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Government Development Bank Initiates Judicial Action Against Cayo Largo
It is rumored the GDB has embargoed the property
By EVELYN GUADALUPE-FAJARDO
May 8, 2003
The Tourism Development Fund (TDF), a subsidiary of the Government Development Bank (GDB), has initiated judicial action against Cayo Largo Hotel Associates, the owners of the Cayo Largo InterContinental Hotel in Fajardo, to force the company to start construction of a 100-key condo-hotel and to complete a $120 million, 314-room resort.
Sources told CARIBBEAN BUSINESS the GDB has embargoed the property but, at press time, GDB officials declined to confirm those reports. The TDF, a subsidiary of the GDB, provided a $75.3 million Afica bond guarantee for the resort in September 1999. The board of the GDB has approved $10.6 million to cover almost half of Cayo Largos cost overrun (estimated at $22 million).
Dan Shelley, president of both Puerto del Rey Inc. and Cayo Largo Hotel Associates, stated in a press release that the construction of the condo-hotel and the opening of the resort depend on, among other things, several government agencies providing infrastructure facilities and authorizations (such as road access). Cayo Largo Hotel Associates board members Jorge Fuentes of Fuentes Construction Co., Diego Suarez Jr. of V. Suarez, and Manuel H. Dubon had no comment on the legal action.
Construction of the InterContinental Cayo Largo Resort came to a screeching halt in February when Shelley allegedly temporarily stopped construction until the Land Authority finished expropriating eight acres bordering the resorts main entrance and providing direct access to highway PR-3.
Cayo Largo Hotel Associates indicated it would initiate construction once the government agencies fulfilled their obligations.
In related news, Cayo Largo Hotel Associates said its independent project manager, The John Hardy Group of Atlanta, has reviewed the $13.5 million in change orders proposed by the hotels contractor and recommended the approval of only 10%, or $1.4 million, of the orders.
The Cayo Largo Hotel Associates board will meet to consider the project managers recommendation and will probably increase the guaranteed-maximum price contract accordingly. Cayo Largo Hotel Associates also made provisions for funding the completion of the project based on all approved contracts and change orders, including the additional $1.4 million pending approval.
"With this review now complete, we hope that the contractor will recommence construction immediately," said Shelley. "Any remaining disputes regarding the proposed change orders should be resolved by arbitration or negotiation between Cayo Largo Hotel Associates, its partners, and the contractor without affecting the completion of the hotel."
Including the $1.4 million in change orders recommended by The John Hardy Group, Cayo Largo Hotel Associates will have approved change orders totaling $5.1 million, or 9% more than the guaranteed-maximum price construction contract.
Bird Construction CEO Miguel Sabater Jr., whose company is managing the construction of InterContinental Cayo Largo, told CARIBBEAN BUSINESS two weeks ago that the resorts $22 million cost overrun resulted from numerous approved changes and their corresponding costs after the project was paralyzed three times--twice because of financial considerations and once because of a lawsuit by a neighboring developer.
Sabater claims the project was within 1% of the original budget, while Cayo Largo Associates says its total claims (including justified and unjustified claims) represent an increase of 30% over the amount agreed upon in the construction contract.
This Caribbean Business article appears courtesy of Casiano Communications.