By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A government complex now subject to a $25 million capital raising was approved just 24 hours before last year’s general election, its developer yesterday branding the timing “unfortunate”.

The May 9, 2017, deal with PPP Investments & Construction also triggered a $4.4 million “advance interest payment” from the Government to the company - a sum equivalent to 20 per cent of “initial construction funding” - one day before the former Christie administration was resoundingly voted out of office.

The agreement, for the construction of a new administrative complex in Eight Mile Rock, was among the public-private partnerships (PPPs) heavily criticised by the current government. However, Alecia Bowe, attorney and a director of PPP Investments & Construction, told Tribune Business yesterday “there was no reason not to sign” the agreement.

She suggested that the furore over the agreement’s timing could have been avoided if the Christie government had moved quicker to approve the venture, explaining that she and PPP Investments & Construction had been negotiating and finalising the documents from November 2016.

Mrs Bowe, an attorney with Karam & Missick & Company, said she was able to prove the Minnis administration that the project was not a ‘back of the envelope’, last-minute deal by providing them with “all the correspondence” exchanged between herself and the Attorney General’s Office over a six-and-a-half month period.

She suggested that the Eight Mile Rock complex was the only PPP, among six to seven such arrangements inherited from its predecessor, which the Government has allowed to proceed after recognising that the contracts built in “protections for all parties involved”.

“It was just unfortunate,” Mrs Bowe told Tribune Business of the May 9 sign-off. “There was no reason not to sign it. The draft agreement was submitted to the Attorney General’s Office in November/December 2016. They had ample time to review the documents. It was unnecessary. “When the new government came in, it was among their first concerns. They reviewed it, and I was able to provide them with all the correspondence between our office and the Attorney General’s Office, which dated from November 2016 to May 2017.

“There was evidence that we were working back and forth constantly. Once the incoming government had the opportunity to review the contract, they saw it was very fair, protecting all parties involved. I was working on this contract, and agreeing each provision with the Government, six months before the election.”

Having seemingly received the Government’s approval to proceed, PPP Investments & Construction is now seeking investor capital to finance the complex’s construction completion, with a $25 million bond issue set to launch on Monday via a private placement.

The offering document, seen by Tribune Business, states: “The contract was reviewed by the current government and approved for completion given the professionals involved, the legal soundness of the contract protecting all entities and the value the compound will bring to servicing the citizens of Eight Mile Rock, Grand Bahama.”

But Carl Bethel QC, the Attorney General, yesterday admitted he was “uncertain” about the project’s status and would have to “double check” on whether it has been approved to proceed.

“I’m uncertain on that one,” he replied, when contacted by Tribune Business. “There may have been a conclusion on that issue. I’d have to double check. I’m not able to confirm that position right now.”

No confirmation was received before press time last night, while Desmond Bannister, minister of works, referred Tribune Business back to Mr Bethel as the principal minister dealing with the PPPs inherited from the former administration.

Both ministers have been critical of these agreements, including the Eight Mile Rock administrative complex, during their contributions in Parliament. Mr Bannister previously criticised that deal’s structure, saying it was “inconceivable” that the Christie administration agreed to the $4.4 million ‘advance interest payment’ - a bill the new government was forced to pick up.

He added that he stopped the project because, among other problems, the concrete “was not sufficient strength for the structure”.

And Mr Bethel, referring to the Eight Mile Rick project and Nassau’s General Post Office, said: “Officials of my Ministry, although they were briefed and working on the proposed contracts, had not ‘signed off’, or given the OK, to the signing of these two contracts, and were never informed that officials in another Ministry had gone ahead and signed them, one on May 9, 2017, a day before the general elections.

“All of these MOUs or contracts,” he added, “have now been put on hold pending a thorough review to determine if they, or any one of them, are truly in the best interests of the people in respect of their pricing or other terms and conditions, and whether there was anything untoward in respect of any of them.”

Mrs Bowe, though, said the Eight Mile Rock administrative complex was only “put on hold for a very short time”.

“Even though the Government was reviewing the contract, work never stopped,” she said, adding that PPP Investments & Construction has now put “about $9 million” worth of work into the ground.

“We were not without scrutiny,” Mrs Bowe added, “but once they [the Government] reviewed the contract and were in agreement with the provisions, they proceeded and continued on. We were the only agreement that survived out of the PPPs that the Government had on the table.”

The PPP Investments & Construction offering document, and accompanying accounts, confirm both the May 9, 2017, contract signing and $4.4 million payment from the Government.

“On May 9, 2017, the Government and the company signed an agreement in accordance with the principles of the public-private partnership initiative, as outlined in the MOU dated November 30, 2016,” the documents revealed.

“Upon signing of the agreement, the Government paid the company a sum of $4.4 million, representing an advance interest payment on the estimated $22.81 million cost of construction.”

The offering documents also reveal that PPP Investments & Construction was only incorporated on November 15, 2016, just one day before the initial Memorandum of Understanding (MoU) for the Eight Mile Rock complex was agreed.

It appears to have been created as a vehicle to develop and construct the project, and is 100 per cent-owned by New Providence-based Top Notch Builders, which is located on Adelaide Road.

The terms in the PPP MoU call for PPP Investments & Construction to finance, manage and design the Eight Mile Rock complex from start to finish, and purchase the 2.83 tract of land upon which the buildings sit.

In return, the Government committed to provide the $4.4 million ‘advance’ as “20 per cent of the initial funding to commence construction”. It will lease the administrative complex from PPP Investments & Construction upon completion for a 10-year period, with the buildings handed over to the Government at the end of that period for a nominal $100 fee.

PPPs are typically designed to reduce the financial stress on cash-strapped governments by contracting the private sector to provide the funding, development and expertise to construct public buildings or run services.

The Government’s cash flow pressures are eased by requiring the private sector to finance the up-front capital costs, with the latter earning a return on investment by leasing the buildings they construct to the public sector or receiving a fee for services provided.

Some observers, therefore, are likely to query the $4.4 million ‘advance’ payment by the Government for the Eight Mile Rock complex, although PPP Investments & Construction’s financial projections say this will be “set off against the interest received” once the lease starts.

Mrs Bowe, meanwhile, said the PPP contract fully protects the Government’s interest. She explained that it calls for bi-weekly meetings with Ministry of Works officials on the project’s progress, with detailed records kept by the contractor. And an independent project manager, Chris Symonette, had been engaged to represent the Government’s interest.

She added that the project required the approval of five contracts and hundreds of pages of documents before it could proceed, including a general construction contract; contract to govern the relationship between the Government and project architect; building maintenance contract; lease agreement; and conveyance.

Mrs Bowe said the last contract, the building maintenance agreement, was only approved by the Government on May 7-8 - just before the general election. “There was almost a year of work before the contract was done,” she added, pointing out that PPP Investments & Construction bought the land - a site identified by the Government - in mid-2016

The PPP Investments & Construction bond offering is a private placement, so members of the public should not seek to become involved.