Las Vegas Sun

March 29, 2024

A $3.5 billion resort, incomplete and empty

Baha Mar

Jennifer Jett / The New York Times

A crane installs palm trees along the beach before work stopped at the Baha Mar resort, in Nassau, the Bahamas, in April of 2015. A dispute between the resort’s developer and his Chinese partners that led to bankruptcy court have left Baha Mar’s future uncertain.

NASSAU, Bahamas — Trei Bethel had been looking for work in the Bahamas for about a year when he finally got a break: a coveted spot in a program that trained young Bahamians to work at Baha Mar, a $3.5 billion mega-resort nearing completion on Nassau’s white-sand Cable Beach.

There, he said, he learned about fine wine and the choreography of five-star service. He saw the resort as a place of opportunity and stability in a difficult economy.

“They really put so much effort into the growth and development of us as young people,” said Bethel, now 20, who became a concierge at one of the resort’s four hotels.

But in October, Bethel lost his job along with 2,000 others, the casualties of a dispute between the resort’s developer and his Chinese partners that led to bankruptcy court. The falling-out has left Baha Mar at a standstill, fenced off at the end of a road that bears its name, more than a year after its original opening date.

Baha Mar’s uncertain future points to the challenges China faces as it finances and builds large-scale construction projects overseas amid language and cultural barriers, lack of regulation and allegations of graft.

“The more problems there are and, in a way, the more media attention these problems attract, they erode positive attitudes toward Chinese presence in the region,” said Ariel C. Armony, director of the University Center for International Studies at the University of Pittsburgh, who has researched the perception of Chinese investment in the Americas.

After losing its U.S. backer during the financial crisis, Baha Mar was revived in 2009 by China Construction America, a Jersey City-based subsidiary of a Chinese state-owned construction company, the China State Construction Engineering Corp. The company facilitated a $2.5 billion loan from the Export-Import Bank of China, a state-owned lender with which it has close ties, and invested $150 million for its own equity stake. In exchange, China Construction America would serve as the resort’s contractor, using Chinese workers.

The rest of the financing came from Sarkis Izmirlian, the Swiss-born developer who conceived Baha Mar and invested $850 million.

Since his project filed for bankruptcy last summer, there has been finger-pointing from all sides. But there is broad agreement on two points: Baha Mar is spectacular, and there is plenty of blame to go around for its failure to open.

Critics say the resort was overly ambitious from the start and should have been built in phases. It combines four luxury hotels, the largest casino in the Caribbean region, a championship golf course, a 200,000-square-foot convention center and what is billed as the world’s largest collection of Bahamian art. The hotel chains Hyatt, Rosewood and SLS had signed on as partners.

The Bahamas welcomed the investment, even moving the prime minister’s residence to provide a prime location for the resort.

But Baha Mar executives say that problems became evident when China Construction America, or CCA, missed several construction deadlines, including a second attempted opening in March for which the hotels had already started taking reservations. The company then walked away from the job, officials say, leaving the resort staffed to run hotels that were not finished.

In a statement in July, it called the developer’s accusations “misleading and dishonest,” saying Baha Mar’s “failure to secure adequate financing and its mismanagement” led to construction delays. The company did not respond to requests for further comment.

The Export-Import Bank of China did not respond to a list of faxed questions.

Unable to maintain the upkeep of a dormant mega-resort, Izmirlian filed for bankruptcy in Delaware in June. He declined to be interviewed for this article.

The U.S. case was dismissed in September because the Bahamian government refused to recognize it. The top court in the Bahamas, which has no bankruptcy law of its own, appointed provisional liquidators. After months of fruitless negotiations, the Export-Import Bank of China put the resort into receivership in November.

Since then the resort has received a $50 million loan from another Chinese state-owned company, the China Harbor Engineering Co., to help maintain the resort. Prime Minister Perry Christie of the Bahamas has said there are several potential buyers from China.

For CCA, which celebrated its 30th anniversary last fall, Baha Mar was an opportunity to show what it could do as it tries to expand into Latin America and the Caribbean.

In court filings, Baha Mar officials say CCA failed to maintain adequate staffing, provide proper schedules or follow through on a promise to bring in partners with the experience needed to build such a complex project.

“China State Construction never allocated the resources that were necessary to meet the deadlines of this project,” Stephen Wrinkle, former president of the Bahamian Contractors’ Association, said in a phone interview, using the name of CCA’s parent company. “From day one they never put the manpower, they never put the management, they never put the materials on site to finish on time.”

In court filings, CCA countered that the developer had mismanaged the project, requesting multiple design changes that created cost overruns.

As evidence of poor construction quality, Baha Mar officials have cited an email from a Chinese subcontractor that appeared to have been accidentally shared with them. In it, he admonished two of his staff for using cheap material.

“What’s wrong with you two! You can’t fake things in such an obvious way!” he wrote in Chinese, according to court records. “You’re going to get yourselves in trouble! If you want to do this, you must be careful!”

In an affidavit, the subcontractor said that the English translation of his email did not convey his intent and that “there is a conflict between American and Chinese culture and expressions.”

As the project went on, more subcontractors from the Bahamas, the United States and elsewhere were brought in to speed the process, said Dionisio D’Aguilar, who was a director at Baha Mar until the entire board resigned in November, including Izmirlian. The bankruptcy plan Baha Mar submitted called for CCA to be removed from the project entirely.

“I have to believe that in the end the goings-on at Baha Mar have embarrassed them,” D’Aguilar said of CCA.

The delays are an economic blow to the Bahamas, which expected the resort to generate a payroll equivalent to 12 percent of its gross domestic product. Bahamians who had returned home to join Baha Mar after working or studying overseas are now leaving again.

Locals had started or expanded small businesses in anticipation of the resort’s opening, “and those people are also left hung out to dry,” Wrinkle said. Bahamian contractors are owed an estimated $74 million by the resort.

Even if work at Baha Mar resumes, it could be another year or more before it opens. Rosewood has moved to terminate its license agreement with Baha Mar; SLS did not respond to requests for comment. Hyatt said it remained committed to the project.

Bethel, the concierge, is holding out hope that he can return to Baha Mar once it opens and put what he learned into practice.

“I have unfinished business there in terms of my career and where I want to get in life,” he said.

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