By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A brewing legal battle has disrupted the $2.8bn revival of Grand Bahama’s former Ginn project and creation of up to 1,400 full-time Bahamian jobs, Tribune Business can reveal.

Documents obtained by this newspaper disclose that condominium owners at Old Bahama Bay are attempting through the Supreme Court to block repossession of the resort by Ginn’s financing partner, Lubert Adler, the US-based real estate financier.

The repossession is vital to Lubert Adler’s sale of Old Bahama Bay to Toronto-based Skyline Investments, the Canadian developer that is attempting to purchase the entire former Ginn sur mer development. The hotel is a vital component in Skyline’s plans, and it is unlikely to close what is thought to be a $40m deal unless it obtains free and clear title to that asset.

The condo owners’ legal action, filed last Thursday December 6 - the same day that Skyline’s acquisition was supposed to close - thus threatens to delay, and potentially even derail depending on how the Supreme Court rules, a major foreign direct investment (FDI) project that the Government was relying on heavily to turn around Grand Bahama’s moribund economy.

Tribune Business understands that a court hearing is likely early this week over the bid by the condo owners and their company, Island Ventures Resort & Club (IVRC), to obtain an injunction Order preventing Lubert Adler and Skyline from “interfering or attempting to interfere” with the Old Bahama Bay assets it operates/manages under a lease agreement.

IVRC’s summons, seen by this newspaper, also wants the Supreme Court to prevent Old Bahama Bay’s current and potential new owners from “evicting or attempting to evict” it from these leased assets, which include the 72-slip marina, gasoline station, retail and restaurants, reception area and other facilities essential to a properly-functioning resort.

The condo owners, headed by IVRC president, John MacDonald, are effectively asking the Supreme Court to maintain the Old Bahama Bay status quo until it can give a “final determination of the rights and obligations” of all parties in relation to the original lease deal they made with Lubert Adler on June 1, 2012.

Alternatively, they are seeking an Order that a new lease be “entered into” by IVRC and Skyline for Old Bahama Bay’s operation and management that gives the condo owners and their tenants “rights of access and use of various common areas” at Old Bahama Bay. Until that happens, the condo owners want the Supreme Court to rule that they continue to “manage and operate” the assets governed by the existing lease.

Mr McDonald, in a December 6 affidavit, said IVRC and its 73 condo owners fear they will lose access to Old Bahama Bay’s resort amenities and common areas once Lubert Adler terminates their lease agreement. IVRC had entered into the 2012 lease agreement to keep the hotel open and prevent its closure following Ginn’s 2011 default, and the property’s takeover by Lubert Adler.

Due to the uncertainty surrounding the Skyline deal, Mr MacDonald alleged that IVRC had been forced to place all its 2019 rental reservations - worth thousands of room nights and hundreds of marina slip rentals - “on hold” (see other article on Page 1B).

He argued that this loss of business would cause “irreparable harm” to both IVRC and the wider West End community, including an Old Bahama Bay staff that had increased nearly four-fold to over 100 since the condo owners took over almost six years ago.

Mr MacDonald also claimed it would be “unjust” for Lubert Adler to effectively hand over to Skyline a profitable business built entirely by IVRC, with the latter’s writ of summons demanding compensation for its $500,000 outlay on marina repairs and $1.6m spent on Hurricane Matthew repairs.

Sources close to Lubert Adler, though, dismissed IVRC’s claim as having little merit and pledged it would be “resisted” whenever it came before the Supreme Court. They added that the US financier was well within its rights to terminate the lease with the condo owners in accordance with the contractual terms, including sufficient notice.

Lubert Adler’s advisers also released to the media a letter from IVRC’s attorney, Sophia Rolle-Kapousouzoglu at Lennox Paton, in which she appears to confirm that the condo owners’ company will comply with the second termination notice.

While IVRC had disputed the validity of the first termination notice, issued on August 17, 2018, Ms Rolle-Kapousouzoglu told Michael Scott, Lubert-Adler’s attorney, that her client intended to comply with the second one.

“Please be advised that IVRC intend to fully comply with Section 28.01 by surrendering the property at the sooner termination of the term, but not prior,” she wrote. “In that regard we affirm our acknowledgement of the Section 2.01 Notice to Terminate dated September 7, 2018.”

Lubert Adler, in a statement, confirmed that Old Bahama Bay’s marina and “certain amenities at the resort will be temporarily out of operation” while it takes back control and prepares the property for the transition to new ownership under Skyline.

“[Lubert Adler] wishes IVRC success as they continue their condominium rental programme operations and embark on greater plans to enhance their own assets,” it added.

“They’re going in there with a team of agents and changing the locks, and taking possession and control,” one source said of Lubert Adler. “As long as they don’t breach the peace, what they’re doing is perfectly legitimate.

“It’s a rubbish claim [by IVRC]. They’re saying we never thought you could sell the property without our consent. They have no option to renew, no right of refusal and Lubert Adler doesn’t need their consent; get out. There was nothing in that lease. They’ve been given contractual notice and told to let Lubert Adler know when they’re out. How long does MacDonald want?

“The Skyline deal is still going to happen but it will be slightly delayed by what’s going on. Both sides [Lubert Adler and Skyline] are very anxious because they want McDonald out; the Government wants McDonald out.”

Kwasi Thompson, minister of state for Grand Bahama, told Tribune Business that the Minnis administration was “very keen” on new investment happening at West End but declined to comment further because of the just-initiated court proceedings.

“We’ve always said we wanted investment to happen in West End,” he said. “We’re still very keen on investment proceeding in West End. That’s as far as I can say at the moment. We are very keen on the development proceeding.

“We are very desirous of seeing development in West End as in all parts of Grand Bahama. This is important for the people of West End and Grand Bahama. I have been informed of a court action and will give no further comment at this time.”

Tensions between IVRC and Lubert Adler/Skyline have been rising for several months, and having seemingly peaked in the last few weeks as the deadline for the Canadian developer to close the purchase of Old Bahama Bay and the other former Ginn assets grew ever nearer.

Skyline’s project relies on two transactions. Besides the deal with Lubert Adler for a 280-acre site plus Old Bahama Bay and its assets, it is also purchasing 1,476 acres from a lending syndicate headed by Credit Suisse, which formed the Ginn sur mer’s real estate component.

If the development goes ahead, it is slated to include a 200-acre “Smart City” intended to help attract technology companies to Grand Bahama in furtherance of the Government’s “technology hub” ambitions. Some 1,025 construction jobs will be generated during a phased 10-year build-out.

Mr MacDonald has himself also announced plans to “complement” the Skyline development with his own 460-unit Grande Harbour at Old Bahama Bay, billed as creating 1,200 construction and full-time jobs on adjacent land.

He could not be reached for comment, despite telling Tribune Business he would call. However, one source, speaking on condition of anonymity, questioned whether any applications for the necessary investment approvals had been made to the Government for then Grande Harbour development.

“No applications for approvals to the Bahamas Investment Authority (BIA) have been made for anything,” they told Tribune Business. “They’ve asked him twice to come into the BIA.”

Another contact, familiar with the latest developments at Old Bahama Bay, added: “Lubert Adler has reclaimed their property after the lease agreement was terminated. MacDonald had agreed the lease had ended, and to sell the property on they had to take them out of the lease.

“IVRC can continue to manage the condos and their facilities. The marina will be shut temporarily. They [Lubert Adler] just have to get their assets, get them straightened out and get them into a position for sale.

“This is not a bad thing. It will facilitate the sale to the new developer. They will take over this stuff. They’ve got to service their assets to sell them and couldn’t do that with the lease in place. This is good. This is what needs to happen. The bigger project will come. It needs to go.”