Government shifts away from Bermudiana hotel plan
The Government has pulled out of a deal that would result in a boutique hotel run by the Hilton group, scheduled to open by next summer.
Instead, the 94 units of the Bermudiana Beach Resort will be put on the rental market once construction is complete at the end of this year.
At a press conference yesterday, Lieutenant-Colonel David Burch, the Minister of Public Works, announced that the Government had decided to jettison the long-running project after a feasibility study conducted by accountancy firm Ernst & Young, which concluded that the hotel model was no longer financially viable.
Colonel Burch acknowledged that the complex, which has cost more than $100 million to build, had been hit by “an incredible set of circumstances“ in recent years, including the Covid pandemic and rising inflation, which meant a 50 per cent increase on the cost of essential building supplies such as concrete and steel.
He said: “Despite these challenges, the project continued, but with presales still not materialising and costs increasing, the Government decided to investigate the business model of the property.
“The Ministry of Public Works retained an expert who found that there was an inherent failure in the current business model.
“In general terms, the root cause of many of the issues associated with the project, including the lack of sales, stem from the direction set by the former development partner.
“The former developer’s projections were overly simplistic, and the current team followed the same plan, but lacked the experience to navigate what would have already been an extremely challenging, brownfield hotel development project from inception.”
Colonel Burch said that E&Y came up with four proposals for the property: stick with the existing model, sell units individually as condominiums, run the property as a standard boutique hotel, or convert units into residential rental apartments.
Confirming that the Cabinet had decided on the fourth option last week, Colonel Burch said: “This was a difficult decision, as much effort was placed into converting the property into a hotel.
“But when presented with the data, and the expert advice, the Government chose to change course yet again — but one that we believe is in the best interest of the country and one that will prove beneficial to the economy in the long term.”
Colonel Burch accepted that the new model failed to address the Government’s two priorities of increasing hotel beds and affordable housing units. The units have been given a provisional monthly rental value of between $3,000 and $7,000.
However, the minister maintained that “a rising tide lifts all boats”, and that increasing the number of rental properties on the market will help bring down overall prices.
He said: “The challenge with housing impacts all segments of our community, which includes our international business sector as well. The need to house this sector puts pressure on the local housing market.
“The analysis indicates that this change in direction would provide a means to cater to this sector directly and thus indirectly free up the local housing market to be accessed by more Bermudians.
“Therefore, by December of this year, this new proposed direction will see 94 studio, one, two and three-bedroom residential units of beachfront property added to fulfil a market demand for additional rental housing.
During yesterday’s press conference, Lieutenant-Colonel David Burch said that plans to convert a portion of the neighbouring Southlands national park into an events lawn for the Bermudiana Beach Resort were still being considered — even though plans for the hotel itself had been scrapped.
Plans for the lawn and a car park were first submitted by resort representatives in 2019. The application insisted that the development was “an integral component of hotel use”.
The application was refused by the Development Applications Board in December 2020 after opposition from environmental groups and the National Parks Commission.
After a redraft that dropped the proposed car park, the plans were resubmitted in 2022.
Although the DAB also rejected that proposal, that ruling was overturned on appeal last November by Walter Roban, the Minister of Home Affairs.
The Government subsequently withdrew its approval after the Bermuda Audubon Society filed for a judicial review into Mr Roban’s decision claiming that he had failed to abide by the Bermuda National Parks Act.
At the end of April, the Department of Parks launched a consultation process for the proposal.
Colonel Burch, the Minister of Public Works, was asked if the events lawn had now been dropped following his Bermudiana announcement.
He replied: “No, that is still under consideration.
“I have received I think it’s 271 objections — we’re wading our way through those and we’ll make a decision.
“It still provides an opportunity for this site to generate revenue but at the end of the day something needs to be done there because most of the trees that are presently on the site are casuarinas, and they’re the cause of the most recent collapse of part of the cliff next door in the Bermuda government property. That has to be addressed.”
“The Bermudiana apartments will be a multifamily community catering to young professionals and couples with amenities including beach access, indoor and outdoor fitness area, a pool area, with the potential for a restaurant, and a spa in the future.
“As the old saying goes, a rising tide lifts all boats, and by adding to the housing market, regardless of the sector, we are helping to address the needs of all residents.”
Under the previous model, condos sold to overseas buyers could be occupied for up to 90 days a year.
The suites would be rented for the rest of the year as tourist accommodation by Hilton Hotels, which had branded the resort as a luxury hotel in its Tapestry Collection.
Colonel Burch confirmed that only one condominium was ever sold.
He also said that the Government will have to pay a “break fee“ to Hilton Hotels for pulling out of its contract with the operator.
Asked how much that fee will be, he said it would be less than $500,000.
The Royal Gazette contacted Hilton for comment but none was received by the time of publication.
The Bermudiana Beach Resort is on the site of the failed Grand Atlantic housing development, which was created by a previous Progressive Labour Party government as a hybrid hotel and affordable housing development.
Only two out of the 78 condo homes built in 2011 were sold and the hotel was never built.
The former One Bermuda Alliance administration confirmed in April 2014 that it had signed a contract to “upgrade and reposition” the complex with MacLellan & Associates, a Caribbean-based tourism and leisure firm.
However, the project was stalled so the site could be used to house sailors and support staff from the America’s Cup competition last year.
A new agreement with the same developer was announced in February 2017.
It was said then that the proposed Bermudiana Beach Resort would be a condo hotel — a condominium complex operated as an hotel.
In March 2018, by which time the PLP was back in power, Colonel Burch said there had been “extensive negotiations over the past seven months” to modify the business plan with the Bermuda Housing Corporation, which owned the property.
The minister said the new arrangement included “more cost-efficient project financing”, which would help the BHC to “clear the debt on the site” and focus on housing.
Bermudiana Development Company Ltd, a subsidiary of the BHC, parted ways with MacLellan & Associates in September 2021.
In March, David Burt, the Premier and Minister of Finance, told the House of Assembly that the Government had guaranteed a $25 million loan on behalf of the BDCL, for the completion of the resort.
The commitment followed a $10 million guarantee for the Bermudiana, bringing the total guarantee amount to $35 million.
Jarion Richardson, the Opposition leader, noting changes to plans for the site, told the Bermuda Broadcasting Company: “At this point it's getting embarrassing.
“I'm hoping that our research will indicate that this is the last iteration or reimagining, because at this point now we are just spending money, and it doesn't seem like we know what we are spending it on any more.”
• For Lieutenant-Colonel David Burch’s full remarks, see Related Media
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