. King Airport PV Project

Peter Ross, Managing Principal of Atlantic Caribbean Consulting was named Project Manager for the 448kWDC STC Photovoltaic Ground Mounted System to be installed at the Cyril E. King Airport in St. Thomas U.S.V.I.
Ross was hired by the Joint Venture of All Rounders Systems, LLC of St. Croix and Veterans’ General Contracting, LLC of Decatur, GA,. All Rounder Systems & Veterans General Contracting JV, won the Virgin Islands Port Authority bid to install the first PV project of it’s kind in the Virgin Islands.

Will Public/Private/Partnerships be the Caribbean Solution to Future Growth ?

Caribbean governments from Jamaica to Barbados have been floating their governments in a sea of debt for many, many years. The day of reckoning may soon be upon several unprepared island nations.

Not only is debt becoming due, but how do island nations stimulate growth, while reducing payroll and services? The usual answer has been to refinance and issue more debt to give the appearance of stimulating the economy. Thus allowing nepotistic government operations to go on without accountability. Those chickens will soon come home to roost.

Puerto Rico despite massive structural debt has decided to follow the lead of the U.S. Department of Defense (DoD). The DoD has successfully created Public Private Ventures (PPVs) on military bases across the country. These PPVs are created by large private development companies in partnership with the Department of the Navy (DoN), Department of the Army (DoA) and the U.S. Air Force (USAF) to build, revitalize, repair and manage military housing communities. Several international construction/development companies such as Balfour Beatty, Bovis Lend Lease and Hunt Development are partners in many of the largest successful military base PPVs across the country.

The joint venture, or PPV will together then go out into the bond market and issue bonds, based on a 50 year partnership. The bonds are utilized to build and revitalize military housing communities, creating public parks, recreational areas, new homes, community centers and overall improvement in the standard of living. The bonds are subsidized by the military personnel’s Basic Housing Allowance (BAH). PPVs have recently been formed to build DoD on-base schools, food-courts and lodging facilities (hotels). 

Puerto Rico’s Governor Fortuno and his team of economic advisors have taken a similiar approach and formed the Puerto Rico Public Private Partnership Authority (PPPA) to facilitate infrastructural growth on Puerto Rico, without incurring all the direct risk of managing and servicing the improvements and associated debt service.

One of the first proposed Private Public Partnerships (PPP) is the public-privatization of existing and a newly proposed toll road system. The estimated cost of the 50 year partnership is expected to top $5 Billion in cost.

PPPs are being created world wide with substantial international financiers such as Carlyle Group, Citi Infrastructure, JP Morgan Infrastructure, Morgan Stanley Infrastructure Fund and Goldman Sachs Infrastructure Fund all investing heavily in PPPs  around the world in road systems, airports, bridges, tunnels, marinas, and industrial ports.  

Not only can Caribbean island nation governments partner with deep pocketed sophisticated developers, operators and financiers to create first class facilities; they also gain the collective ability to maintain and properly operate those facilities as a full and vested partner.

Caribbean Hotel & Tourism Association Investment Conference

330 attendees listened as Puerto Rico’s Gov. Luis Fortuno kicked off the CHTA Investment Conference on Tuesday evening, May 2nd, as the Keynote Speaker. Govenor Fortuno knows tourism, being the former Executive Director of the Puerto Rico Tourism Company, among many other accomplishments.  The Governor gave a broad positive overview of the importance of tourism, particularly in Puerto Rico. Former President Bill Clinton gave a video address on the need to continue the earthquake relief effort in Haiti and the role tourism can play in it’s recovery.

On Tuesday, the 1st full day of the Conference, Robert Crandall, former CEO & Chairman of AMR Corp. (American Airlines),  threw cold water on the conference with a pompous dark lecture on the future of  Caribbean Tourism and the economy in general.  Crandall lectured the attendees to make sure that the Caribbean island nations cooperate in promoting their product. The message was ironic coming from the former chief of the largest predatory operator in the sky.  

Simon Townsend, Director of KPMG, based in London presented a factual overview of Caribbean tourism and the investment market. Nearly 40 resort projects in the Caribbean have stopped construction and he predicts that most of them will never be completed, as there is little lender interest in refinancing broken projects. Townsend said that lenders will not lend to resort projects if the market is not there and unless you have the right location and airlift. Townsend stated that it is back to basics, sizable equity, track record and a diversified client base, as in Europe, So. America and North America. Townsend predicted that lending interest rates will rise. Smaller phased projects will become the norm, with higher costs and lower returns. Finally Townsend warned of the impending re-finance bubble, which may shake any potential resort investment in the Caribbean.

Perhaps the best presentation was the Tourism &  Hospitality Leader’s Forum, with Hugh Andrews of the Puerto Rico based International Hospitality Enterprises, Allen Chastanet, Minister of Tourism & Aviation, St. Lucia, Graeme Davis, V.P. of Operations of Starwood’s Southern & Caribbean region, Pedro Febregas, President of American Eagle, Danny Hughes, Senior V..P. of  Hilton for the Caribbean, Mexico & So. America, Jim Lewis , President of  Disney Vacation Club and Chairman of American Resort Development Assoc. (ARDA) and Peter Odle, Chairman of Mango Bay Hotel, Barbados.  These distinguished  gentlemen unanimously agreed that tourism occupancy in the Caribbean was up in the first four months perhaps as much as 4%, but REVPAR and ADR were down, by as much as 6%. Overall their discussions and banter was positive, looking forward to a slow gradual growth, not much new development, but re-development and repositioning of existing properties.

Much of the balance of the Conference was focused on the Development of Mixed Use Resort Development, condo hotels, time share and fractional ownership as a method of financing new projects. Also discussed were Infrastructure Development, The Economics of Being Green, Collaborative Business Models Between Private Sector and Governments. On the last day of Conference much of the morning session concerned the impending onset of opening Cuba to the U.S. market and what will be it’s impact on other Caribbean destinations. The reactions to the Cuba discussion were mixed with most agreeing that perhaps the Dominican Republic would be hurt the most and that it would take 10 years of infrastructural development to allow Cuba to handle increased visitation. 

The real irony of the CHTA Investment Conference was the lack of investors and bankers, the later, who probably did not want to have to answer the real hard questions that was on everyones’ mind, ”who’s going to start the lending and when?”

St. Croix Hotel Development, An Oxymoron?

It has been over 25 years since St. Croix built and opened a new hotel. Oh yes, the Divi was rebuilt in about 1999, but the hotel is really a Hollywood set, “open” so the casino can conduct business. Divi only does  cursory advertising of it’s St. Croix property, outside of St. Croix. The last new hotel built was the Carambola Golf & Beach Resort, originally a Rock Resort. The Carambola property has been bifurcated, bankrupted, sold, and resold many times over, it has been a Westin, a Raddison and a timeshare resort to name a few renditions. Now the VI Government Employees Retirement System (GERS) has come to the rescue with $13M, mostly to cover debt, in hope of securing a Marriott Rennaisance franchise.  

In the later 1980s several large scale hotel projects were scheduled , such as the Ritz Carlton near Carambola, Sheraton at Coakley Bay and Stouffer Hotel  & Golf Course at Diamond Keturah were initially slowed by lawsuits from the St. Croix Environmental Association (SEA), finally blown away by Hurricane Hugo and a bad economy.

In recent history, the Virgin Islands government has been desperate enough to offer rezoning, permitting, convention center funding and casino licenses to questionable developers on sensitive properties, with little, or no resort development experience, or funding, all to no avail.

Over the past few years Nevis has built a Four Seasons Resort and Golf Course, St. Kitts, a Marriott Hotel and Vieques will open a 5 star W Hotel & Resort this month. Puerto Rico through the Government Development Bank (GDB), assistance from the Tourism Development Bank (TDB) and local lenders continues to open luxury resort property, after luxury resort property. Ritz Carlton recently announced that a group of investors, with the help of Puerto Rico’s GDB and TDB will build a $341M Ritz Carlton Reserve at Dorado Beach, which will hopefully open for the 2013 season.

“Without a true partnership between the developer and the government, construction of major Tourism projects are practically impossible”, stated Hugh Andrew, president of International Hospitality Enterprises in 2002, Caribbean Business article. Mr. Andrews knows from what he speaks, his organization developed and/or redeveloped most of the finest resort projects in Puerto Rico, The El San Juan, Condado Plaza, El Conquistador, Las Casitas Village, El Convento, Condado Vanderbilt and most recently La Concha. These are incredible accomplishments, but as Mr. Andrews rightfully points out, would never have come about without the partnership with government.

Rum revenues are fine, but if the Government of the Virgin Islands had invested say $500M in hotel development with a real developer, St. Croix could have two new 500 room hotels. Such development would create 2,000 construction jobs, 2,000 permanent jobs, diversify the economy, create numerous new service businesses, support jobs and tax revenues. Maybe even entice a Hugh Andrews to St. Croix and make some lemonade, out of some of the islands lemons.  

Barbados Gets It!

Barbados P.M. David Thompson is actively engaged in promoting and helping guide development of a balanced tourism product on that island nation. Barbados may be fast coming the Caribbean leader in quality tourism experience.

P.M. Thompson understands the need for diverse flagged properties, such as the government’s involvement in reopening the new Four Seasons property. The former Escape Hotel and Spa has also under gone a $14M renovation and reopened as The Waves Resort. Caribbean governments should take note of the importance of their needed involvement in developing quality resorts, working hand in glove with large and small chain operators and franchisers. P.M. Thompson is also actively promoting the reduction of tourism’s carbon footprint, through sustainable initiatives. 

Take note Virgin Islands! St. Croix will never be a destination island without recognizable flagged properties, gaining occupancy through their reservation networks.

Affordable, Comprehensive, Design & Feasibility Resort/Hotel Studies Now Available

Retrofitting Green, Affordable Solutions to Ensuring Long Term Viability

Retrofitting, or rebuilding a hotel property green is not just a passing fancy. Upgrading an existing property can improve energy and environmental  efficiency, reduce water usage and improve the quality and comfort of  the property’s guests and employees. The property is also financially enhanced by reduced operational costs and return on investment (ROI) to the owners and operators. The ROI on a newly retrofitted hotel property is quantifiable, as a truly “deep” retrofit can achieve energy savings of up to 50%. The cost of these redesigned retrofits can cost as little as $10 a foot. 

Potential lenders and investors can look at the long term amortization of the upgraded property’s new infrastructure cost and see real operational savings. $1 of reduced operating expense on a 100,000 square foot property translates into $1.4M of value, at a 7% cap.  Federal energy incentives and rebates are additional financial enhancements for the long term financial viability of a retrofitted green hotel property.

The contemporary hotel guest is aware of the potential future environmental fragility of the planet and feel more comfortable staying at a resort property that has factored those considerations into their design and operation. The employees at a green resort feel proud, that their owners and operators care enough to create an environmentally sensitive property.

Atlantic Caribbean Consulting (ACC) believes that “Good Design Equals Good Business”. Our team factors design consideration with the highest and best possible return for our clients. “Building Green Equals Good Business”. ACC  can analyze your current site, future financial and operational needs, in an affordable, comprehensive, preliminary design and feasibility study. This study enables owners, operators, potential investors and lenders to analyze potential cash flow, operational costs and ROI before entering into a full  planning and design phase. This study provides a real look at the  potential  possibilities of redesigning, rebuilding, retrofitting and repositioning an existing hotel property without substantial financial risk. This study can be the vehicle that attracts new investment and/or financing to a hotel resort property.  

Return of Resort REITS?

HOTEL Magazine and several other sources have announced that, “Hotel Acquisition Funds are Ready & Waiting”. Despite dire predictions that the U.S. hotel industry would collapse in 2009, the other shoe has yet to fall. In anticipation of large scale failures, many hotel investment and management groups began raising significant monies to grab attractive distressed hotel assets. Hersha Hospitality Management of Harrisburg, PA formed it’s own Real Estate Investment Trust (REIT) Hersha Trust (HT) to raise funds to double it’s portfolio.

Several other hospitality investment groups are  targeting established markets, such as Boston, NYC, Washington, D.C., California, Miami, Hawaii and Chicago. Some are even looking as far away as Russia and eastern Europe as new areas of opportunity. 

Starwood Property Trust of CT, intends to form a REIT and raise $921M, Pebblebrook Hotel Trust’s IPO intends to close on December 14th, after generating $350M new investment dollars, Concord Hospitality Enterprises of Raleigh, NC plan a $300M fund, Canyon Value Opportunity Fund of L.A. and Adventurous Journeys Capital Partners of Chicago also intend to be substantial players in securing distressed properties.

Much of the new hospitality investment group funding is coming from foreign investors from Asia, Europe, Middle East and South America, who believe that  U.S. hotel properties are irrationally undervalued.

Will distressed resort properties in the Caribbean be the next area of interest? Most ”opportunity fund” managers are looking in the Caribbean for trophy resort properties with existing cash flow, or the potential for near immediate cash flow. There are several upscale properties in St. Lucia, the Bahamas and Turks and Caicos that are near completion, but not open, such as Le Paradis on St. Lucia, that may be  the lowest hanging fruit.

After the top upscale properties are snatched, it should be a year or two, before the market settles down and investors start to look at purchasing and upgrading the next tier of resort properties, in anticipation riding the next cycle to flip them at the right time.

Investment Conferences

Two important hotel & resort investment conferences will be held in the Spring of 2010. HOTEL Magazine will sponsor a Virtual Conference, called Investment Outlook on April 28, 2010. The Virtual Conference is for hotel financiers, investors, builders, consultants, franchisers, designers, architects, construction professionals, designers and management companies. Topics include, how to buy or sell distressed assets, lessons learned from the real estate bubble, repositioning your asset, balancing risk and return in a cyclical sector.

A very important investment conference is the Caribbean Hotel & Tourism Association Investment Conference on May 4-6 at the Puerto Rico Convention Center in San Juan, speakers include P.R. Governor Luis Fortuno, Nick Prizker, Chairman of the Board & CEO of Development for Hyatt Hotels, Matthew Avril, President of Hotel Group for Starwood Hotels Worldwide, Robert Crandell former Chairman of American Airlines and ADR and Peter Yesawich, CEO the Y Partners, among many other influential speakers. This investment conference will benefit the same groups that will be represented at the HOTEL Magazine Virtual conference and will cover many of the same topics on a regional level.

A hopeful sign in Puerto Rico is the announced grand opening of the 503 room Sheraton Puerto Rico Convention Hotel &  Casino. Starwoods Hotels & Resorts & The Interlink Group are opening the $210M hotel/casino adjacent to the P.R. Convention Center, in San Juan.

Troubling Numbers

Price Waterhouse’s hospitality numbers released yesterday, do not bode well for Caribbean Hotels & Resorts. Hotel rates (ADR) are down 8.8% compared to 2008. Occupancy is also down 8.4% to 55.2%.

It is expected that there will be an overall increase of 3.2% in hotel room inventory and a decrease of nearly 2% occupancy in 2010. Let’s hope they’re wrong!!