|The Bahamas Investor Magazine
June 27, 2007
June 27, 2007
Regardless of what trials fate has thrown at Grand Bahama over the past 52 years, The Bahamas’ fourth-largest and second most populated island, with its deep harbour, prime geographic location and robust industrial sector, has only grown stronger. Yet remarkably, this island known primarily for industry for more than a half century is now garnering equal time in the media for the billions of dollars in new tourism and residential investments being attracted to its shores.
After being hit hard by hurricanes in the early 2000s, there has been a resurgence of interest in Grand Bahama’s tourism product in recent years, driven by a robust second home market, overcapacity in nearby Florida, and the confidence instilled by planned construction of mega-resort and residential projects like West End’s Ginn sur Mer. “Certainly a very, very key part of the Development Company and the Port Authority and Hutchison’s plans in terms of economic development is focused around the continued development of the tourism product in order to give us the critical mass that we need to become a true tourism destination,” says Graham Torode, president and CEO of DEVCO, which is responsible for master planning most of the land zoned for tourist/commercial and residential use within the city of Freeport. “We have so many natural competitive advantages … miles of beautiful, unspoiled beaches, all of the infrastructure that has been installed in Freeport over the years, a state-of-the-art airport with US pre-clearance and our biggest advantage, of course, is that we’re 65 miles away from Palm Beach so both from a tourism and a second home point of view, Grand Bahama is strategically placed to take advantage of the Baby Boomer generation … Over a 20-year period there’s going to be an incredible and sustained demand for second homes, retirement homes and tourism product.”
Torode adds that there is a “huge merger of the residential and the tourism product” under way at the moment. “What Bobby Ginn has done in Florida and what he’s now doing at the west end of the island is a perfect example of how those different sectors of the market have been merged together.”
The high-end, high-profile resort/ residential development from Florida-based Ginn Company to which Torode refers is proceeding as planned in West End. To date, a total of 150 home sites have been sold and total projected expenditures remain at $4.9 billion over the duration of the project.
Meanwhile Christopher Lowe, president of the Grand Bahama Chamber of Commerce, says a number of other as yet unexplored tourism models have the potential to significantly buoy prospects in the island’s tourism sector. “I think we have a lot of potential for more speciality-type tourism. For example, the Royal Oasis … could become a world-class medical hospital affiliated with a North American university hospital. … It certainly would present an asset in that a lot of older people who like to travel might well feel more secure having it around. … If you look at the immigration to Florida every year, one of the biggest things that these émigrés with disposable income need is a first-class hospital very handy and we don’t have that in The Bahamas. In fact, I can point to at least a dozen people that I’ve known over the years who have left The Bahamas simply because they couldn’t get the health care here that they needed in their senior years.”
Another important part of the tourism product that many are hoping to see evolve is the convention trade. In January 2006, the United States Internal Revenue Service began allowing US taxpayers, including corporations, to deduct costs incurred for attendance at conventions and business meetings held in The Bahamas in the same way that they could deduct identical costs for events held in their home country. Lowe sees such incentives as a stepping stone toward garnering an ever larger share of the lucrative US convention business, and says that Grand Bahama is uniquely poised to cash in on the bounty, provided they build the facilities necessary to house such events. “The top 200 conventions in the United States require upwards of 600,000 square feet and anywhere from 4,000-8,000 hotel rooms. … Where on earth would you put a convention centre facility in Nassau? Yet here in Freeport we have so much space, so much infrastructure,” says Lowe, noting that if Grand Bahama were to add to its hotel room numbers and target the top 200 conventions, with each convention lasting anywhere from three days to a week, the economic ramifications would be considerable. “Obviously we wouldn’t be trying to corner the whole convention market but you certainly could avail yourselves of an awful lot of convention business with the sundry income or with the sundry expenditures that the attendees would make, that the vendors would make and not to mention the exposure of Bahamians to these types of industries and businesses and specialities in other words. Construction conventions, hardware retail conventions, broadcasting conventions, flower show conventions, I mean, the list is endless.” Already progress has been made, he says. “On our side, we’re doing things to facilitate the Americans coming. Case in point was the recent Associated Grocers convention that they held here, which was predominantly for South American, Central American and Caribbean retailers, and some Florida buyers as well … in other words, their customer base.”
A Bahamian presence
In terms of domestic residential development, Torode says that while a good deal of press time has been devoted to mega-projects such as Ginn sur Mer, local buyers are not being shut out of the market. A number of notable developments backed by DEVCO are providing high-quality, affordable housing to local residents on the island. “We take very seriously our obligation to provide land at affordable prices to the Bahamian market. Every year, we sell 300-400 parcels of land principally into the Freeport and Nassau markets and we provide financing for those sales. So we are encouraging the acquisition of land by Bahamians on the island but, perhaps more importantly, we’ve also, over the last five or six years, undertaken a number of residential developments that we’ve done in partnership with the Ministry of Housing and a number of local contractors,” says Torode. “We’ve taken unserviced DEVCO land, master planned it, installed all the necessary infrastructure and then engaged local home contractors who’ve built houses.” Chesapeake, which is a middle-income housing project, is now complete and Heritage, an entry-level affordable housing project, is now moving into its second phase, as is another development called Lincoln Green. Torode notes proudly that the Ministry of Housing has already filled in excess of 100 homes. “We’ve also generated over $30 million worth of construction contracts for local contractors, so it’s had a significant economic impact on the local economy. So our support for Bahamian home and land ownership is more than just words; we’re putting time, effort and a great deal of money into those programmes.”
Meanwhile in the island’s thriving industrial sector, the Freeport container port is proceeding with its extensive multi-phase expansion plan. Phase IV of the expansion is now complete, bringing the port’s total capacity to 1.3 million TEUs (twenty-foot equivalent units). Phase V, a two-year project with a projected price tag of $175 million, will bring the Port’s TEU capacity to 2.2 million, which represents a nearly 70 per cent increase from current capacity.
Chris Gray, chief executive at Hutchison Port Holdings, says that much of the increased traffic at the port is being “driven by the exploration of world trade, which continues to grow.” Also, he adds, the size of the ships being built today makes Freeport’s harbour, which is one of the deepest along the US Eastern Seaboard, an extremely attractive selling point.
“The container port is doing very well,” agrees Lowe at the Chamber of Commerce. “If anything, it is bringing to fruition the original vision of Grand Bahama, and it’s even more viable today than it was when envisioned.”
Prominent Nassau attorney Michael Scott of Callenders & Co agrees that “Freeport and Grand Bahama has found its niche. That niche was recognized thirty or forty years ago and they ought to continue in that vein. It’s got that fantastic deep harbour, so it’s uniquely poised right between the major shipping lines. I think it should finally be able to function as the industrial manufacturing hub of The Bahamas and complement what Hutchison is doing with the Port, Freeport Harbour.”
Also expanding is the Grand Bahama Shipyard, which is developing the north end of its facilities to include two more wet berths to accommodate a heavier flow of cruise ships and cargo vessels in for maintenance and repair. The company is also contemplating the creation of a third dry dock.
The tremendous success at the port is helping the island pursue its vision to become the trans-shipment hub of the Americas. Although no additional clients have yet been announced at the Sea Air Business Centre (SABC) since Associated Grocers of Florida signed on last year, interest in the new facility remains high. The reasons, contends Lowe, are simple. “Grand Bahama has the potential to be the goods distribution point for the whole country, simply because we can hold goods here in bond, which is a benefit not just to The Bahamas but to the whole Caribbean as well.” Associated Grocers, he says, was simply the first to recognize the potential cost savings and inherent geographical advantages of Freeport and is paving the way for other businesses to follow. “Now that Associated’s gone in there, I think you’re going to see others poking around and looking into it and realizing the potential. [That] potential is basically that they’re not paying import tax to the States on goods that are destined to come back out of the States and go elsewhere. You’re incurring a six per cent tariff plus shipping that you don’t need to, so the benefit is to them. They’re more price competitive to their Caribbean, South American and Central American customers and also those customers themselves see quite a significant drop in those costs of goods,” says Lowe.
China-based CITIC (China Inter-national Trust Investment Company), a conglomerate that owns 44 banks worldwide, has for some time been in talks to sign on at the SABC, and hope remains that an agreement may be reached at some point in the future. Scott feels that the arrival of such notable international entities, particularly from Asia, may help “create a third economic model to add to tourism and financial services.” That, in turn, he says, will spin off into other areas “because you get people, Chinese businesses and Chinese manufacturing plants and so forth coming into Grand Bahama. … The money’s here, they want to park it someplace or do something with it, so the potential is limitless. Even I can’t estimate it. It’s like asking how much sand there is on the beach.”
In addition to the SABC, a number of other new projects are breathing life into the island’s economy and, in particular, its manufacturing and industrial sector. Construction of one high-profile project announced last year is already well under way. James Sands is building the Bahamian Brewery & Beverage Company in Grand Bahama and hopes to begin production of his lager, Sands Beer, by the end of 2007. The new facility will employ a staff of approximately 30 Bahamians. Sands says that Grand Bahama offers a number of unique advantages that make it conducive to transacting business there (see Business of brews, page 56, for more details).
President and CEO of Pegasus Wireless Corp, Jasper Knabb, also opened a 20,000 sq ft wireless manufacturing facility in Freeport earlier this year, employing more than 200 people in a project worth an estimated $25 million. The newly licensed wireless technology supplier has also been negotiating for another site on Grand Bahama that will allow it to construct another 400,000-sq-ft plant.
Other projects discussed but not confirmed at press time include the Morgan Stanley development at Barbary Beach, which has been rumoured to involve a major hotel and casino, timeshares, condos, second homes and retail and commercial facilities, and the Raven Group project, which would entail luxury hotels and multi-million-dollar mansion-style residences targeted at ultra-high-net-worth investors on 250 acres of land.
Looking to the future
With industry, tourism/residential and maritime sectors all gathering momentum, Lowe feels the turnaround in Grand Bahama has already begun. “In ten years time I hope that [Grand Bahama is] twice as active and busy as it is today and I think it has the potential to realize that,” he says. “One thing is for sure: Freeport will never be the same. And I for one believe it’s going to be a lot better.”