The ongoing drama of Ginn's default is edging closer to a resolution. The Bahamas legislature this week passed a bill that allows Resort Holdings (aka Credit Suisse Lending Group / G-LA Resorts) to pay 2% stamp duty on the transfer of 1,500 acres (instead of the normal 12%), and assigns the lender "developer status" under the original Heads of Agreement. That agreement, which Ginn negotiated in 2005-2008, contains economic incentives for the development.
With the law passed, Credit Suisse is ready to execute transfer agreements in which Resort Holdings - a company owned by the lenders - would "become the absolute beneficial owner of the mortgaged property."
Resort Holdings proposed to the government that within the first six months following the transfer of the land, they will focus on "master planning; re-engaging the marketplace; commencing a builders’ program; construction of model homes; and preparing for sales launch."
It is still unclear if Resort Holdings and Lubert Adler are finally joining forces to develop the project together.
From the Bahamas Prime Minister
Background to the Ginn Act
My Government has tabled a Bill to amend the Modification of Provisions (Ginn LA-West End Grand Bahama) Act.
This honourable House may recall that in 2005, the Government of The Bahamas concluded a Heads of Agreement with Ginn-LA West End, Limited, the original Developer of the Ginn Sur Mer Project at West End, Grand Bahama.
The 2005 Heads of Agreement purported to grant the Developer considerable concessions which were not permissible in law.
My Government, in 2008, sought to honour the Agreement made between the Government and the Developer, and did so by enacting appropriate legislation to give effect to the concessions provided for in the Heads of Agreement. Accordingly, My Government enacted the Modification of Provisions (Ginn LA-West End Grand Bahama) Act 2008 (“the Ginn Act”) .
Many of the concessions in the Heads of Agreement related to the stamp duty rates which would be applicable in certain circumstances. Clause 2.1.8(a)(i) of the Agreement provided that the applicable rate of stamp duty for sales of $250,000 or more shall be 2% for any unimproved lot sold by the Developer during the period commencing on the date the Developer shall sell the first unimproved lot in the Project and ending on the date which is five years after the date on which the Developer shall sell the first unimproved lot in the Project.
In 2008, My Government concluded a Second Amendment to the Heads of Agreement. Clause 2 confirmed and ratified that the date of the first sale of an unimproved lot was the 12th day of October 2006. Accordingly, the concession provided under this provision will expire, five years later, on or about the 12th October 2011.
Background to the Mortgage
This Honourable House is advised that the Ginn Sur Mer project is owned by the Developer, as well as another company called Ginn-LA OBB, Limited, which was a subsidiary developer.
The Developer owns approximately 1,500 acres of the Project. The Developer mortgaged its land as security for a loan of $276,750,000 in favour of Ginn-LA Conduit Lender, Inc., which subsequently (in 2006) transferred its rights to Credit Suisse AG, Cayman Islands Branch as Administrative Agent and Collateral Agent for a syndicate of Lenders (“the Lenders”).
In 2008, the Developer defaulted on the loan and the Lenders commenced steps to realise their security. As at 2010, the parties contemplated amicable measures to convey the Borrower’s equity of redemption to the Lenders using the concessionary rate provided in the 2005 Heads of Agreement and the Ginn Act 2008.
My Government was advised that once these measures had proven unsuccessful, on 12th May 2011, the Lenders commenced foreclosure proceedings in the Supreme Court of The Bahamas. On 1st September 2011, the Lenders filed to discontinue the foreclosure proceedings, as the parties again determined that they would pursue a conveyance of the equity of redemption in the mortgaged property.
Conveyances to this effect were concluded and placed in escrow, pursuant to an Escrow Agreement executed on 31st August 2011, between the relevant parties. It is intend that a company owned by the Lenders, namely G-LA Resorts (Bahamas), Limited, would become the absolute beneficial owner of the mortgaged property.
Requests of the Government – Amendments to the Ginn Act
In furtherance of continuing the Ginn Project in respect of the mortgaged land, the Lenders have requested that Government:
- Approve an assignment to the Lenders of the Heads of Agreement made the 9th day of December 2005 between the Government and Ginn-LA West End, Limited, as amended in 2006 and 2008;
- Amend the Ginn Act 2008 to include the proposed assignment of the Heads of Agreement and to enable the Lenders to benefit from the Ginn Act as a Developer.
- Amend the Ginn Act 2008, and Heads of Agreement, to enable the concessionary rate of 2% stamp duty to be applicable beyond the 12th October 2011, but solely in respect of the proposed conveyance of the equity of redemption from the Borrowers to the Lenders.
- Allow no stamp duty to be payable on conveyances or transfers of property or equity interest in a property from a Developer to an entity wholly owned by members of the resort community (for example, a homeowners association). This is provided the property is for the benefit of the community. It is contemplated that this would accommodate the transfer of roadways, canals and amenities, which would otherwise have no intrinsic value.
Accordingly, My Government agreed and did so table the Modification of Provisions (Ginn LA-West End Grand Bahama) (Amendment) Bill, 2011.
In making such a decision, My Government took into consideration:
- The potential benefit the continuation of this development would have on the economy of Grand Bahama
- The capital invested in the Ginn Project to date
- The Lenders’ development intentions once they become the absolute owners of the mortgaged properties.
My Government has been advised that approximately $505 million have been expended by the Developers as at 30th June 2011 on the development of the Ginn Project. Besides land acquisitions and various legal and marketing fees associated with the Project, the amount expended includes capital works amounting to approximately $200 million including in respect of
- Roads and canals infrastructure
- Marina infrastructure
- Beach club and gatehouse facilities
- The utility infrastructure required for the Project
- And a championship 18-hole golf course
The Lenders have advised Government that it intends to continue the development of the property once they have full ownership of the same.
My Government has required that they do so in conformance with the plans and designs previously approved in the Heads of Agreement, as it relates to the mortgaged property.
The Government is advised that the Lenders have engaged in extensive preparations to continue the development of the residential component of the resort, including market research and planning.
They have retained Replay Resorts, a Canadian-based company which specialises in large-scale master planned resort developments, to move forward with the development.
The Lenders’ Project Timetable submitted to Government provides that during the first six months following the Lenders becoming the absolute owners of the mortgaged lands, they propose to focus on: master planning; re-engaging the marketplace; commencing a builders’ program; construction of model homes; and preparing for sales launch.
I am advised that whereas the Lenders were prepared to execute the conveyances in escrow, they are reluctant to close the transaction before knowing that they would be approved to obtain the benefits and concessions provided for by the Ginn Act 2008 to enable them to carry on the development as originally intended.
Accordingly, My Government has table the Bill to amend the Ginn Act before this Honourable House.
Oct 10th: Statement from the goverment