Jamaica
News - Real Estate - Sales (June 30, 2004)
Hendricksons
in formal bid for Jamaica Grande
The Karl Hendrickson family will today
formally submit a bid for Jamaica's largest hotel - the Jamaica Grande in Ocho
Rios, meeting the deadline set by Finsac, which has the largest single block of
shares in the company.
Finsac owns 49.44 per cent of the hotel, but
the other two partners - Marriott and Fred Kassner's Go-Go Tours - have
signalled their willingness to offload their interest in it.
Robert Koger of Molinaro Koger a Virginia, USA
real estate broker, has been trying to offload the property on behalf of Finsac.
He confirmed yesterday that today was the deadline for submission of bids.
The 720-room hotel with extensive convention
facilities is the only significant property remaining in Finsac's portfolio. An
acquisition by the Hendricksons would give them over 2,000 hotel rooms, further
deepening their interest in an industry they entered in earnest only five years
ago.
The Hendricksons' interest in Jamaica Grande was
first reported last year. But the hotel has proved to be a hard sell because of
its ownership structure, and complex management arrangement.
For example, Finsac's less than 51 per cent
shareholding makes that block of shares unattractive to investors because of the
lack of controlling interest. Moreover, the other two shareholders have
complicated management contracts which would require their being compensated for
future earnings up until the contract expires in 2020, in the event there was a
majority take over.
Sources say however, that the two companies are
now willing to join Finsac in selling their shares in the hotel, a positive
development both for Finsac and the Hendricksons.
Finsac, which acquired the shares when it took
over the Century National Group, has never earned revenue from the investment -
unlike Marriott, the holder of the hotel's management contract, and Go-Go Tours
which has been a major supplier of guests to the property over the years.
The Marriott chain controls 22.57 per cent of the
hotel, while Fred Kassner's estate is a 28.09 per cent partner.
An industry source said that the partners were
turned off by the prospect of having to spend millions of dollars in improving
the physical plant, several sections of which have deteriorated over the years.
"It is likely that they (the major
shareholders) would have recognised that the run-down state of the property
would severely compromise future business and, ultimately, their earnings,"
he said.
At one-time a cash cow for the Marriott hotel,
Jamaica Grande has been in what one industry veteran described as "a
downward spiral for some time".
For example, it is understood that the hotel's
cooling tower and main boiler are in need of replacement.
"The run-down state of the property
doesn't fit into the high-end market to which the Renaissance is pitched,"
said the source. Renaissance - along with the Ritz Carlton - is one of the
Marriott chain's top three high-end brands.
The Hendricksons are known to purchase properties
that have great locations, have been physically neglected, then upgrade them,
rebrand them and make a success of them.
Examples are the former Marcus Garvey building
in New Kingston, which is now the Courtleigh Hotel and Suites and Seawind in
Montego Bay which is now Sunset Beach & Spa. Both now operate at over 85 per
cent occupancy.
|
