“The failure of Government to do what it is committed to and legally obligated to do, as well as the public acknowledgments by Government that they are fully aware they have been in breach since May 2012, negatively impacts Cayman’s international reputation as a credible place to do business, especially for other investors who may be considering public private partnerships,” Jackie Doak, Chief Operating Officer, Dart Realty.

 

Full (unedited) DRCL Statement, May 16 2013

The NRA Agreement, including the First and Second Amendments, is a binding and enforceable agreement. That Government was negotiating a third amendment with Dart does not change the fact that a binding contract is in place.

Government continues to acknowledge that since May 25, 2012 it has been in breach of its contractual obligation to close the full stretch of the road. Dart Realty has complied with all its obligations under the NRA Agreement thus far and continues to do so despite Government’s breach.

“The failure of Government to do what it is committed to and legally obligated to do, as well as the public acknowledgments by Government that they are fully aware they have been in breach since May 2012, negatively impacts Cayman’s international reputation as a credible place to do business, especially for other investors who may be considering public private partnerships,” said Jackie Doak, Chief Operating Officer, Dart Realty.

Section 119 of the NRA Agreement required Dart Realty to commence work on the new hotel by December 15, 2012. Dart Realty complied, starting well in advance of the required start date, by issuing a contract to Island Builders for interior demolition work. Since then, a total of US $3 million has been spent on construction work, with a 70% Caymanian workforce completing 14,450 man hours on site to date.

More than a year after the execution of the NRA Agreement, with construction underway and design plans well progressed; Government requested that Dart Realty agree to limit the incentives for the redevelopment of the hotel.

In February 2013, Government proposed that the development incentives as well as the accommodation tax rebate be limited to US$16 Million and included in Section I of the Investment and Development Incentive Schedule, which would be subject to the Net Present Value cap.       After months of negotiations, on April 11 2013, the parties reached agreement. This agreement is reflected in the Third Amendment which Government provided to PWC and which is included in the draft version of the Independent Review released to the public.

Government then requested further changes relating only to the hotel incentives in the Investment and Development Incentives Schedule. Dart Realty did not agree to the proposed changes and communicated the same to Government. On April 23 2013 Government in Cabinet made a unilateral decision to approve their own version of the Investment and Development Incentives Schedule.

Dart Realty confirms that all the new items in the Third Amendment, including widening of the ETH and transfer to Government of the new public beach lands in Smith Cove and Barkers had been agreed. It was only the last minute change to the new Investment and Development Incentive Schedule already agreed by the parties on April 11 2013 that created the impasse. Not being able to reach agreement, Dart Realty withdrew from the negotiations, giving finality to the NRA Agreement and allowing the Independent Review to be finalized on the executed documents.    The Independent Review was issued two days later.

It is also important to highlight that both versions of the PwC report found that the hotel redevelopment project alone is estimated to provide benefits to the country of $755 million over 20 years, as well as some 1,651 man years of construction activity. Even with the 50% hotel tax abatement provided to Dart Realty in the finalized NRA Agreement, Government will still receive an estimated US$18 million in hotel tax revenue, revenue it would not receive if the hotel was not redeveloped.

Despite Government’s breach of the NRA Agreement, Dart continues to fulfill its obligations, including work on the public beach park, the design of the new hotel, as well as work on Phase Two of the ETH Extension to Batabano.

Ends