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We make no comment on the investigation by the Office of the Contractor General of alleged lack of transparency of the deal, or the sale price of US$40 million, including a US$32.5-million vendor's mortgage. But Prime Minister Bruce Golding has, on the face of it, made a reasonable case for his Government's intention to sell its two-thirds stake in the Sandals Whitehouse hotel property to Mr Gordon 'Butch' Stewart's holding company, Gorstew Limited.
But the seeming logic of the administration's decision notwithstanding, we believe that there are other matters to be settled to ensure the protection of the interests of the people who ultimately own the hotel - the taxpayers of Jamaica.
Here, broadly, are the arguments offered by Mr Golding for the sale:
Mr Stewart's company already owns a third of ANDCo Ltd, the company that owns the property. Gorstew has right of first refusal if the Government divests its two-thirds stake in ANDCo.
Moreover, Mr Stewart's firm has a long-term lease on the property - there are 14 years to go - on terms, that, according to Mr Golding, make it unlikely that ANDCo can, any time soon, turn a profit.
For instance, it requires, the prime minister reported, US$6.6 million a year to service ANDCo's outstanding principal debt of US$55.5 million. Then, there is US$1 million a year for insurance, leading to an overall cost of US$7.7 million.
However, rental income from Gorstew has averaged US$3.9 million a year, meaning an annual loss of around US$3.8 million.
Said Mr Golding: "Importantly, under the terms of the ANDCo shareholders' agreement, Gorstew is not obliged to bear any portion of the company's cash deficits by way of additional equity or loan contributions, and the funding of such deficits has been, and, in the absence of the sale of the property, would continue to be the responsibility of the government shareholders alone."
In these circumstances, we agree that the sale of the property to a third party would likely be difficult, as Mr Golding argued.
Controversies recalled
However, there is another matter that was not addressed with any clarity by the prime minister in his parliamentary statement.
Mr Golding did recall the controversies and disputes with Gorstew over the sharing of the US$43.3-million cost overrun on the construction of the hotel. Further, there is Gorstew's 2005 court claim of US$28.8 million for alleged losses and damage to its Sandals brand because, it is alleged, ANDCo failed to complete and deliver the hotel on time.
These controversies preceded Mr Golding's premiership. And taking Mr Golding's remarks at face value, the former government negotiated poorly.
In 2008, his administration and Gorstew agreed to arbitration.
"These proceedings and their outcomes are being awaited," Mr Golding said.
Therein lies our concern.
We believe that the sale to Gorstew should include a settlement of Gorstew's claims, preferably by way of their unconditional withdrawal.
As matters now stand, taxpayers could be blindsided by more big bills for the hotel, beyond those that maladministration has already forced them to embrace.
But the seeming logic of the administration's decision notwithstanding, we believe that there are other matters to be settled to ensure the protection of the interests of the people who ultimately own the hotel - the taxpayers of Jamaica.
Here, broadly, are the arguments offered by Mr Golding for the sale:
Mr Stewart's company already owns a third of ANDCo Ltd, the company that owns the property. Gorstew has right of first refusal if the Government divests its two-thirds stake in ANDCo.
Moreover, Mr Stewart's firm has a long-term lease on the property - there are 14 years to go - on terms, that, according to Mr Golding, make it unlikely that ANDCo can, any time soon, turn a profit.
For instance, it requires, the prime minister reported, US$6.6 million a year to service ANDCo's outstanding principal debt of US$55.5 million. Then, there is US$1 million a year for insurance, leading to an overall cost of US$7.7 million.
However, rental income from Gorstew has averaged US$3.9 million a year, meaning an annual loss of around US$3.8 million.
Said Mr Golding: "Importantly, under the terms of the ANDCo shareholders' agreement, Gorstew is not obliged to bear any portion of the company's cash deficits by way of additional equity or loan contributions, and the funding of such deficits has been, and, in the absence of the sale of the property, would continue to be the responsibility of the government shareholders alone."
In these circumstances, we agree that the sale of the property to a third party would likely be difficult, as Mr Golding argued.
Controversies recalled
However, there is another matter that was not addressed with any clarity by the prime minister in his parliamentary statement.
Mr Golding did recall the controversies and disputes with Gorstew over the sharing of the US$43.3-million cost overrun on the construction of the hotel. Further, there is Gorstew's 2005 court claim of US$28.8 million for alleged losses and damage to its Sandals brand because, it is alleged, ANDCo failed to complete and deliver the hotel on time.
These controversies preceded Mr Golding's premiership. And taking Mr Golding's remarks at face value, the former government negotiated poorly.
In 2008, his administration and Gorstew agreed to arbitration.
"These proceedings and their outcomes are being awaited," Mr Golding said.
Therein lies our concern.
We believe that the sale to Gorstew should include a settlement of Gorstew's claims, preferably by way of their unconditional withdrawal.
As matters now stand, taxpayers could be blindsided by more big bills for the hotel, beyond those that maladministration has already forced them to embrace.
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