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Palladium resort rejects casino carrot - Reconsidering 800-room expansion
Published: Friday | June 7, 2013 4 Comments
Land surveyor Gordon Langford says proof of land ownership could be problematic for casino investors. - File
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The hunt by the Ministry of Finance for investors in brand new casino-hotel developments defined as integrated resorts, or IRDs, has cooled the ardour of at least one previously interested party - the Spanish-owned Palladium Hotel chain.
Dimitri Kosvogiannis, country manager for Palladium Jamaica, which includes Grand Palladium Suites & Spa Hotel and its sister resort Grand Palladium Lady Hamilton, said Wednesday that Palladium will not bid for an IRD at this time.
The proposal as laid out by the Ministry of Finance, he said, requires investment of about US$1.2 billion, which no investor would be prepared to drop within the time frame proposed, especially since the Jamaican economy is still to prove itself under the new IMF bailout.
"We would not be able to start construction in time for 2014. We are absolutely unwilling to start construction in the middle of the season. We would have to wait until sometime in May or June in order to be ready in 2016," Kosvogiannis said.
Requests for proposal opened on June 1. The bid deadline is September 30.
US$300m plan
Grand Palladium Jamaica previously announced a US$300m plan to add another 805 rooms to an existing 1,056 at Point, Hanover, to position itself for one of the three casino licences to be issued by the Jamaican government.
Kosvogiannis had hoped to secure a casino licence prior to and as justification for adding hundreds of new rooms to Palladium's existing hotel property in Hanover.
But the proposal does not appear to fit into the guidelines developed by the Government.
The casino legislation requires construction of 1,000 rooms prior to the issue of the licence, and another 1,000 on a predetermined schedule after the licence is in hand.
"We need an amendment that will allow variations. We have offered to do a complete refurbishment of our existing rooms and add a new set over time, but the legislation calls for 2,000 new rooms," said Kosvogiannis.
"Variations or permutations of the legislation would be welcome," he said.
As specified in the RFP, the proposed resort development is expected to include a minimum of 2,000 rooms of which no less than 1,000 should be ready for occupancy prior to the start of the casino-gaming activities.
"The call for new rooms as well as the timeline linking the provision of licence to the first 1,000 new rooms is the reason why the chain will not be applying at this time. Further, the failure to state what allowance might be given for the additional 1000 rooms in terms of delivery time, is problematic," Kosvogiannis added.
The RFP states that proposals will be evaluated on the committed investments.
"All else being equal, proposers that commit to a higher development/ investment outlay before the first issuance of the casino licence, will be viewed more favourably," the document states.
The proposals will also be assessed on the distinctiveness and quality of architecture that will differentiate the IRD from other IRDs internationally.
"This includes an iconic design which considers façade and roof design, greenery provision, and treatment of building crowns."
The finance ministry requires a non-refundable bid fee of US$150,000 (J$15m) to facilitate due diligence, a cost Kosvogiannis said was prohibitive.
"The deposit, with all due respect, is excessive. If we present an RFP, due diligence is redundant. It's excessive and redundant," the hotel executive said.
He notes that construction expenses for the first 1,000 new rooms will include a payment of about US$1 million (J$100m) to the local parish council for plan approval and that the development of the rooms and casino facilities could reach US$1.2 billion.
Land surveyor Gordon Langford agrees that the IRD might run to US$1 billion in cost. But he sees the requirement for proof of land ownership as potentially more problematic.
"One thing that strikes you is they want you to prove that you own land" before the proposal is accepted, said Langford.
"It does not work like that," he said. "A casino operator will not buy land on the likelihood that maybe he might get the licence."
The RFP notes that Government, through the Urban Development Corporation, is willing to facilitate land acquisition for bidders who do not own property, but Langford said government procurement rules could derail efforts at a side deal.
"For the UDC to sell land, they have to advertise it generally. The person who wants that land has to fight with others who might want it. If is a prized piece of land it might be quite difficult. That route is fraught with problems," the land surveyor said.
Meantime, Grand Palladium's plan for the construction of new rooms won't get underway for "about a year" and could potentially be shelved.
"We are not saying that we are not building the extra rooms, but for us to be able to go forward we need guarantees. The Government has to be observant of the options which are realistic and those which are not," said Kosvogiannis.
"We are prepared to do the 1,000 rooms immediately, but we would need assurances to go forward. The Government, in its desire to attract this kind of development, may need to be lenient when it comes to the second phase. The legislation does not stipulate when the 1,000 rooms need to be finished."
Palladium has not totally given up on its casino ambitions. The hotel group has recently rebranded from Fiesta and Kosvogiannis says he is currently wrapping up assignments relating to rebranding of other properties in the group, as well as the opening of a new resort in Ibesa.
Thereafter: "The first thing on my agenda will be to restart discussions with the minister of finance (Dr Peter Phillips)," he told the Financial Gleaner.
"There should be a re-examination of the requirements especially in relation of the second 1,000 rooms. No one will present plans for immediate construction of 2,000 rooms. I don't believe those candidates are knocking on our door, and I draw examples from Harmonisation, Palmyra and our own experience," he said.
business@gleanerjm.com
Published: Friday | June 7, 2013 4 Comments
Land surveyor Gordon Langford says proof of land ownership could be problematic for casino investors. - File
1 2 >
The hunt by the Ministry of Finance for investors in brand new casino-hotel developments defined as integrated resorts, or IRDs, has cooled the ardour of at least one previously interested party - the Spanish-owned Palladium Hotel chain.
Dimitri Kosvogiannis, country manager for Palladium Jamaica, which includes Grand Palladium Suites & Spa Hotel and its sister resort Grand Palladium Lady Hamilton, said Wednesday that Palladium will not bid for an IRD at this time.
The proposal as laid out by the Ministry of Finance, he said, requires investment of about US$1.2 billion, which no investor would be prepared to drop within the time frame proposed, especially since the Jamaican economy is still to prove itself under the new IMF bailout.
"We would not be able to start construction in time for 2014. We are absolutely unwilling to start construction in the middle of the season. We would have to wait until sometime in May or June in order to be ready in 2016," Kosvogiannis said.
Requests for proposal opened on June 1. The bid deadline is September 30.
US$300m plan
Grand Palladium Jamaica previously announced a US$300m plan to add another 805 rooms to an existing 1,056 at Point, Hanover, to position itself for one of the three casino licences to be issued by the Jamaican government.
Kosvogiannis had hoped to secure a casino licence prior to and as justification for adding hundreds of new rooms to Palladium's existing hotel property in Hanover.
But the proposal does not appear to fit into the guidelines developed by the Government.
The casino legislation requires construction of 1,000 rooms prior to the issue of the licence, and another 1,000 on a predetermined schedule after the licence is in hand.
"We need an amendment that will allow variations. We have offered to do a complete refurbishment of our existing rooms and add a new set over time, but the legislation calls for 2,000 new rooms," said Kosvogiannis.
"Variations or permutations of the legislation would be welcome," he said.
As specified in the RFP, the proposed resort development is expected to include a minimum of 2,000 rooms of which no less than 1,000 should be ready for occupancy prior to the start of the casino-gaming activities.
"The call for new rooms as well as the timeline linking the provision of licence to the first 1,000 new rooms is the reason why the chain will not be applying at this time. Further, the failure to state what allowance might be given for the additional 1000 rooms in terms of delivery time, is problematic," Kosvogiannis added.
The RFP states that proposals will be evaluated on the committed investments.
"All else being equal, proposers that commit to a higher development/ investment outlay before the first issuance of the casino licence, will be viewed more favourably," the document states.
The proposals will also be assessed on the distinctiveness and quality of architecture that will differentiate the IRD from other IRDs internationally.
"This includes an iconic design which considers façade and roof design, greenery provision, and treatment of building crowns."
The finance ministry requires a non-refundable bid fee of US$150,000 (J$15m) to facilitate due diligence, a cost Kosvogiannis said was prohibitive.
"The deposit, with all due respect, is excessive. If we present an RFP, due diligence is redundant. It's excessive and redundant," the hotel executive said.
He notes that construction expenses for the first 1,000 new rooms will include a payment of about US$1 million (J$100m) to the local parish council for plan approval and that the development of the rooms and casino facilities could reach US$1.2 billion.
Land surveyor Gordon Langford agrees that the IRD might run to US$1 billion in cost. But he sees the requirement for proof of land ownership as potentially more problematic.
"One thing that strikes you is they want you to prove that you own land" before the proposal is accepted, said Langford.
"It does not work like that," he said. "A casino operator will not buy land on the likelihood that maybe he might get the licence."
The RFP notes that Government, through the Urban Development Corporation, is willing to facilitate land acquisition for bidders who do not own property, but Langford said government procurement rules could derail efforts at a side deal.
"For the UDC to sell land, they have to advertise it generally. The person who wants that land has to fight with others who might want it. If is a prized piece of land it might be quite difficult. That route is fraught with problems," the land surveyor said.
Meantime, Grand Palladium's plan for the construction of new rooms won't get underway for "about a year" and could potentially be shelved.
"We are not saying that we are not building the extra rooms, but for us to be able to go forward we need guarantees. The Government has to be observant of the options which are realistic and those which are not," said Kosvogiannis.
"We are prepared to do the 1,000 rooms immediately, but we would need assurances to go forward. The Government, in its desire to attract this kind of development, may need to be lenient when it comes to the second phase. The legislation does not stipulate when the 1,000 rooms need to be finished."
Palladium has not totally given up on its casino ambitions. The hotel group has recently rebranded from Fiesta and Kosvogiannis says he is currently wrapping up assignments relating to rebranding of other properties in the group, as well as the opening of a new resort in Ibesa.
Thereafter: "The first thing on my agenda will be to restart discussions with the minister of finance (Dr Peter Phillips)," he told the Financial Gleaner.
"There should be a re-examination of the requirements especially in relation of the second 1,000 rooms. No one will present plans for immediate construction of 2,000 rooms. I don't believe those candidates are knocking on our door, and I draw examples from Harmonisation, Palmyra and our own experience," he said.
business@gleanerjm.com
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