The approximate 409-acre Grand Lucayan Resort complex
in Freeport, Grand Bahama (“The Resort”) is being offered exclusively for sale by HVS Capital Corp (“HVSCC”) via a Sealed Bid Auction. While it is the intent to dispose of The Resort in its entirety, bids for the various individual assets of The Resort will be considered. Also, for appropriate bidders, purchase-money financing for assets may be considered.
The Resort is currently comprised of two adjacent, distinct resorts, which share some common amenities and facilities.
- The 522-room all-inclusive Memories Beach Resort (“Memories”) with 12 food and beverage outlets
- The 749-unit Grand Lucayan Resort (“Grand Lucayan”) with 12 food and beverage outlets
Other important elements in The Resort include a large casino, conference center, spa, two signature golf courses (one of which is currently closed), approximately one mile of private waterfront, tennis courts, and a variety of outdoor pools.
Numerous value-enhancement opportunities exist for bidders interested in:
- Resort Hotel ownership and management
- All-Inclusive Hotel ownership and management
- Timeshare and other for-sale resort and residential developments
- Casino operations ownership and management
Where this page of information is available in any other language, the English version shall prevail whenever there is a discrepancy or conflict between the two versions.
SEALED BID AUCTION
Sealed Bid Auction Overview
Hutchison Lucaya Limited (“HLL”) is the owner of the Grand Lucayan and Memories resorts and Bahama Reef Limited (“BRL”) and Lucaya Golf Club Limited (“LGC”) are the respective owners of the two golf courses (collectively “The Resort”), located in Freeport, Grand Bahama. HVS Capital Corp (“HVSCC”) has been engaged to exclusively assist and advise on the sale of The Resort via a Sealed Bid Auction, in which interested bidders are invited to bid on the acquisition of The Resort through a purchase of the shares of Fentilla Investments Limited (“FIL”) which indirectly holds the entire issued share capital of HLL, BRL and LGC as herein described.
Principal Assets of Grand Lucayan Resort
The Resort is a major, integrated destination resort improved with appropriate resort amenities, situated on approximately 409 acres, of fee simple land along approximately one mile of private waterfront. As is described herein, the Resort consists of approximately 1,271 hotel guest rooms that are contained in four distinct room elements or structures:
- 522-room Memories Beach Resort
- 528-room Breaker’s Cay
- 198-room Lighthouse Pointe
- 23-unit Lanai Suites
Other core elements are summarized below and more specifically defined in the Offering Memorandum and due diligence documents:
- 24 food and beverage outlets
- 40,000-square-foot conference center
- Recreation and entertainment facilities inclusive of the spa and fitness center, tennis courts, kids clubs, and a variety of swimming pools
- Two signature golf courses: Reef and Lucayan
- Retail outlets
- Casino floor and operations
- Back of house operations including an off-site commercial laundry
Due Diligence Information
Significant diligence and other supporting information have been gathered and is available for review. After execution of the Non-Disclosure Agreement (“NDA”) and qualified by HVSCC, bidders are encouraged to review this diligence information in depth prior to submitting a bid. If a bidder has questions or requires further clarification regarding any due diligence information, please contact (Mike Sullivan of HVSCC at 303-512-1222 or MSullivan@hvs.com in advance of bid submission.
It is anticipated that prior to the Bid Due Date, On-Site Inspections will be held at The Resort. Those bidders interested in participating in an On-Site Inspection should contact HVSCC for scheduling.
In appropriate circumstances, and subject to the sole and exclusive discretion of the Seller, the Seller may consider providing purchase-money financing to a qualified bidder to partly finance the acquisition of The Resort.
Bid Submission Format
After execution of the NDA and qualified by HVSCC, bidders will be provided with the Bid Submission Document that bidders are requested to use in submitting a bid. It is the intention of the Seller to sell or otherwise dispose all of The Resort. While it is the Seller’s preference to sell The Resort as a single transaction, bids will be considered for the acquisition of individual specific assets.
Purchase and Sale Agreement
Enclosed is the Purchase and Sale Agreement, which has been pre-approved by the Seller to be used in connection with this transaction.
Bid Due Date
BIDS, PREPARED IN ACCORDANCE WITH THE BID SUBMISSION DOCUMENT, ARE DUE ON OR BEFORE June 10, 2016.
Items to be contained with Bid include:
- Bid Submission Document
- Bidder Identification: Including detailed background and other information regarding the identity of the bidder to include nationality, principal office location, general background information, proof of funds statement, and financial data (especially in the case where vendor provided Purchase-money Financing is being requested)
- Purchase and Sale Agreement: Bidders’ willingness to execute the enclosed Purchase and Sale Agreement, or an edited version, as necessary
The Seller reserves the right, in its sole and exclusive discretion, to accept or reject any submitted bid, and to withdraw The Resort from auction at any time without notice.
The Resort is owned by HLL, BRL and LGC , wholly owned subsidiaries of Cheung Kong Property Holdings Limited (“CKP”) (stock code 1113:HKEx) based in Hong Kong. A company affiliated with CKP, Hutchison Port Holdings is the operator of the massive shipping container port in Freeport.
The premises at Memories were leased to Blue Diamond Grand Bahama Ltd. (“Blue Diamond”), an affiliate of Sunwing Travel Group, a vertically integrated tour and travel entity. This lease commenced in February 2014 with an initial term of seven years and a five-year extension at the option of Blue Diamond. The casino is currently operated by Treasure Bay LLC dba Treasure Bay Casino under an agreement that is ending. The Resort is self managed , so at closing, other than the Blue Diamond lease, the assets are being offered free of any existing property management contracts and free of any hotel franchise agreements.
The Seller has invested in excess of $38 million since 2013 in capital expenditures, which includes the renovation of the Memories Beach Resort prior to the commencement of the aforementioned lease, as well as for the renovation and conversion of the 198 rooms at Lighthouse Pointe to an all-inclusive element at the Grand Lucayan, to include a separate lobby, food and beverage outlets, etc.
The Government of The Bahamas (“Government”) has been extremely supportive of The Resort including provision of various incentives and direct monetary support with respect to the leasing of both Memories as well as the casino operations. Because the tourism element of the local economy is significantly dependent on the success of The Resort, it is anticipated that this governmental support should continue with the acquisition and the potential redevelopment of certain elements of The Resort.
Memories Beach Resort was previously branded as a Sheraton and managed by Starwood. Memories’ 485 currently available rooms do not reflect the total potential rooms inventory. Approximately 37 rooms have been converted for house uses. Other major facilities and amenities of Memories include:
- 12 food and beverage outlets
- Three pools including a children-centric area
- Outdoor entertainment area with staging
- Approximately ½ mile of white sandy waterfront
The Grand Lucayan (formerly a Westin Hotel, managed by Starwood) includes three distinct room elements:
- 528-room Breaker’s Cay (ten stories constructed in 2000)
- 198-room Lighthouse Pointe (renovated and converted to an all-inclusive resort operating since December 2015)
- 23-unit Lanai Suites (approximately 900-square-feet units on the beach)
Other major facilities and amenities associated with the Grand Lucayan include:
- 12 food and beverage outlets
- Three pool areas
- 40,000-square-feet of indoor meeting space including a 15,000-square-foot ballroom
- 50,000-square-feet of outdoor function space with tenting capabilities
- Approximately ½ mile of white sandy waterfront
Other facilities shared by both resorts include:
- 23,375-square-foot Las Vegas style casino with approximately 25 gaming tables and 195 slot machines
- Reef Golf Course – 6,930-yard course designed by Robert Trent Jones Jr. on 160 acres
- Lucayan Golf Course – 6,821-yard course designed by Dick Wilson on 195 acres (currently closed)
- 25,000-square-foot spa and fitness center
- 15,000-square-feet of free-standing retail area
- Four tennis courts with different surfaces ranging from clay to grass
Value Enhancement Opportunities: There is a number of redevelopment, value enhancement opportunities, several of which are briefly described herein.
The Resort has a 23,375-square-foot casino in a free-standing building that is prominently located within The Resort. Based on its current size and configuration, this casino is the third largest in The Bahamas (behind Atlantis and Baha Mar) and fifth largest in the Caribbean. The casino has approximately 25 gaming tables and 195 slot machines. The gaming equipment is the property of the casino operator. The Seller made significant investments in the building including a sophisticated security camera system, which remains as a building fixture.
In 2009, the casino was leased to an affiliate of Treasure Bay Casinos to replace the previous operator, Isle of Capri Casinos. This short-term operating lease has expired and Treasure Bay is currently operating the facility on a month-to-month basis.
As part of the Memories Beach Resort lease in 2014, approximately 11,000 square feet of the casino building was converted to two food and beverage outlets for Memories. As such, the gaming floor area of the Casino is now approximately 23,375 square feet.
The Government has been a strong supporter of the casino operations at The Resort. Historically, the Government offered inducements and financial assistance to the casino operations, including certain guarantees against annual financial losses (if any), as well as marketing funds to HLL.
Value Enhancement Opportunities
- The casino operation is offered unencumbered by any existing operator lease. There is a current agreement with Government and HLL for the former to provide substantial financial contributions for several years to induce the execution of an operating lease for the casino with a significant operator. The financial inducements are paid to HLL.
- Moreover, there is the opportunity to expand the size of the casino subject to approval of pertinent governmental agencies. The current floor area of the casino equates to 18 square feet per guestroom of The Resort. In comparison, Atlantis’ and Baha Mar’s gaming floor area per guestroom is approximately 40 square feet. It would be a significant enhancement to The Resort as well as to its competitive position vis-à-vis the two mega resorts to reposition the casino as a destination element that could induce gaming junkets and other enhancements which would result from a larger casino operation, which would obviously include additional guest room demand for the Resort.
All-inclusive resorts have emerged as one of the fastest growing areas of leisure travel. 15 years ago, there were about four major brands, and all-inclusive resorts were synonymous with value conscious travelers who accepted a three-star (average) experience. Today, there are over 20 major brands encompassing the premium and luxury market segments.
Historically, all-inclusive resorts catered to mostly European, Canadian, and Latin American budget travelers. Seeing the rise of interest from the American marketplace, all-inclusive companies began to cater to the U.S. traveler by making facilities and amenities more conducive to this market. Over the last 10 years, the U.S. grew into a primary source market. As more resort product opened and improved in overall quality, the all-inclusive sector also surged in global travel media exposure while continuing to earn a better reputation among the American traveling public.
One of the effects of the global financial crisis was to fuel the discriminating and luxury traveler segment to look for package travel bargains. This new influx of high-end consumers willing to try all-inclusive resorts spurred higher and higher levels of luxury product and resort services.
Now, the all-inclusive resort industry in the Americas is a fully mature hospitality vertical, targeting clearly delineated market segments including single and multi-generational families, couples of all ages, and luxury travelers.
There is also a hybrid form of the all-inclusive experience whereby a resort may offer an all-inclusive package, often during lower occupancy periods, as a means to generate additional demand. Atlantis’ Cove and Royal Towers offer this alternative on a seasonal basis.
Value Enhancement Opportunities
- Memories Beach Resort is an all-inclusive product associated with the Blue Diamond (Sunwing) brand, which is exclusive to the Caribbean, Central America, and Mexico. Blue Diamond predominantly targets the midscale lodging segment.
- The 528-room, 10-story Breakers Cay structure is conducive to an all-inclusive upper scale conversion. With appropriate renovation, a similar repositioning with a possible brand affiliation would place the property in a very competitive position in that marketplace. Especially given the various amenities including: substantial meeting/conference facilities, casino, and golf that would create a rather unique lodging alternative in The Bahamas, as well as for much of the Caribbean.
- The 198-room Lighthouse Pointe is located on the far eastern section of the Resort and offers a certain degree of privacy from the Resort proper. The conversion to an all-inclusive concept included a separate lobby/check-in area, as well as four food and beverage outlets and pool areas solely for the use of Lighthouse Pointe guests.
Timeshare sales have been a growth industry in the Caribbean for the past several years. In The Bahamas, vacation club ownership tied to resorts such as Atlantis has been very successful. There are several timeshare destinations on Grand Bahama. A vast majority of these are small, with limited food & beverage and recreational amenities, and most have been sold out. Timeshare is popular in The Bahamas because of the high “trade” value of waterfront timeshares in the major international exchange programs.
The current trend in this industry has seen dramatic growth. A primary reason for this substantial growth in timeshare sales has been the evolution of a “capital-light” strategy whereby timeshare organizations such as Wyndham, Hyatt, Hilton, and Bluegreen provide sales and marketing on a fee-for-service basis to third party developers and resort owners. Before the emergence of sales and marketing fee-for-service arrangements, the barriers for developers and resort owners to enter the shared ownership industry were very high and in many cases not feasible. Without an experienced and effective sales and marketing organization, the timeshare model cannot be successful.
Value Enhancement Opportunities
- There has never been any timeshare, fractional or whole ownership, product at The Resort. It is important to note that there are several opportunities within the existing structures for reasonable conversion alternatives. Moreover, any timeshare units would have full access to all the amenities and facilities of the resort.
- The 23 Lanai Suites offer superb ocean views and direct access to the beach. These 900-square-foot rooms would only require a small kitchen installation as well as interior renovation and furniture, fixture, and equipment replacement. There is also the potential to expand the Lanai Suites by an additional six to 10 units.
- Approximately 80 percent of the 400-800-square-foot rooms of Lighthouse Pointe offer unobstructed views of the marina and the ocean. Situated at the extreme eastern end of the Grand Lucayan, Lighthouse Pointe offers the most serene and private experience at The Resort. The building structure has two wings and can yield approximately 68 two-bedroom units with the second bedroom available as a lock-off, which would produce a unit of approximately 1,200 square feet.
- It is also important to note that there is the ability to add approximately 25 marina slips at Lighthouse Pointe.
- There are also approximately two acres proximate to the conference center. A tower could be constructed that could yield 70-75 units, all with direct ocean views, for fractional or whole ownership potential.
The signature 6,930-yard Reef Golf Course is situated on approximately 160 acres and is directly across Sea Horse Lane from Grand Lucayan. This Robert Trent Jr. course was designed in 2000. The exceptional quality of this championship golf course has been recognized by some of the sport's leading publications. It has been referred to as the No. 1 golf location in The Bahamas, and Golfer magazine has ranked it in the “Top 100 Golf Resorts in the World.” The Reef Golf Course is popular on the competitive circuit and has hosted the PGA's Bahamas National Open, the Senior PGA's Slam, and 12 other national championship tours.
Currently, unlimited golf is offered and included as an amenity available to the guests at the all-inclusive elements of Memories as well as Lighthouse Pointe.
The 6,824-yard Lucayan Golf Course is located approximately ½ mile from the Grand Lucayan. This tree lined, Dick Wilson designed signature course has been closed since 2011.
Value Enhancement Opportunities
- The 195-acre Lucayan Golf Course can be reopened. To fully renovate and reopen this course to previous play level, the cost is estimated at approximately eight million dollars according to resort management.
- Alternatively, there is the possibility to create a planned single-family unit development around the golf course. The latter may be shortened to a nine-hole course to accommodate this alternative land use.
- Lastly, the opportunity exists to create other recreational amenities on the golf course site to augment the competitive position of The Resort in The Bahamas and the Caribbean. Creating such amenities as a large five-acre surf pool with other free-standing surf machines, zip lines and rock climbing, other “water park” type features as well as unique recreational/sport activities would position The Resort and Grand Bahamas overall to be more competitive with the mega resorts on Paradise Island and Nassau. With the existing landscaping, water and electric resources used in this 195-acre golf course, costs of such a conversion are expected to be lower than developing this use on a similarly sized vacant land parcel. Such a “park setting” could be offered as a discount to guests at The Resort but would be open to any guest or resident on Grand Bahama as well as to visiting cruise ships. It would be a point of difference that would be unique in The Bahamas.
The island of Grand Bahama is the fourth largest island in the Commonwealth of The Bahamas (“Bahamas”) as well as the second most populous island. Grand Bahama is located 60 miles from Florida and is 100 miles north of Nassau, Bahamas’ capital. Freeport is the primary city in Grand Bahama.
The Resort is located in the 233-square-mile area that comprises the City of Freeport. This fact is significant because Freeport currently has a favorable economic status unlike anywhere else in Bahamas (because of the Hawksbill Creek Agreement, a land use, taxation agreement, unique to Grand Bahama), which currently includes the following:
- No real property taxes or real property levy
- No personal property taxes and no capital levies or taxes on capital gains or appreciation
- No taxes of any kind on the earnings of the licensees of the Grand Bahama Port Authority (this includes The Resort)
- Exemptions from excise taxes for imported goods and other consumables
It is important to note that the aforementioned economic benefits from the Hawksbill Creek Agreement have been extended into the first quarter of 2016; negotiations with the Government are in final stages for a renewal of these economic benefits.
There are three distinct lodging markets in The Bahamas: New Providence (Nassau), Grand Bahama, and the Out Islands. Overall hotel occupancies in The Bahamas over the last three years has been in the low to mid 50 percent level with composite ADR in the $195-$205 range. Within the three aforementioned submarkets, the following characterizes the lodging market metrics over the past few years:
- New Providence 57-64% occupancy @ 220-$230 ADR
- Out Islands 36-41% occupancy @ $155-$177 ADR
- Grand Bahama 43-47% occupancy @ $77-$84 ADR
Source: Ministry of Tourism
It is important to understand some of the major hospitality trends and reasons for the above operating results for Grand Bahama:
- The Resort accounts for 1,271 rooms of the 2,037 rooms that comprise the 23 lodging supply on the island. Except for a three other small hotels, the remaining lodging supply is clearly deficient from a quality level.
- In order to provide a stable source of new revenue, The Resort shifted a part of its market orientation toward the (day) cruise ship industry, for sailings originating from South Florida. The obvious trade-off was lower ADRs for this segment of business.
The opportunity from a pure European plan lodging perspective is to continue the renovation of the main Breaker’s Cay structure as well as to upgrade the outdoor pools, landscaping, and FF&E. The Grand Lucayan then would be completely renovated. This, coupled with soft branding opportunities and a redirection of the sales and marketing efforts, would position the resort in a much stronger competitive situation relative to the Bahamian and overall Caribbean marketplace.
Grand Bahama International Airport (GBIA) is just north of the City of Freeport and is less than six miles, or a 15-minute drive, from The Resort. The airport is unique in several respects:
- The primary runway is over 11,000 feet which can handle the largest aircraft currently in service.
- GBIA offers fast and convenient pre-departure U.S. Custom Clearance. This preclearance operation is only available in 15 airports in six countries worldwide. This feature is extremely beneficial to air passengers and carriers in the U.S. and abroad.
- GBIA is the largest privately owned international airport in the world. A company affiliated with CKP has a 50 percent interest in the airport.
GBIA has non-stop, year-around service from five U.S. cities: Atlanta, Fort Lauderdale, Miami, Orlando, and Charlotte, as well as international flights from Montreal and Toronto. Nassau, the primary gateway to The Bahamas, has an additional 15 direct flights from the U.S., Canada, and London. GBIA is a convenient 30-minute flight from Nassau.
During the late spring and summer high season period, direct airlift to Grand Bahama dramatically increases from the U.S. including such cities as Newark, Houston, Philadelphia, Baltimore, Cincinnati, Pittsburgh, Nashville, Richmond, Memphis, and more. There are continuing discussions to add more direct airlift to Grand Bahama.