WRONG_WOEID WRONG_WOEID

No Half Moon Development

Pending developmentI share Finance and Economy Minister Harold Lovell’s optimism on the pending development of Half Moon Bay. This once internationally recognised facility (number one beach in the world) was expropriated by the government of Antigua & Barbuda after it was hit by Hurricane Luis in 1995.

For those of you who may not be aware,  Lovell said in his statement to the media last week, “This single project will have far reaching positive effects on the communities around Half Moon Bay and on overall economic growth and development in Antigua and Barbuda.”

I suggest therefore that the government allocates the first US$24 million it receives from the loan approved by the International Monetary Fund to HMB Holdings.

Surely, that would add a much-needed boost to the struggling economy. According to Lovell, an investment in Half Moon Bay would work wonders for the economy.

“Apart from the hundreds of construction jobs over a prolonged period, there will be career opportunities in every aspect of the hospitality industry," he said. “Suppliers of a wide range of goods and services including from the agricultural, wholesale and retail trades, transport, banking and insurance and real estate sectors also stand to benefit from the development."

Okay, to pay HMB the US$24 million from the initial IMF disbursement may be asking too much. I can just hear all those other local suppliers who the government has owed and refused to pay over the years crying foul. But here's the deal, the government has taken the HMB property under the guise of eminent domain, and after three years of possession has not paid one red cent.

It’s time to pay.


The thing is, the government has no money, and each day that they refuse to pay the assessed price - which by the way is being appealed - continues to mount. Today, the US$24 million has grown to US$31 million and counting. Earlier, I said that I shared in Lovell’s optimism, but I am quite aware that this development may never come to pass. And here is why.

Half Moon Bay Developers LLC does not have the necessary capital to finance this project. Surely, if it did, it would have jumped at this "steal of a deal" without blinking. To purchase the Half Moon Bay property for US$5 per square foot is akin to getting away with murder. For those who do not agree, just look at the price of property in Antigua & Barbuda and make the comparison.

There is one main reason however, why Half Moon Bay Developers will not be paying anything into that development yet. HMB Holdings has appealed the figure of US$24 million the assessment board said the property is worth. I’m sorry, but no one in his right mind would make such an assessment.

It will not stand, and the developers must recognise that, hence the reason they have been so lethargic in going ahead with the project. Here is the government’s problem. It has no money.
The developers are skittish about making any payments on the property when the price may skyrocket following the appeal. Why skyrocket, one may ask?

Well, the government has agreed that the minimum price is US$24 million, but the past owners disagree - with good reason I might add - so they are going back to court. The previous owners had asked for US$60 million - a price the government scoffed at. Well, if the government is not careful, it will end up paying much more than that.

Here's why. At US$2 million a year on interest, and the pending appeal, the price could balloon in five to six years. If the appeal holds, and there is no reason why it should not overturn that assessment, the principal price may be US$60, or in that region.

With the government already broke, it will take another what - maybe three years to pay - with the interest now US$6 million per year. The math suggests that this expropriation will end up costing this country much more than was expected.

There are three entities that have now come together to develop Half Moon Bay - the government, Half Moon Bay Developers LLC, and Antigua Distillery. The government is broke, so what is its input into this development?

It can be neither money nor property, since it has neither. The Distillery, I understand, has property. Half Moon Bay Developers LLC has been unable to come up with any significant financing for close to two years. This development is going nowhere. At least, if the government had some money, it would have paid the US$24 as decided by the assessment board then awaited the appellant court’s ruling.


There can be no development if no money is paid, and that’s a fact the government seems not to be aware of. Notwithstanding the fact that the government expropriated the property, there are cautions on it, and those cautions must be removed before it can be handed to any other party.

That the redevelopment of Half Moon Bay will begin in the middle of 2011 is nothing more, in my estimation, than stretching the truth. Nothing good has come out of expropriating Half Moon Bay, and this saga, perhaps more appropriately a disaster, should be a lesson for all of us. The government moved to wrestle away the lands from its rightful owners as far back as 2000. Ten years later, what was once a world gem lays derelict.

Now, three entities are teaming up to develop what HMB Holdings made world famous. Perhaps it’s time for the government to recognize its failure and hand the property back to the rightful owners. This may be asking too much, but I do believe that we will forever look at Half Moon Bay as what it once was.

It’s such a shame, but typical of Antigua & Barbuda, that we can never truly appreciate what we have and move to enhance it. When one looks at the low level of direct foreign investment in this country, one can only take a sneak peek at Half Moon Bay to understand why.

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16 Comments In This Article   

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observations 2

#16 mr mango » 2010-07-05 05:44

The idea that a resolution of the Half Moon Bay debacle and its (eventual) re-opening by whatever combination of owners will result in anything other than yet another half-empty hotel struggling to survive is simply naive. The other idea suggested by some that development of beautiful, unspoilt beaches such as Rendevous is an alternative solution is simply horrifying.

The solution, my friends, is to demolish what is left of HMB and turn the land into something that can be used and enjoyed by Antiguans and visitors alike. An eco-park or nature reserve would be one idea. Use the land to educate people about the ecology and natural beauty of the island, rather than covering yet more of it in concrete and steel. Or how about this for a radical idea: use the land to grow things we actually need! Lease it, for a peppercorn rent, to small farmers, turn it into a solar energy park, cultivate crops for bio-fuel, use it for iivestock and dairy production......basi cally anything other than yet another empty hotel!
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observations

#15 mr mango » 2010-07-05 05:42

Good article and some perceptive comments but i can't help thinking that the author and comment posters are failing to look at this issue from a wider perspective. Elsewhere in this issue there is the story of the Elle Colonna resort failing before it even opened because of, i quote, "appallingly low" guest numbers. There is also the rather pathetic attempt to put a positive gloss on the fact that overall visitor numbers are only slightly up on the very low numbers of the previous year, which was one of the worst on record due to the global financial crisis etc. All over the island both luxury resorts (Carlisle Boy, Curtain Bluff, Galley Bay etc) are experiencing very low occupancy and bookings for the 2010 season. I have not seen figures for the 'budget' end of the market (Sandals etc) but i am willing to wager that they too are suffering. The conclusion that i believe needs to be drawn from this is that TRADITIONAL TOURISM IS NOT THE ANSWER to our current woes.
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Response to Tenman part 3

#14 Valuation » 2010-07-04 15:11

My final point is that I think this development is not economically viable for any developer. They first have to dish out US $30 million plus (and counting) even before a construction worker lifts a shovel. Add to that all the construction costs and capitalization of interest while the construction phase is ongoing and you will probably be looking at a debt of US$80 to US$100million before the doors are open. Add to that debt the ongoing operational costs of staff etc., then you begin to realize that the property would need to have a very high occupancy rate to break even. When do you think the investor will start to see a return on his investment. Certainly not in the first few years. I think the decision to move ahead with the development is an emotional one. Yes, we all want to see the property open to provide jobs and so on, but do you really think that this is a good decision for the country to have the government involved in this type of business venture?
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Response to Tenman part 2

#13 Valuation » 2010-07-04 14:58

The second point is that, yes, it is true that the gov't tried to give it back with the condition of a reasonable time to develop. However, it was refused. Why? Because I'm sure Mrs. Querard knew at the time and as the government and everyone else in this development is realizing now, it is very difficult to get financing in a developing country where litigation and conditions are attached to the very property that will provide security for the financing. The government wanted to give them six months, as I recall, to get financing and start development. Can you honestly look back now and argue that that was a reasonable condition? The government itself is finding it difficult to get this development off the ground despite having owned it for three years. With a condition of six months attached or else acquisition for a project that would cost millions was completely unreasonable and I think only a fool would have accepted such an offer as it was doomed to fail. Had the government been sincere in its efforts to help the owners open, we would not be in the mess we are in today and the property would be opened. Isn't that what we ultimately want?
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Response to Tenman part 1

#12 Valuation » 2010-07-04 14:56

There are a few things that have to be addressed. The first is that the point about other people fighting over the property was squarely to the government and the others participating in the joint venture. If as you say, the property is an eyesore, then why not let the owners have it back and develop some other property. If any other property is as good as this one, then go for it. There are a number of ocean front properties that could be developed. Five Islands, rendezvous and so on. I think we both know the answer is that the developers and the government realize the potential of the property. If they didn't then why bother with it? If one beachfront is equivalent to another, then let's develop some other property. It would save the country the international embar**ment it has had with this one. Not to mention the fact that if the government goes ahead with the development without paying, it will potentially drive away legitimate investors who will be thinking that some where down the line, their fate may be the same as that of the former HMB owners.
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Valuation

Valuation

#11 tenman » 2010-07-04 13:49

Valuation I agree with you statement that there are other methods to value the land. However if there are other parties fighting to buy it why don't we access the offers? I am sure the government would have had no problems in allowing someone else to purchase the property as long as it was going to be developed. The government went as far as being willing to hand it back to the prior owners as long as they would agree to a time frame for development. Mrs Querard as usual refused any conditions.

Let me quote HMB "If allowed to stand, the establishment of a US $5 per square foot value, on what has been consistently proclaimed to be the best property on Antigua, devalues ALL of Antigua." I have shown via posts other properties for sale in Antigua at near half the 5.00 USD value, how would a usd 5 for HMB devalue these other properties? The days of proclaiming Half moon bay as a great site started to diminish after the hurricane Luis because the property, now an eye sore, has itself resulted in helping to devalue near by properties.
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tenman

#10 Valuation » 2010-07-04 09:40

There are a number of different valuation techniques that can/should be applied to the value of the HMB property. It is not just what other large tracts of land sell for. There have been comments that say, well look that this large piece of property that sold for x amount. But it's not a simple as that. Is the property's uniqueness comparable to that of the HMB property? Was it ever named world's No.1 beach? Probably not. And if it were the Gov't would be trying to develop it, not the HMB property. How much revenue can the property generate if it were put to its best use? These are some of the underlying considerations that must be looked at in order to determine value. Yes, we all want the value to be lower, but in reality if you look what Bill Cooper got for his property as well as the amount the Stanford liquidators are asking for Guiana Island, US$5 per square foot is too low. The property is very unique and beautiful, why else do you think everybody is fighting over it. You can't have it both ways. Either it's valuable and whoever gets it should be willing to pay fair value, or its not really that unique and in that case any other property will do.
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Valuation

more land to compare to the half moon bay price

#9 tenman » 2010-07-04 00:25

Property for sale, 3 times the size of half moon bay (430 acres). The Barters Estate, Rendezvous Bay, Antigua, West Indies. Beachfront property on the island of Antigua. Price $45,000,000
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#8 Truth » 2010-07-03 21:03

Maybe, in view of the irrefutable evidence that the so-called "country" of Antigua is a complete failure on a political, cultural, economic and social basis, it may be time to demand that Great Britain be made to come back and clean up the mess they left.

Someone should hold the British responsible for the entire decades long failure.

Who in God's name thought it would be a good idea to give a tiny, uneducated, undeveloped, culturally bereft, island "nationhood"???
The British should be required to clean up the mess and take over the responsibility for the damage caused by their error.
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Truth

#7 Pellucid » 2010-07-03 19:28

If Half Moon Bay was located on an Island with a sound economy, a stable government and a low crime rate, possibly someone could invest, develop and eventually turn a profit. Unfortunately, these conditions haven't existed on Antigua since the British shed them from the empire back in '81.
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is 5.00 usd too low

#6 tenman » 2010-07-03 15:20

Magic as usual I enjoy your articles. However with this article I find myself left with some unanswered questions. There is currently a 21 acre private island, located in the northern coast of Antigua for sale the price works out to 2.74 usd per sq foot and part of the reason for that price is because it is undeveloped land and not all of the land can be used as a building plot because there are mangroves and ponds. In your saying that the 5.00 usd per square foot is low are you suggesting that all of the 110 acres can be considered good to build homes/rooms on?. How much of the 110 acres is actually developed land? You scoff at the idea of land being sold for 5.00 usd per sq foot, however there is currently land in English harbor going on auction with the beginning bid at about 3.00 usd per sq foot. It would have been good if your article pointed out similar lands that were sold for the us 12.54 the former owners are claiming it is worth.
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Welcome back

#5 DC » 2010-07-03 09:26

I just want to say that I welcome Magic's return to op-ed writing on Caribarena. Agree with him or not, his pieces are usually well-crafted and well written.
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DC

#4 Cool Ruler » 2010-07-03 08:20

Just curious if the woman has appealed the assed amount is she still to be paid before the appeal is heard or she should be paid once the appeal is heard. This is a very litigious woman so am afraid she will find something to sue about even if she loses the appeal over the assed amount.
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Cool Ruler

a proposal - part 2

#3 fnpsr » 2010-07-03 03:08

As Magic has pointed out, the Half Moon Bay Developers LLC has failed to raise any significant amount of money. However, with control of the property, they will now be able to leverage the property to raise the required money needed to develop the property.

If Lovell is correct in his statement that, “Apart from the hundreds of construction jobs over a prolonged period, there will be career opportunities in every aspect of the hospitality industry. Suppliers of a wide range of goods and services including from the agricultural, wholesale and retail trades, transport, banking and insurance and real estate sectors also stand to benefit from the development.", this would be a “win win” situation for all concerned.

The government should not cut off its nose to spite its face!!!
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a proposal - part 1

#2 fnpsr » 2010-07-03 03:07

Magic, this is a very insightful article. I agree that the government does not have the money to pay the owners for the property. Additionally, based upon the IMF agreement, the money from the IMF cannot be used fore this purpose.

I agree that the easy way out of this embar**ment is for the government to return the property to the owners. They may have to pay a small fee for holding the property for 10 years, but as the saying goes, everything is negotiable.

With the property returned to the owners, the government would be off the hook and will begin the process of repairing its image worldwide. Now what will the owners do with the property? I suggest that the owners could make an offer to join the venture with the Half Moon Bay Developers LLC and the Distillery. The added effect of this would also be a truly private enterprise, without government intervention and no cost to the taxpayers.
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fnpsr

#1 The Dreamer » 2010-07-03 00:09

Lovell...Just pay for the land your government has expropriated then you can start making grandiose plans.
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The Dreamer

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Ian 'Magic' Hughes

Ian 'Magic' Hughes is an Antiguan Journalist.






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