Sarkis in $40m Rosewood ‘buy out’ proposal

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Sarkis Izmirlian

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Sarkis Izmirlian made a $40m offer to buy-out the Rosewood hotel property from the rest of Baha Mar after the property was placed into receivership in late 2015.

But the mega resort’s Deloitte & Touche receivers rejected his proposal on the basis that they were trying to “dispose of the entirety” of the property even though its original developer suggested part of the deal involve himself and his former Chinese partners dropping multi-million dollar legal claims against each other.

Mr Izmirlian also proposed that he, and the China Export-Import Bank and China Construction America (CCA), “enter into a confidentiality agreement prohibiting future disclosures” by either party concerning their dealings prior to Baha Mar being placed into Chapter 11 bankruptcy protection in June 2015.

The developer’s multiple offers to reclaim the development he and his family invested $800m, and some 13 years, into are detailed in never-before seen Supreme Court documents that were finally made public this week.

An affidavit from Raymond Winder, Deloitte & Touche (Bahamas) then-managing partner, which was previously “sealed” from public access due to the need to “protect the integrity” of Baha Mar’s sales process, was disclosed in the New York State Supreme Court on Tuesday as part of CCA’s battle with Mr Izmirlian over his $2.5bn “fraud and breach of contract” claim against the state-owned contractor.

Mr Winder, now president of BISX-listed Commonwealth Bank, alleged that Mr Izmirlian’s Rosewood offer was submitted after the deadline for first-round bids in the formal Baha Mar sales process had passed.

Referring to the May 17, 2016, proposal that was submitted through the developer’s More Development Company, he said: “The proposal was a cash offer to purchase the physical assets and property previously referred to as the ‘Rosewood at Baha Mar’ on an ‘as is’ basis for the sum of $40m cash with a contemplated 30 -day closing.

“Specifically, the physical assets and property which More Development proposed to acquire would include the buildings and the underlying ground, including all residences, rooms, villas and lobby, spa, restaurants and other common areas inclusive of the entry drive, porte cochere, parking, pools, tennis complex and other areas..... and the Baha Mar Racquet Club.” 

All furniture, fixtures, equipment and operating supplies were to be included in Mr Izmirlian’s purchase, while all shared Baha Mar systems would still be accessible to the Rosewood.  

“The proposal stipulated that all construction to complete that property would be at the buyer’s sole expense, and that upon closing of the purchase the buyer would - and would cause its affiliates - to withdraw, release and permanently forbear from asserting all claims and actions” against its former Chinese partners,” Mr Winder alleged.

This was conditional on CCA and China Export-Import Bank ceasing all claims against Mr Izmirlian and his entities, he said, adding: “This proposal also set out that the buyer and the released parties would enter into a confidentiality agreement prohibiting future disclosures in relation to past dealings. This offer was said to be separate and independent from any offers or proposals made by any affiliate of the buyer.”

Mr Winder alleged that the receivers responded eight days’ later on May 24, 2016, advising Mr Izmirlian that he had missed the bidding deadline. “The joint receiver-managers also reiterated that we were conducting a sales process with a view to disposing of the entirety of the integrated development,” he added. “Therefore More Development’s proposal to acquire the ‘Rosewood at Baha Mar’ was not accepted.”

The Rosewood offer came after previous proposals by Mr Izmirlian were also rejected by the receivers appointed by China Export-Import Bank, the state-owned $2.5bn financier for the Baha Mar project.

Mr Winder’s affidavit revealed how former Baha Mar executives, Thomas Dunlap and Whitney Thier, met with representatives for the China Export-Import Bank and the receivers on Mr Izmirlian’s behalf to propose how the project could be re-opened.

“In the framework proposal it was assumed that approximately $700 million would be required to complete construction and open the project,” Mr Winder alleged. “It was proposed that China Export-Import Bank invest $450m to complete construction and Mr Izmirlian would invest $250m to fund opening and operational start-up costs.”

The bank’s existing loan and additional capital were to remain in place for 50 years, and the former Deloitte & Touche (Bahamas) managing partner added: “It was further proposed that Mr Izmirlian would assume full control of operations and, once operations stabilised, it was proposed that he would be paid an annual fee of $25m.....

“One of the numerous problems with this framework proposal was that there was no clear repayment plan. It was proposed that repayment would only take place if there was any surplus after accumulated commitments had been settled.

“The proposal provided for China Export-Import Bank to stay for up to 50 years, but if the Baha Mar resort was sold to a new investor, that new investor would have to agree to enter into a long-term lease with Mr Izmirlian for Mr Izmirlian to manage the Baha Mar resort.”

That offer, too, was rejected and Mr Izmirlian ultimately elected not to participate in the formal sales process.