Home' Trinidad and Tobago Guardian : February 1st 2015 Contents Two Friday's ago, a no-confidence
motion in the name of Chaguanas
West Member of Parliament, Jack
Warner, came to a premature end
as the substance of the motion
was not debated.
The motion of censure, according to an
entry on Mr Warner's official Facebook page,
"sought to challenge the professional com-
petence of Senator Larry Howai to be the Min-
ister of Finance and the Economy at this dif-
Mr Warner's motion must have been based
on the assumption that Mr Howai is not fit
to hold to hold public office because he presided
over a financial institution that lent money
to some high-profile businessmen, such as
Arthur Lok Jack, and that First Citizens was
not paid back.
In my view, Mr Warner's motion was ill
conceived as banks are in the business of lend-
ing money and it is a fact of banking that
some loans go sour. There are hundreds of
thousands of banks in the world and Mr Warn-
er would be hard pressed to find one bank in
the whole world that did not have a "bad"
loan in the period 2006 to 2009. Loans that
go sour have been part of the history of banking
since the first Babylonian merchant made a
loan to a farmer around 2000 BC.
The Carlton Savannah project was one of
many construction projects in this country
that suffered from cost overruns and delays
in the 2007 and 2008 period.
That's because the cost of construction
escalated sharply in that period as a result of
sharply higher labour and material costs that
impacted almost every construction project
in the world during the years 2007 and 2008.
That was the period during which the price
of all steel products more than doubled on
the global market.
While there were significant cost overruns
globally for construction projects in 2007 and
2008, locally the cost of construction was
exacerbated by the fact that the then admin-
istration contributed to heating up the con-
struction sector by opting to build a number
of high-profile projects---such as the Port-of-
Spain Waterfront, the Richmond St Govern-
ment Complex, NAPA and other state-spon-
sored projects---at the same time.
Most local construction projects started
during the years 2006, 2007 and 2008 suffered
from the impact of higher labour and material
Carlton Savannah was not the exception.
Construction on the project, which was
originally designed to be a condo/hotel, began
in 2007 with a loan of $150 million from First
Citizens and with the shareholders and poten-
tial condominium purchasers putting up $40
Eventually, because of the cost overruns
caused by the sharp and unpredicted escalation
of construction costs in 2008, the bank lent
the project $286 million.
Discreet enquiring have revealed that First
Citizens is close to closing the sale of the Carl-
ton Savannah property to some British investors
for about $150 million.
I was told last week that the project's share-
holders, who put up a total of $40 million,
were entirely wiped out but that the prospective
condominium owners got back much of what
they had invested mainly because there was
a threat of a lawsuit that would have prevented
the property from opening in time for the
Commonwealth Heads of Government con-
ference that was held here in late 2009.
Also as a result the cost escalation problem,
Guardian Holdings, which coincidentally is
chaired by Mr Lok Jack, was forced to take a
$457 million writedown on a Martinique prop-
erty development named Pointe Simon in
2013. The 2013 writedown followed a $150
million non-cash provision GHL took in 2012.
GHL declared net profits of $46 million in
2013, a sharp decline from the $353 million
the group reported in 2012.
The adjustments on the Pointe Simon proj-
ect---which comprises a 22-storey office tower,
a seven-storey condominium unit and a eight-
storey, mixed-used boutique hotel---were due
to the "longer expected absorption period and
lower than anticipated future revenue than
we originally forecasted," according to GHL's
2012 annual report.
Canadian-owned RBC Caribbean, which
was GHL's partner in the project when it
started construction in 2007, exited Pointe
Simon in 2010.
But RBC is one of two Canadian banks, the
other being CIBC First Caribbean that lent a
huge sum of money to the Shorelands Ren-
aissance project. It's estimated that the two
Canadian banks lent the developers of the
project the eye-watering sum of $850 million
(US$132 million). The Renaissance project
ended costing a total of $1.1 billion.
The project, which started in March 2006
was due to be completed in April 2008. The
project experienced problems with the original
contractors, which resulted in expensive reme-
dial work having to be commissioned. And
given the problems with original contractor
and the escalation in construction costs, the
developers were forced to seek new financing
in April 2010.
This was because the project had run out
of money and was already two years late. In
April 2010, the developers needed an addi-
tional $425 million to complete the two-
tower complex which comprises 74 resi-
dences: Eight penthouses, 28 four-bedroom
units, 26 three-bedroom units and 12 two-
The developers were the Rahael family
holding company, with 50 per cent. A 25 per
cent stake each was owned by property devel-
opers Jeffrey Guillen and Richard Woodruff.
The complex, which completed construction
in mid 2012, is built on 90,000 square feet
of land, which was acquired for about $30
million in 2004. That's $333 a square foot or
nearly $15 million an acre.
Located on the water's edge at Shorelands,
just opposite the Hi-Lo in Glencoe, the Shore-
lands Renaissance comes with an infinity pool,
a fully fitted out gym with accompanying
saunas, one for men and the other for women,
a large common room with bar and flat-screen
television as well as a 24-hour concierge service
and a receptionist.
Each of four-bedroom units has exclusive
elevator access, is en-suite with its own walk-
in closet and shower and toilet facilities. The
four-bedroom units, all of which have ten-
foot high ceilings, also come with an extra
room for a helper, which is also en-suite.
Even today, the price for the residences is
about $3,000 per square foot. The four-bed-
room units are 5,200 square feet, which means
that this residence will put a $15.6 million
dent in the purchaser's bank account. The
three-bedroom units are 4,200 square feet
and the two bedroom units are 2,800 square
It is interesting to note that Toronto-based
bankers from RBC and CIBC visited the Min-
istry of Finance two Friday's ago in an attempt
to negotiate a stamp duty concession from
The stamp duty issue arose because the
potential owners of properties at the Renais-
sance were asked to subscribe as shareholders
in Hyacinth Akow Ltd, the development com-
It is believed that the property development
was structured so that the shareholding owners
would not have to pay millions of dollars in
stamp duty to convey their properties.
Board of Inland Revenue sources say the
request by the Canadian banks for some con-
sideration on the stamp duty issue is under
active review but that such consideration would
involve the BIR setting a precedent that might
be difficult to justify.
In 2012, the Canadian banks issued a warn-
ing e-mail to the shareholders threatening to
have the company that owns the property
placed into receivership. The threat of losing
the deposits made on the million-dollar res-
idences infuriated the shareholders, some of
whom have been waiting to take delivery of
their homes for more than six years now.
The Sunday BG understands that 34 of the
76 apartments remain as "inventory."
Asked on Friday about the stamp duty issue,
Rahael said: "The shareholders of the devel-
opment subscribed to shares in the develop-
"Those who have subscribed for shares are
awaiting the distribution of assets pursuant
to the voluntary liquidation process. There
have been some delays in the distribution of
the assets as the liquidator is required to com-
plete certain statutory and legal duties.
"The stamp duty issue has nothing to do
with the voluntary liquidation process, but
there is an expectation that the subscribers
would pay a stamp duty of $25, which is the
prescribed payment for situations of liquida-
tion, AFTER the process of voluntary liqui-
dation is completed and in keeping with the
"I don't recall when the process of voluntary
liquidation began but it was sometime after
we spoke in July 2012.
Last week, Nicole Duke-Westfield, RBC
Financial's senior manager of corporate com-
munications was asked to confirm or deny
that RBC sent officials from Toronto to Port-
of-Spain for a January 23 meeting to discuss
with the Government the possibility of a tax
concession on the $1.1 billion Renaissance at
Shorelands project, which was financed by
loans totaling $850 million from CIBC First-
Caribbean and RBC Royal Bank.Ms Duke-
Westfield responded: "No. The banks (FCIB
& RBC) have not requested any tax concessions
"The bank(s) meets regularly with the
Trinidad and Tobago government and gov-
ernment officials. It is our policy not to confirm
nor deny such meetings, nor to comment on
the substance of such meetings due to client
FEBRUARY 1 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
COMMENTARY | SBG3
Banks left holding large properties
when private developers over budget
PHOTO: ABRAHAM DIAZ
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