Mr. Speaker, in accordance with Section 2 AA (3) of the Government Loans Act 1978, I rise to inform this Honourable House of the execution of a Government Guarantee on behalf of Hotelco Bermuda Holding Ltd, part of the Hotelco International group of companies, in relation to loans to finance the development costs & related expenses associated with the construction of the proposed St Regis Bermuda Hotel in St. George’s. This is indeed a historic project for the tourism industry, the St. George's community and Bermuda as a whole.
Mr. Speaker, Honourable Members may recall that the previous Government signed a Master Development Agreement (MDA) with Hotelco Bermuda Holding Ltd., which was followed by a ground breaking ceremony that took place on May 4th 2017.
Mr. Speaker, just to provide Honourable Members with a little bit of background on the Hotelco Group:
The origin of Hotelco goes back 60 years, when it started in Venezuela as a construction company and real estate developer of housing and commercial projects. The company went international at the beginning of the 2000s.
In the 1990s the company switched the main focus of its business to the development and direct construction of hotel properties.
Hotelco has built five hotels with a total of 1,160 rooms, all of them operated by Marriott International under its various brands.
The portfolio of current developments of Hotelco includes a Ritz Carlton Resort in Providenciales (prov-ah-den-cee-a-leez) Turks & Caicos Island (129 rooms and 72 residences), a St. Regis Hotel and
Residences in Aruba (127 rooms and 56 residences) and the St. Regis Resort in Bermuda (120 rooms and 102 residences).
It is the philosophy of the company to hold the ownership of the hotels for the long-term.
Mr. Speaker, the Government gave an undertaking to support the financing of this project by providing a guarantee for up to $25 million of the estimated project cost of $160 million. The developers relied on this commitment when arranging the financing for this project and it is only fair that the current Government also honor this commitment.
This project has and continues to provide jobs for Bermudians in the construction phase as well as jobs for Bermudians once the facility becomes operational.
Mr. Speaker, the Guarantee provides that the Government cannot be legally required to fund more than $25 million to repay the lender if Hotelco Bermuda Holding Ltd is unable to perform their obligations to the lender. The financing being guaranteed is provided under a loan facility maturing in fifteen years.
Mr. Speaker, it is important to note that the Government will be compensated for providing the guarantee. Also of note is the fact that initially the developer invested a greater sum of their own equity capital into the project and is a sign of good faith and a show of confidence, by the developers, in the viability of the project.
Mr. Speaker, to be clear, the Government guarantee is in relation to the bank loans and not the developer’s equity, therefore the Government’s actual contingent liability only exists in line with the Banks loan. The funding arrangements for the project are as follows:
The first $35 million of the project cost was funded with equity capital;
The next $125 million will be funded between equity and the bank loan;
62.5% or $100 million will be funded with equity capital;
37.5% or $60 million will be funded with a bank loan
The Government’s guarantee is limited to $25 million of the bank loan.
Mr. Speaker, the development is on time and on budget and its estimated opening of the hotel is scheduled for the spring of 2021. As at the end of September 2019, the total investment in the St. Regis development was $65 million and was 100% funded by equity of the developers.
Mr. Speaker, the 120 room St. Regis Bermuda Resort will be the first significant hotel development in St George’s, will include a casino, spa and golf resort and will potentially provide for many opportunities for local residents and businesses to participate firstly in the construction of the development and eventually in the running of this tourism facility in the East End.
Thank you, Mr. Speaker