Funding not ‘fully secured’, Gencom discloses in November
Submissions made to the Information Commissioner’s Office in November by Gencom said financing for the Fairmont Southampton hotel project was at that time still not “fully secured”, according to a decision recently published by the ICO.
Westend Properties, an affiliate of the Miami-based investment firm and the hotel’s owner, highlighted last week that funding in its entirety for each stage of building permitted under an anticipated special development order was dependent on the presale of units.
The company added that it would not consider starting such a significant venture without sufficient funding to complete the hotel renovation.
Shuttered in 2020, the Fairmont Southampton was initially expected to reopen after about 18 months, but the latest update announced that construction on the refurbishment is to begin “in earnest” early this year.
Westend Properties told The Royal Gazette on December 26: “While the full funding of each phase of the SDO is contingent on pre-selling a percentage of units, we are ready to start work on the hotel in January.
“We wouldn't even consider commencing a project of this magnitude unless we were adequately funded to complete the hotel renovation.”
In October 2021, the Gazette made a public access to information request to the Cabinet Office for copies of correspondence, since March that year, to and from the Premier in relation to Gencom, its subsidiaries, its founder, Karim Alibhai, and Chris Maybury, who was said earlier to be a representative of the company.
In January 2022, the public authority decided that the records were exempt from disclosure under exemptions provided in the Pati Act.
Major Marc Telemaque, the Secretary to the Cabinet, found that their release would or could have adverse effects on commercial interests; would or could prejudice the conduct or outcome of negotiations; and could be expected to have a serious adverse effect on Bermuda’s financial interests or the Government’s ability to manage the economy.
The Gazette sought an independent review by Gitanjali Gutierrez, the Information Commissioner, and her decision was published last week.
It showed that Gencom, as a concerned third party, was invited to make submissions as part of the process.
A footnote highlighted that any reference to Gencom in the decision was a reference both to that company and its subsidiaries, such as Westend Properties.
The Information Commissioner’s findings said: “Gencom explained that the relevant records related to negotiations in 2021 for the financing of the Fairmont Southampton hotel project and the conditions demanded by the Government for providing a loan guarantee and the amount of the guarantee.
“Gencom submitted that the information identified in the records was, by its nature, highly confidential and sensitive.
“Gencom acknowledged that the records dated back to April 2021, but emphasised that the financing for the hotel project had still not been fully secured as of the time of its submissions.
“Negotiations with lenders to secure debt financing remained fluid and ongoing. The information in the records remained highly confidential in 2023.”
The ICO said the submissions were made on November 10, 2023.
In April 2022, Mr Alibhai told the Gazette: “ … we have a fully capitalised project with all the financing in place when we start, to complete the project”.
David Burt, the Premier and Minister of Finance, said last September that the hotel renovation project was “fully funded" and parties involved in financial arrangements were ”progressing to closing“.
Walter Roban, the home affairs minister, announced in October his approval for an SDO that would pave the way for up to 250 additional tourism and residential units at the site.
Westend Properties was asked for clarification about whether “hotel project” as referenced in the Information Commissioner’s decision meant only the existing hotel building and beach club renovations, or included works that would be carried out under the SDO. There was no response by the time of publication.
MPs heard in May 2022 that the Government is to provide a loan guarantee for the refurbishment project of up to $75 million.
Legislators must be informed “as soon as practicable” after a guarantee is executed, in line with the Government Loans Act.
The Fairmont Southampton Hotel Act 2023, which was approved by the House of Assembly last March, provided that Westend Properties will be entitled to a full rebate from customs duty paid in relation to any building materials, furnishings, fixtures and equipment needed for the redevelopment.
This would be in place for 15 years after the hotel’s opening date, minus any period for which customs duty relief is granted on the items up until the opening date.
Rebates outlined in the legislation also cover hotel occupancy tax, land tax and the employer’s share of payroll tax.
Vance Campbell, then the Minister of Tourism, said in November that when the SDO is finalised, it will be published in The Official Gazette, but no notice could be seen when the site was checked yesterday.
The Royal Gazette, in October 2021, sought copies of correspondence to and from the Premier as it related to Gencom, its subsidiaries, its founder and a named representative, since March 1 that year.
Major Marc Telemaque, the Cabinet Secretary, determined in January 2022 that the records requested fell within exemptions from disclosure afforded by Section 25 (1)(c) and (d) as well as Section 31 (1) of the Public Access to Information Act.
The clauses related to adverse effect on commercial interests; prejudice of contractual or other negotiations; and the expectation of "serious adverse effect on the financial interests of Bermuda or on the ability of the Government to manage the national economy”.
An independent review was requested by the Gazette and the Information Commissioner’s decision was published last week.
As well as considering the Cabinet Office’s reliance on the exemptions cited to withhold three identified records, the scope of the review was revised to include the reasonableness of the public authority’s search.
In light of submissions by Gencom, the decision said, the review also looked at the company’s assertion of sections in the Act that related to information received in confidence and breach of confidence, to object to the disclosure of records.
The Information Commissioner, Gitanjali Gutierrez, noted in her decision the Cabinet Office explained that negotiations between Gencom and the Government “formed one-third of a complex international transaction supported by senior and mezzanine lenders whose combined capital support of the redevelopment came to over $250 million”.
It added that the public authority submitted “it was unconscionable and untenable to contemplate such negotiations taking place in the public domain when the majority of capital risk was underwritten by international funding and not a public/taxpayer commitment”.
The Information Commissioner was “not satisfied that the Cabinet Office conducted a reasonable search” as required by the Act.
Her decision added: “The Information Commissioner is satisfied that section 25(1)(d) [related to contractual negotiations] was applicable to exempt parts of records 1 and 3 from disclosure and that the personal information about certain individuals in records 1 and 3 was exempt from disclosure under section 23(1).”
It said she was not satisfied that the exemptions cited — including those that related to information received in confidence and breach of confidence — “were applicable to exempt record 2 or the remaining parts of records 1 and 3 from disclosure”.
Part of the decision’s summary said: “The Information Commissioner has varied the internal review decision by the Cabinet Office to deny public access to certain parts of records 1 and 3 under the exemptions in sections 25(1)(d) and 23(1).
“The Information Commissioner has also reversed the internal review decision, in part, and ordered the Cabinet Office to disclose record 2 and parts of records 1 and 3.
“Finally, the Information Commissioner has ordered the Cabinet Office to conduct a reasonable search in accordance with the confidential search instructions, to process any newly located records, and to issue an initial decision to the applicant, as directed by this decision and the accompanying order.”
The Cabinet Office was required to disclose the records as instructed and carry out its reasonable search by February 7.
In another decision published last week, the Information Commissioner annulled an internal review decision by the Cabinet Office that said no additional records existed in response to a Pati request from the Gazette about Gencom-related correspondence spanning March 1, 2020 to March 1, 2021.
Ms Gutierrez found that a reasonable search was not conducted before the public authority concluded that further records did not exist.
Her order was for a reasonable search to be carried out and a decision to be issued by February 7.
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