Wednesday, December 21, 2011
Wednesday, December 21, 2011
THE Arawak Cay port will generate an extra $800 million in Bahamian gross domestic product (GDP), and more than 1,200 full-time jobs, over an initial 20-year period by freeing up 20 acres of prime Bay Street land for downtown Nassau’s redevelopment.
These projections, contained in the Economic Impact Statement produced for the Nassau Container Port project by KPMG Corporate Finance, described “the most significant impact” from the $83 million project as being the relocation of the container shipping industry from the heart of Nassau’s city centre.
The findings, disclosed in the report obtained by Tribune Business, came as the placement agents for the $10 million Arawak Port Development (APD) initial public offering (IPO) expressed great optimism that the offer will be “fully subscribed” well before its January 31, 2012, close.
The APD IPO is the first one to be held over the Christmas period. Previous offerings have traditionally avoided such timing, given that investor minds and disposable income, especially on the retail side, are traditionally deployed elsewhere, but Providence Advisors’ chief executive, Kenwood Kerr, said the IPO had already attracted great interest since its Friday launch.
“We’re very confident that the offer will be fully subscribed, notwithstanding the time of year,” Mr Kerr told Tribune Business yesterday.
“We’ve had a high degree of interest from all aspects of society – institutions, high net worth individuals and retail participants. We’re encouraged by the increased interest we’ve seen in the last two-and-a-half to three days, and prior to that. The offering will stand on its own merits, and is a very attractive offer.”
And, while Bahamians traditionally went after instant consumable goods for Christmas presents, Mr Kerr said an investment in APD’s shares would be “a gift that keeps on giving” through annual dividends and potential capital appreciation through share price increases on the Bahamas International Securities Exchange (BISX).
“That’s the best gift you could have at Christmas, and it keeps on giving,” Mr Kerr told Tribune Business. “This is more a long-term investment in a company with a dominant market share, and is an excellent opportunity for portfolio diversification in a market dominated by financial services companies, banks and insurance companies.”
APD is effectively the first infrastructure-based stock coming to BISX, although it could be argued that ICD Utilities (Grand Bahama Power Company) was ahead of it. It is a start-up, and thus projections on its future financial performance are difficult to make, but it has an effective monopoly and government support, with high barriers to entry.
Mr Kerr pointed out that the 19 private sector shipping companies, through the Memorandum of Understanding (MoU) with the Government, had taken all the risk out of the project, enabling Bahamian investors to participate from the ground up at the same $10 entry price.
“The risk that someone will create another port is thrown out of the window based on the strength of the MoU,” Mr Kerr said. “The barriers to entry, by definition, are also very high.”
The KPMG Economic Impact Statement, while somewhat dated, as it was completed on April 30, 2010, (not April 2011, as the APD IPO prospectus suggests), still provides a good idea of the overall impact the project will have on the Bahamian economy, even though some of the underlying assumptions and data may have changed.
“By far the most significant impact of the project is the potential for redeveloping downtown Nassau, including approximately 20 acres of developable waterfront land currently occupied by shipping operations,” the KPMG report said.
“Over a 20-year operational period, the Economic Impact Statement estimates the Port’s relocation could generate an additional $800 million in gross domestic product (GDP) and 1,200-plus full-time equivalent permanent jobs in a revitalised city of Nassau.”
The KPMG report estimated that with the Arawak Cay port paving the way for downtown Nassau’s revamp, the increased GDP impact – over a 20-year period – would come from $21.3 million worth of construction spend, and $804.2 million in visitor spending, for a collective $825.5 million boost.
And it projected that Bay Street’s long-sought rebirth could generate $27 million in extra wages, through creating 785 jobs, with some 490 indirect jobs adding another $7 million. All told, KPMG projected that the total impact from creating 1,275 total new jobs would be $34 million in extra wages pumped into the Bahamian economy.
The report said 55 per cent of the area earmarked for Bay Street’s ‘Phase Two’ redevelopment was currently occupied by the shipping companies.
“Redevelopment of the waterfront area is likely to lead to an appreciation in value for neighbouring properties, according to discussions with various commercial property appraisers,” the KPMG report said.
“Moreover, the downtown redevelopment process will also result in an increase in the volume and mix of local real estate investment opportunities.
“Redevelopment of the approximately 20 acres of waterfront land currently occupied by the shippers is expected to be in the range of several hundred million dollars. Besides generating construction jobs, the new land uses, such as hotels or retail space, would provide for additional direct employment and GDP contributions.”