A Developer’s Guide PART TWO

IN Part 1 of this “Guide” we examined the decline in inflows of Foreign Direct Investment to the region, and noted that this decline was being used as the rationale for the Citizenship by Investment Programme as a means of attracting foreign capital. While that decline is often attributed to the 2008 financial crisis, the IMF points out that there had been similar declines in capital inflows to emerging markets during the 1980s and 1990s, and that low growth rates in those emerging markets accounted for much of the current decline.

We also considered the risks associated with investment, Part 1 pointing out that St. Lucia had the dual problem of low growth rates and high levels of risk, citing the weather as being one such source of risk to our economy. We therefore framed the FDI issue as a question of how can we attract legitimate capital investment in a low growth economy with a high risk assessment, in effect asking what we should be doing now to strengthen our economy that we are not doing.

While Part 1 did not further this point, there is another aspect of risk that needs to be mentioned, and that is the risk of failure of the proposed real estate developments associated with the CIP, particularly when these involve the construction of luxury hotels. With the sale of passports tied to the construction of these hotels, there is now little or no requirement for proposed developers to acquire independent financing. These developers are now operating in an environment where there is no risk to capital, where that capital is obtained interest free, and the developer’s profit is guaranteed. All of those benefits flow to the developers from the sale of our passports.

To date, three parties have received approval for developments in St. Lucia: Boka Group, GP Group, and Range Developments. Little is available publicly on the GP Group, and so we start our developer’s guide with a look at Range Developments, and conclude with the Boka Group.

So, the first step to becoming a developer is to establish your offices in London, UK, trading as Range Hospitality Ltd. Next step is to establish offices in Dubai for the purpose of trading and investment in real estate, call yourself Range Hospitality, and then propose to construct a US$100m five-star hotel providing 624 rooms in Karbala, Iraq, to cater to the needs of religious pilgrims.

Next, launch the hotel and residences, al Rawdatain Residences, in 2010, commence construction in 2011 on the basis of the sale of time-share units prior to completion of construction, and schedule the project for completion by the end of 2013. In February 2013, promise delivery of one-third of the proposed units by the end of that year, and then disappear in the middle of the year with the development under construction and far from complete. Meanwhile, appear in the Caribbean in 2011 as Range Developments, having the same principal officers as Range Hospitality Ltd. and Range Hospitality, and become a developer of luxury hotels for small Caribbean islands using funds acquired from the sale of their passports.

This is precisely what two British nationals of Asian extraction have managed to accomplish. Range Hospitality Ltd was incorporated in the UK on December 31, 2009, with the principal officers having backgrounds in finance. Registered as Range Hospitality in Dubai, the company announced the launch of the al Rawdatain Residences project in Iraq in August 2010, indicating that it had engaged Noor Capital to procure the initial funding for the project. In December 2010, Range Hospitality indicated that construction of al Rawdatain would commence in February 2011, with completion expected in 2013. On completion, the hotel was to be operated by Shaza Hotels, a joint venture between Guidance Hotel Investment Company and Kempinski Hotels.

By January 2011, Range Hospitality had announced that it had entered into a strategic partnership with the al Daaysi Group, indicating that with the support and patronage of the Group “we are confident of … the successful delivery of al Rawdatain Residences by Shaza”. By February 2012, the development was reported as costing US$175m, (up from the initial US$100m), with Range Hospitality indicating that it had secured funding for the project through pre-sale of the time-share units. In February 2013, Range Hospitality Group announced that 249 of the 624 units would be handed over to buyers of these residences in the final quarter of 2013, the point in time at which the project should have been completed.

There is nothing further on Range Hospitality past this date, and a visit to the al Rawdatain Residences website offers a construction update at June 13, 2013 showing the building still under construction. Nothing further is publicly available on Range Hospitality’s relationship with Noor Capital PSC, the company which arranged the initial financing for construction of the al Rawdatain Residences, or of its partnership with the al Daaysi Group. And although Range Hospitality had been registered to trade in real estate in Dubai up to March 2014, it is no longer listed as a development company in Dubai.

Meanwhile, over in the UK, Range Hospitality Ltd. saw their share capital fall from US$1m in March 2010, shortly after its December 2009 launch, to US$1,000 at the end of 2013. The company was dissolved by compulsory strike-off of the Register in the UK on April 28, 2015.

While some detail of the activities of Range Hospitality has been provided above, the concerns with respect to this company and with respect to Range Developments, both of which companies have the same named principal officers, were first raised in an article in Caribbean News Now dated February 24, 2014. At the time, Range Developments was launching its CabritsKempinski Hotel in Dominica, and the article indicated that Range Developments was also developing the Park Hyatt Hotel in St. Kitts. A visit to Range Development’s website shows that these are the only two projects listed by this company in its portfolio of projects, and for the principal officers of this company, those two projects and the unfinished al Rawdatain hotel in Iraq comprise the extent of the public record of their expertise as developers.

That is why the recent announcement that Range Developments had become an approved CIP developer in St. Lucia and would be the Master Developer for the Black Bay Development project was surprising. And why it was particularly surprising to see the CEO of Invest St. Lucia quoted in an SLHTA press release as saying that “given their record of similar projects in the Caribbean and their tried and tested association with some of the world’s top hotel brands, Range Developments’ proposed project in Black Bay, Vieux Fort is a powerful validation of the return of investor confidence to Saint Lucia”. The CEO should try telling that to the investors of Range Hospitality’s al Rawdatain Residences in Karbala, Iraq.

From their asset portfolio, we are also aware that Invest St. Lucia has previously identified the Black Bay site for touristic development, and we wonder at whose invitation did Range Developments become interested in that site. It is important for the country to know whether it was Invest St. Lucia inviting Range Developments to develop the Black Bay site, whether it was the CIP office which issued an invitation, or whether it was Range Developments simply flying over Black Bay and identifying it as an ideal site for development. It is important for us to know how Range Developments became involved with St. Lucia, because it is important for us to know just who did the “due diligence” check on that company and invited them in. And then we will fire whomever is responsible.

But even that won’t help us in this “race to the bottom” as this CIP industry has been previously characterized. We’re grasping at straws, couldn’t seem to care less, and we are making the Third World look bad.

In Part 3 next week, the Boka Group.