Archive for April 11th, 2008

Time to force the issue

Time to force the issue

| 11/04/2008 | 0 Comments

Time to force the issue 

By Wendy Ledger (Friday, 11 April 2008)

The owner of theproperty, Asif Bhatia, recently lost the Hyatt
Regency brand and is now operating the 58 room beachside part of the
property as Grand Cayman Beach Suites. However, the other half, which
consists of around 240 regular hotel rooms, is now completely
segregated from the beach side by the new Easterly Tibbetts Highway
and remains derelict and untouched since Hurricane Ivan took its toll
in September 2004, more than three and a half years ago.

Kim Lund, one of the islands’ best known property professionals and
owner and broker with Re/Max, believes that the circumstances
surrounding the derelict property are such that the sanctity of
property ownership should now be broken.

“This situation has gone on for far too long,” said Lund. “The
property is in a prime location and it is becoming a problem for other
owners and investors in the area. The government should force a
purchase.” He noted that the properties on the Brittania development,
which were linked to the Hyatt, are being negatively impacted by the
situation. At the end of last year, one luxury home in the development
was dramatically reduced in price and Lund said it was as a direct
result of the current state of the former Hyatt hotel.  

“Demand has been so weak at Britannia, largely due to the ongoing lack
of resolution for the insurance of the main Hyatt Hotel, that prices
in some cases are below replacement values,” Lund said, and explained
just how much of a real impact the situation had on the particular
price of the particular luxury home.

“A lot of this weakness relates to this current uncertainty as to what
will happen with the hotel and facilities like the golf course. 
This extraordinary house would probably be worth around US$5 million
if it were located on the Ritz golf course, and could not be built for
what it is currently listed when you consider the land value, building
costs, and soft costs.”

Lund said the former Hyatt is an important factor in our tourism
product and thinks the issue should now be forced and that government
must step in to rectify this situation. He is not alone. Reports of
rat infestations have raised concerns among the businesses at
Buckingham Square, which is across the highway from the derelict
property, as well as the residents in the Britannia development
adjacent to the derelict property itself. Those residents have also
complained that, aside from the property being an eyesore, they have
lost access to facilities such as the tennis courts, which were
supposed to be part of the home-ownership deal.

The idea of a compulsory purchase order has much support, even though
it would normally send the property industry into a frenzy of fear, as
the rights of property owners are extensively protected in law in
Cayman and have much to do with why we have such a lucrative overseas
investment market. The idea of any government coming along and taking
property from owners for a nominal sum would act as a serious
deterrent for any future investors. However, there are exceptions,
according to Lund, and the current condition of the former Hyatt is
one of them.

“Whatever they decide to do they must now force a solution,” he said.
The issue now is whether or not the government will have the stomach
for the fight to take what Lund refers to as the necessary
action.  Minister Clifford has persistently said there is little
the government can do and has always insisted that Bhatia would settle
quickly. More than one year ago he publicly stated that he was
convinced that the property would not remain as it is for much longer,
and that either Bhatia would settle or someone would buy it.

“I have had discussions with the owners and impressed upon him the
need to get the project back on schedule,” theMinister had said in
March 2007. However over a year on, nothing has changed.

The details of the case seem to surround Bhatia’s claim for business
continuity payments that he lost as a result of the hotel’s
destruction by Ivan, as well as actual replacement costs. Bhatia and
his insurance company remain in legal battle with no resolution.
Moreover, sources very close to Bhatia say he will not settle for a
penny less than his claim, which although unconfirmed is rumoured to
be in the region of US$ 50 million, and that the insurers have offered
only half that claim.

Meanwhile, Bhatia is also in the courts over the drying work conducted
immediately after the storm on the beach suites side by a firm based
in New York. Commercial Drying Technologies were the experts who dried
the hotel, and one of the owners of the company recently confirmed to
CNS that the bulk of the bill remained unpaid and that the New York
firm was continuing its legal proceedings to recover the full costs.
The work was evidently carried out successfully as the Beach Suites
side of the Hyatt was relatively quickly re-opened on 15 December
2004, only three months after the hurricane struck.

Bhatia is no stranger to the courts and to fighting financial battles
to the bitter end. He is also one of the world’s richest Asians; he
and his family members appear on numerous rich lists and between them
they own an extensive portfolio of properties, hotel businesses and
other investments all over the world.

If, as the circumstances would indicate, Bhatia is not prepared to
settle and rich enough to fight, the government is facing little
option but to step in to avoid a worsening situation. With competition
in the tourism sector across the region ever more fierce, the
situation of the Hyatt reflects badly on brand Cayman and, contrary to
the government’s position that its hands are tied – it is after all
the government – it does have powers to force a purchase order. The
question is not can it, but will it?

This week Clifford noted that the situation was serious and that
government would be forced to take some kind of action, but declined
to say exactly what. Several months ago, he said that he was expecting
to meet with Bhatia in “a few weeks” to address the situation.
However, despite repeated attempts, the government has failed to meet
with him and Clifford said that the circumstances surrounding the
Hyatt were no longer acceptable.

“We will have to make a decision as the current circumstances are not
in the best interests of the tourist industry. I am examining the
options but cannot yet commit to a position,” he said, adding that the
idea of compulsory purchase wasn’t ruled out.

In the meantime, as the years pass, the combination of indecision by
government and the failure to settle by Bhatia means that the former
Hyatt property, once one of the jewels in Cayman’s tourism crown,
continues to crumble before our very own and our visitors’ eyes.

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