When the committee overseeing the transfer of Stonington Beach Hotel to John Jefferis had its final meeting in February after more than a year poring over his plans, they thought they knew exactly what deal had been agreed.

Four months later, as the full details of the lucrative lease Mr. Jefferis finally negotiated have emerged, College president Michael Orenduff is stunned at the difference.

The College believes the changes made after Mr. Jefferis was selected have left the institution with an immediate debt of around $1.25 million, and in the first five years the College will have no rental income coming.

In addition, Mr. Jefferis has secured almost two acres of prime waterfront land plus two cottages that were not originally on the negotiating table - having been earmarked for halls of residence - and obtained a 50-year lease rather than the 21 year term agreed to when he was selected.

Neither Dr. Orenduff nor the College's chief financial officer Ann Parsons saw the final deal before it was signed and College lawyers are now examining the contract.

The hotel sits on a prime piece of real estate right on Elbow Beach.

It was run by Bermuda College as both a commercial hotel and a place where Bermudians could learn the hospitality trade.

But it had been a drain on the public purse for years and figures last year showed it was losing up to $75,000 a week, which the tax-payer had to bail out.

The College decided in October 2001 to bring in a private company to run the hotel, but still ensuring Bermudians would be trained at the facility.

The contract went out to tender and in January 2002 a committee of civil servants, a hotelier and College officials chose Bermuda Resort Hotels (BRH) - which also owns the Harmony Club, the Wharf Executive Hotel, and Surf Side Beach Club - to run Stonington.

Mr. Jefferis' company, Island Resorts - one of six which applied - was unsuccessful, but the decision to award the contract to BRH was never made public.

Dr. Orenduff would not confirm BRH won the contract, saying it was confidential. But The Royal Gazette reported at the time that a letter had been sent to Mr. Jefferis telling him he had been unsuccessful.

In March, 2002, Education Minister Paula Cox, announced the hotel would be transferred from Education to Tourism to free the College of the burden of debt.

The tendering process started all over again and a consultant was brought in from California to help the process.

A committee involving the departments of Tourism and Education took over the selection process and Dr. Orenduff said at the time the reason tendering was started again was to avoid the appearance of a conflict of interest.

BRH president Billy Griffith, a former president of Bermuda Hotel Association, sat on the College Board of Governors, and Government wanted to avoid any concern there could be a conflict of interest.

In December last year after a long and drawn out new selection process Mr. Jefferis - the former general manager of Elbow Beach who owns the award-winning Coco Reefs Resort in Tobago - was picked by a selection committee.

The selection committee consisted of Director of Tourism Judith Hall-Bean, Education Secretary Michelle Khaldun, Philip Butterfield of Bank of Bermuda and Jerry Morrison, a hotel consultant brought in from California.

BRH, owned by entrepreneur Naval Mehra made the short-list of two again, but this time it was edged out by Mr. Jefferis.

In the meantime, a Stonington Transition Team involving a range of civil servants and Bermuda College representatives was set up to carefully examine the proposals, work on the transfer of the hotel and to make recommendations to a new company, Stonington Beach Hotel Ltd., which had been set up to oversee the hotel.

Minutes from a Stonington Transition Team meeting on October 31, 2002 show Anthony Turner of Works and Engineering had calculated Mr. Jefferis' proposals would yield less rent to the College than Mr. Mehra's plan over the course of what was agreed by the team would be a 21-year lease.

Mr. Turner told the meeting that based on Mr. Mehra's offer of base rent of $400,000 per year plus eight percent of annual turnover, the College would net a "current value" of $4.1 million over the 21 years.

Mr. Mehra wanted an option to walk away every five years when the rent was reviewed.

Mr. Jefferis' plan was to have a base rent of $300,000 for the first five years, rising to $400,000 on years six to ten, and $500,000 from year 11 to the end of the 21 year lease.

He also offered 20 percent of gross profit.

This would yield a "current value" of $3.8 million over the 21 years, said Mr. Turner.

The minutes show Mr. Turner saying Government's opening asking base rent was $600,000 plus 10 percent of the gross annual turnover.

"This was the lead-off for the negotiations, and one would expect to settle for a minimum of $500,000, and a cap of around eight percent gross annual turnover," state the minutes.

The minutes show Mr. Turner saying Government's aim was to get $6 million in rent "which he was pretty sure could be done".

Mr. Turner noted Mr. Jefferis "wants to fix the rent for 21 years, which means the income becomes less valuable over time, which is not an acceptable position".

Mr. Jefferis wanted a lease longer than 21 years, which the Transition Team ruled out, and he also wanted another plot of almost two acres of land which contained two cottages.

The minutes of the Transition Team meeting on October 31 state: "The land requested by John Jefferis was now out of the equation since the Bermuda College has plans for it."

Minutes of the committee of October 17 2002 show Mr. Jefferis wanted the land to develop, but: "Dr. Orenduff advised that the parcel of land was in fact included in the overall officially adopted master plan of the Bermuda College for residence halls."

On November 21, 2002, Bermuda College submitted plans for a sub-division of its land which ruled out the chunk of land Mr. Jefferis was looking for in his submissions to the selection committee.

Mr. Jefferis was selected to run the hotel in early December and the subdivision was approved by the Development Applications Board on December 31 last year. The selection committee was Director of Tourism Judith Hall-Bean, Education Permanent Secretary Michelle Khaldun, Philip Butterfield of Bank of Bermuda, and Jerry Morrison, a hotel consultant from California brought in to help.

Government announced on January 6 that Mr. Jefferis had been selected to lease and operate the hotel "with final terms and conditions to be negotiated," according to a joint Education and Tourism press release at the time. It also stated Government expected Mr. Jefferis to be operating the property by the beginning of the 2003 tourism season.

After Mr. Jefferis was selected, all the numbers he provided for rent he would pay to the College were thrown out of the window as he secured drastically lower rent rates than he had previously proposed.

He was now negotiating the details of the lease with the board of the Stonington Beach Hotel Company, which had been set up to oversee the hotel, and technical staff from the civil service.

The company is chaired by lawyer Paul King and includes Mrs. Hall-Bean, Mrs. Khaldun, the chairman of Bermuda College Board of Governors, Raymond Tannock, among others. The company approved the lease and notified Cabinet, which also approved it.

As well as a five year rent holiday, Mr. Jefferis was also able to renegotiate other key changes:

He obtained a 50-year lease rather than a 21-year lease which was the basis of the award;

And he got the 1.9-acre plot of oceanfront land with two cottages he always wanted, but which the Transition Team had noted in October was not on the table and was "out of the equation".

He was given first option to buy the hotel if Government decides to sell it.

Although he was selected in December, Mr. Jefferis did not sign a lease until June 12 this year and the contract was back-dated to begin in May.

This meant, according to Dr. Orenduff, that the college is saddled with a debt of $1.25 million because the College picks up all the losses from the off-season and Mr. Jefferis picks up a clean slate for the summer season when the bookings start to roll in.

In addition, according to Dr. Orenduff, no inventory was done to separate what the College owned and what Mr. Jefferis owned when the hotel was transferred over on May 1, so there is the possibility that cheques after May 1 for bookings before the handover could go into the new company's account.

Although Mr. Jefferis had been selected in December on an agreed basis, on May 8 2003 plans were submitted under the College's name as landlord to the Development Applications Board to redraw the boundaries to add in the 1.9 acre (83,274 square feet) plot of land with the two cottages which Mr. Jefferis had always wanted but which the Transition Team minutes show was never on the table.

The minutes of the Transition Team show how Mr. Jefferis's position changed from before he was selected to afterwards as he succeeded in getting a better deal for his company.

Minutes of a Transition Team meeting on 6 February state: "The management contract provided by John Jefferis was considered not to be of any use at all. The proposed lease should replace the management agreement."

The Royal Gazette has been told by an informed source familiar with the transactions that Mr. Jefferis asked to be paid more that $100,000 to run the hotel when he submitted a management contract after he was selected. Mr. Jefferis denied to the ewspaper that he asked for any money.

The Transition Team meeting on February 6 showed Mr. Jefferis had sent "revised terms" to Ms Khaldun on January 14. He was now proposing to pay no rent for the first three years except 20 percent of gross profits; $200,000 plus 20 percent gross profit for years 4-8; $250,000 plus 20 percent gross profit for years 9-12; and $350,000 plus 20 percent of gross profit for years 13-21. He was also still pushing to have the duration of the lease extended beyond 21 years because of the planned capital investment and reinvestment he was planning to make.

However, the Transition Team stuck to its guns and recommended "no change" to the term limit and "no change" to the "demise" i.e the amount of land Mr. Jefferis was to get.

The meeting was also agreed that the terms of the lease now be: free rent for years 1-2; $300,000 for years 3-6; $400,000 for years 7-9; $500,000 for years 10-21 plus eight percent of gross annual turnover for the whole 21 years.

However, the lease Mr. Jefferis finally signed on June 12 this year was radically different to the one on the table on February 6 - and the plans the businessman had submitted earlier.

The lease was increased to 50 years, and he will pay no base rent for the first five years; $200,000 per year between 2008 and 2013; $250,000 between 2013 and 2018; and $300,000 until 2053.

There would also be 20 percent of gross annual profits in rent.

Another clause in the lease states: "The landlord (Board of Governors of the College acting for Government) agrees to use its best endeavours to ensure that all Bermuda Government consultants and others visiting Bermuda in connection with the Bermuda Government shall stay at the property commencing from the first anniversary of the date thereof.

"The landlord shall allow the tenant (Mr. Jefferis) the right of first refusal if the landlord decides to sell the property during the term of the lease."

Mr. Jefferis told The Royal Gazette last month when he signed the lease that he would be investing $10 million in the short term.

A Press release issued by his company Coco Reef Resorts said he had "acquired" Stonington, which would then be known as the Coco Reef Resort Bermuda.

Mr. Jefferis raved about how well Tourism was doing under Minister Renee Webb.

He said after signing the lease: "Bermuda's tourism industry under the new minister, the Honourable Renee Webb, is currently enjoying an upswing.

"Confidence in Bermuda and the Government is the main reason for our investment ... innovative initiatives such as the 2001 Hotel Concessions Act have been responsible for the dramatic upgrading and refurbishment of many of Bermuda's hotels.

"From talking to various wholesalers currently on the Island, the prognosis for the summer is extremely positive for Bermuda, which many attributed to the various new strategies executed by the Department of Tourism, such as the new advertising campaign and other promotional endeavours."

Ms Webb insisted the deal had been good value for Bermuda because the tax-payer would no longer have to bail out the loss-making hotel and Mr. Jefferis was planning to make a major investment in upgrading the property.

She said regardless of what the Transition Team may have discussed, it had no power to make deals. It was Cabinet which approved the deal after it was negotiated by the Stonington Beach Hotel Company.

And she said the two cottages had always been on the table for the development.

Referring to the 50 year lease Mr. Jefferis got for Stonington, the Minister said: "A 99-year lease was given to Club Med and Daniel's Head was 121 years more recently. We decided that time period was too long and we went for 50 rather than 99 years."

Newspaper stories at the time of the Daniel's Head lease in 1998 reported that the lease was for 65 years, with an option for a 35-year extension.

Ms Webb added: "The cottages were in the original proposal from Government. The committee did not have the original proposals. The cottages and property were always part of the hotel and was used by the college for staff."

When it was pointed out the survey submitted on the College's behalf to Planning in November last year for the land to be included in the deal did not include the 1.9 acres which contain the cottages, Ms Webb said: "I have no idea what the survey report said, but whatever it said it was wrong. The Transition Team does not have the authority to agree otherwise, in spite of what they may have been privy to."

She added: "Mr. Jefferis agreed to take over the contract as of May 1 but the contract was not available to be signed until June, but the contract was to be commenced in May."

When asked if the taxpayer has got good value out of the deal, Ms Webb said: "When one considers Stonington Beach was losing money for years and the Government has had to inject money into the hotel every year as a consequence and Mr. Jefferis, a Bermudian who is a first class hotelier, will be investing $15 million to make the hotel first class so Government doesn't have to bail it out yearly, I think it is great value for money."

Mr. Jefferis told The Royal Gazette he would be investing $10 million into the site, the same number he cited when he was announced as the successful bidder.

Ms Webb concluded: "I think the people will be very pleased. John Jefferis is respected worldwide as a hotelier and I think he will do an excellent job for Bermuda."

When The Royal Gazette asked Mr. Jefferis how he managed to get such a better deal than what he proposed when selected, he said: "I don't think it was that much better. I assumed the liabilities such as insurance claims against asbestos pre-May 1 and there could be no claims for structural problems.

"There was a lot to do for maintenance. In terms of who was going to do what, it was restructured. There is less rent but it has to be balanced out by me taking on more responsibilities.

"Clearly they (the College) did not want to take on any extra risk and they didn't want to put any money into the property."

When asked why the extra land and cottages were now included in the final lease when they had not been on the table when he was selected, he said: "I've been working on these arrangements for two and half years and they have always been in my original submission. In the Planning Act of 1972 that is zoned as part of the hotel.

"There have always been cottages but they were staff accommodation. You can't suddenly take a chunk away."

When it was pointed out the cottages and land were not originally on the table or on the original subdivision, Mr. Jefferis said: "That's not my view of the situation at all. You can't have the hotel property and take that away. You can't do a dog-legged drawing, that's not going to work. That's hotel accommodation."

The Royal Gazette referred to Transition Committee minutes of October 17, 2002 showing Dr. Orenduff saying the land was zoned for the college, Mr. Jefferis said: "Dr. Orenduff gave the contract to Billy Griffith so maybe he's unhappy that the right thing is now being done."

When asked if he had asked to be paid fees when he submitted his management contract after he was selected, Mr. Jefferis said: "There was never any question of asking for fees."

But Dr. Orenduff is now scratching his head trying to figure out how this deal came about and the College's lawyers have been asked to take a close look at it.