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Developers Continue To Move Forward With Hotel Projects
Sale of Crowne Plaza to close in two week
BY EVELYN GUADALUPE-FAJARDO
July 18, 2002
Despite a tough market for hotel financing, local developers with projects in the pipeline are moving forward with plans to refurbish existing hotels or to build new ones.
The Government Development Bank (GDB) has recently approved a Tourism Development Fund (TDF) guarantee on a subordinated loan for 20% of the total cost of the $156 million Fairmont Resort and Spa at Coco Beach. The GDB also approved a deficiency guarantee on the former Holiday Inn Crowne Plaza Hotel in Isla Verde, which has a Scotiabank loan covering 60% of the total cost of the project.
The deal between Citibank, the GDB, Scotiabank, and investor Hugh Andrews to buy the Crowne Plaza, which will now be converted into a Marriott Courtyard, should be finalized within two weeks.
"There are hotels in the pipeline; however, the exercise we are now concentrating on is closing these deals and putting into process the approved projects," said Roberto Cordova, senior vice president of commercial and corporate banking for Scotiabank in Hato Rey.
Cost overruns on the Inter-Continental Cayo Largo Resort in Fajardo and Ponce Hilton have also been covered by TDF guarantees. The developers of Cayo Largo already reported $16 million in cost overruns on an original $75 million loan, while the Ponce Hilton also has $16 million in cost overruns on a $39 million loan.
The Carib-Inn Hotel in Isla Verde, which Flagship Services Corp. will transform into a Holiday Inn, is in the process of closing its finance structure with the GDB. Flagship Services, headed by hotelier Rick Newman, requested an $8 million subordinated loan and a $3.2 million TDF guarantee to cover cost overruns and debt service.
"We [the GDB] have concentrated our efforts in completing the financial process of those hotel projects that have already been approved and are in the pipeline," said Jose Pagan, vice president of the GDB. "There is a new list of hotel projects that have indicated they also need government assistance."
Banks and lenders have gotten picky since 9/11, when hotel occupancy plummeted and the tourism industry in general fell on tough times, causing plenty of projects to be canceled or stalled.
In Puerto Rico, average occupancy for fiscal year (FY) 2001 was down to 67% from 70.1% in FY 2000. Occupancy for June 2002, the last month for which data is available, was 75.6% in FY 2002 compared with 72.4% in FY 2001.
"Despite a weak economy and the events of 9/11, Puerto Rico has been able to survive these ordeals. The destination has proven itself with its occupancy rates," said Cordova.
This Caribbean Business article appears courtesy of Casiano Communications.