Hon. Mark Vanterpool, Minister for Communications and Works and Hugh Darley, President of IDEA at the July 10, 2012 meeting.

Photo Credit: Melissa Edwards/BVI Platinum News

Hon. Mark Vanterpool, Minister for Communications and Works and Hugh Darley, President of IDEA at the July 10, 2012 meeting.

Photo Credit: Melissa Edwards/BVI Platinum News

As Government continues to meet with residents to discuss the proposed public/private partnership of the $75M cruise pier and land side development planned for Road Town, the issue of the buy-out option within the 48 years was raised recently.

At a meeting held at The Moorings conference room on Tuesday, July 10 with taxi professionals, Minister for Communications and Works, Hon. Mark Vanterpool was asked about the proposed inclusion of a buy-back clause.

"My question is about the buy-back; on the buy-back option will Government be working with a fixed number, or at that time the company will be open to charge whatever they want to charge," a taxi operator asked.

The development is referred to as the Tortola Pier Park and the investment will come from IDEA and its parent company, US-Based United Infrastructure Group (UIG).

Under the proposed plan, Government will have to lease the land for 48 years to the developers and Disney and Norwegian Cruise Lines have guaranteed a large number of passengers over the next 15 years and an increase in passenger tax. The guaranteed amount of passengers is 425,000 minimum passenger arrivals per year.

Minister Vanterpool in June had explained that in relation to the 48 year lease, it may not be a total of 48 years since they have options in between those years.

"Four and some acres plus of land that we are sitting on is being leased to a partnership between the Ports and this group for 48 years for the investment that is being made with buyout options at 15, 20, 25 or 39 years intervals. Whichever option the Government chooses to exercise, they can over the period of time. It's a 48 year lease. There will be no liens or incumbencies on the property by any group or anyone for funding. It is going to be clear from that angle," according to Minister Vanterpool.

He said following the lease, everything goes back to the Government. "After 48 years, if we do go that long, because we do have options in between, everything comes back to us for zero dollars...After 48 years the project belongs to the Virgin Islands."

Meanwhile, in response to the taxi operator's question about the buy-back clause on Tuesday, Minister Vanterpool said persons must understand that they are still in discussions and a figure has not been set as yet.

"We are discussing and finalizing the agreement for the 48 years lease on the property there to a joint venture with the ports and Tortola Port Partners; in order words, this group. The port will be a 50 percent owner of the lease and they will be a 50 percent owner of the lease. Now what's going to happen after 15 years, the Government or the port will have an option to buy-back the development and run it themselves," the Minister stated.

The operator then queried further, "but at what cost Minister." Hon. Vanterpool said he could not provide an answer on the exact figure since negotiations are still taking place.

"I am not going to necessarily tell you a cost now because we have not finished negotiating that, but there will be a fixed price, cost. So the answer is, yes. And that fixed price is normally set by studying the various accounting terms that are there; what is the opportunity cost you are giving up, what's the return investment of the person who invested $75M and we calculate that based on certain numbers and at the end of a certain time period, what is that value."

He said based on the value of the development, Government will pay at that time.

"If the Government for example wanted this project now and wanted to borrow $70/75M; if we were able to do so we would have and over 15 years or so they would have paid back the $75M with interest; that interest may have been $30M or so, more than likely around $40M between those 15 years...So you would have paid back $115M to the bank or whoever lend the money. So we have to take all of that into account," he explained.

Minister Vanterpool said they have to calculate and negotiate based on their return on investment [RIO], or what would have been the opportunity cost if they had taken that money themselves and done something else with it.

"So at the end of 15 years there will be a number that we are working with and at the end of 20/25 years there will be another number based on what happens over the next 10 years. So you have those options at each time. It's a 48 year lease yes, but technically if the Government wanted to make it a 15 year agreement, it can cut it at 15 and invest the money then that they would have invested now, only that it will sound like a bigger number then because of what you call inflation; 15 or 20 years gone...So those are the kinds of things we have to calculate and work it out. So there will be a number that we will be negotiating," he outlined.

There Should Be No Buy-Out Clause

At the meeting, Talk Show Host and taxi operator, Sam Henry made attempts to challenge the Minister on the buy-out clause.

He said with a bank loan, if someone borrows $10.00 from the bank and the interest is $1.00, at the end of the year that person pays $11.00 and that's it, "but this deal, not knocking it, but I am simply highlighting the facts. With this deal, at the end of 20 or 25 years we would have paid them back interest plus interest, but yet still we have the buy-back clause. Why is that?"

A section of the proposed plan

Photo Credit:

A section of the proposed plan

Photo Credit:

The Minister said that is the case because, "you didn't take any risk for those first 15-20 years." However, Henry said Government will be taking a risk. "We took a lot of risk, we give up a land. You give value in something...you give up something."

Henry, who disagreed with the comments made by the Minister that a bank deal is different from an investment deal, said "No, don't try that Mark...At the end of 25 years, assuming everything goes well, they [developers] would have made, if my calculation is right, more than a $140M...So why do we still have a buy-back clause; it should be a walk away clause at that point instead of 48 years."

The Minister, who was in disagreement with the comments made by the operator, said the developers have invested $75M and that investment money has a lot more investment value than $75M loan money.

"That is as simple as I can put it. I can say to you Sam, I will sit down with you and look at how you can calculate that. But my $75M that I put into something versus if I lent you $75M and I say Sam, I am lending you $75M, I want to hold your house, your land, your cow, dogs, sheep in case you don't pay it back to me, then I can have that when the time comes. I am not giving these folks [developers] anything like that."

He added, "So that is a different value I expect on my money. So there is a negotiation as to what that value is...You might figure at the end of 25 you got the money and leave, and you may have a value as to what you are willing to pay, but the investors may have an idea on what he expects to get, so we have to come somewhere in the middle and that is what we are doing."

The total investment is $75M, with $25M for pier and excursion dock; $25M landside development; and $25M community investment.

According to the developers, the project which will see the BVI Ports moving from a B class to A class port, will develop the area in such a way that it will be "married to the rest of Road Town". This, according to Government, will result in other businesses benefiting as a whole, including vendors at the proposed Craft Alive Market area.

Minister Vanterpool has stated that Government, through the BVI Ports Authority, will remain in control of the Road Town Port.

The development includes the extension of the pier, a retail village, community park, market, ferris wheel, boardwalk, a terminal building, a chapel and trolley lines.