Prime Minister's Statement to Parliament on the Sale of Shares in Jalousie Hotel
STATEMENT BY PRIME MINISTER AND MINISTER FOR FINANCE
HONOURABLE DR. KENNY D. ANTHONY
TO PARLIAMENT ON THE
SALE OF SHARES IN JALOUSIE HOTEL
16 August 2005
Mr. Speaker, I would like to bring Honourable Members up to date on the sale of shares in the Jalousie Hotel. But before I do this, it will be useful to dwell for a moment on the history of this matter, so that Honourable Members can gain an appreciation of the decision that Government had to make with respect to the offer to purchase the Government’s shareholding in the hotel.
In 1996, the Government of Saint Lucia purchased shares in Jalousie (1996) Limited along with M Group Resorts Inc. and Comfort Inns B.V. The latter is an affiliated company of the Hilton Group of hotels. This was a new entity formed to take over the assets and liabilities of the old company, Jalousie Plantation Limited. Hilton Hotel, Honourable Members will recall, was offered a contract to manage the hotel. The ownership of the company was structured as follows:
M Group Resorts (Mahvi Family) 43.5% Comfort Inns (Hilton) 28.8% Government of Saint Lucia 27.7%
As part of the arrangements for funding the purchase of shares by the Government, the National Insurance Corporation participated through an investment of $2.7M. The Government is holding the equivalent amount in value of shares in trust for the National Insurance Corporation.
A HISTORY OF ACCUMULATED LOSSES
During the period of its operations (i.e. from 1997) the Company has been making trading losses and as of December 31, 2004 had accumulated losses of US$15,057,063 or EC$ 40,654,070.
While the operations of the hotel have generated above average occupancy, the hotel’s viability was challenged by inadequate capital, heavy debt and high operating costs relative to its size.
Based on the audited financial statements of the company as of December 31, 2004, the book valuation of the shares of the company was US$0.14(EC$0.38) per share. The shares were originally purchased at a book value of US$0.42(EC$ 1.13). This therefore means that there has been a decrease in the value of the shares by approximately 67% over the 7-year period of the operations of the company.
In other words, shareholders have experienced a reduction in the value of their original investment in the company by approximately 67%, or on average 9.5% per year. At least one of the investors in the company, the NIC, would have expected a return of between 7–9% on its investment. No dividends have been paid to shareholders. Mr. Speaker, this says it all about the value of the investment.
From this brief summary of the operations of the company, it is clear that certain decisions had to be made with respect to the continued viability of the operations of the hotel.
OFFERS TO PURCHASE
Over the years there have been many offers to purchase the hotel. Honourable Members may recall that the Government had issued a statement in this House regarding the possible purchase of the hotel by the One & Only Group. This offer was made in May 2004, but was later withdrawn by the principals of the One & Only Group as there was some difficulty in securing the required funding.
Recently an offer was made by TRMC Caribbean Inc., a Saint Lucian company partially owned by the owners of Le Sport Hotel and another investor currently resident in Saint Lucia. The offer was as follows:
Offer Price Original Price Paid
M Group US$ 2M US$8.8M Comfort Inns US$ 1.1M US$5.8M Government of Saint Lucia US$ 3M US$5.6M
Honourable Members will note that the Government of Saint Lucia got the highest price offer per share at US$0.23, while the other shareholders got lower offers of US$0.10 and US$0.08 for M Group and Comfort Inns respectively. The other shareholders received additional sums, however. M Group received US$4M for land comprising 133.64 acres. Previously the land on which the hotel is sited (some 90 acres) was leased from M Group. M Group has now sold the land to the company along with some additional 43 acres. Comfort Inns was repaid an advance made to the Hotel and was paid as well for the remainder of the Hilton management contract. The value of the Comfort Inns/Hilton transaction was US$3.9M.
SETTLEMENT OF TAXES
The Government of Saint Lucia was also able to have settled some outstanding payments due for taxes. Government has agreed to the full settlement of taxes as follows:
Hotel Accommodation Tax EC$ 3,718,338 Stamp Duty EC$ 712,375 Property Tax EC$ 194,400
After a careful review of the proposal made to the Government, the offer has been accepted and arrangements are being made for the transfer of the shares.
The decision to invest in the Jalousie Hotel in 1996, meant that the Government of the day was taking a risk that the investment was viable and would have resulted in some measurable returns. The fact of the matter is that the decision did not yield the desired results and that this Government was left with no alternative but to seek other means to ensure the continued viability of the hotel which would ultimately lead to sustaining the livelihood of the many workers who remain employed at the hotel.
IN THE HANDS OF SAINT LUCIANS
Our understanding from the investors is that they would soon commence refurbishment of the hotel. In addition, more rooms will be built and the spa redeveloped. Given the already successful operations of Le Sport and Rendezvous and the seemingly successful outcome of the Landings project, the Government looks forward to the successful redevelopment of the Jalousie Hotel and its continued attraction as an exclusive property for the discerning traveler. The Government is pleased that this property is now in the partial ownership of Saint Lucians.
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