'We can't prosper without growth'

The youngest son of Juan Trippe, the founder of PanAm airlines, the American hotelier has a long association with Bermuda. He has been stung by the criticism of his hotel in the debate over the new development.

Mr. Trippe sat down with the Bermuda Sun’s James Whittaker to attempt to answer, point-by-point, the public’s concerns over the expansion plan.

Your family has a long history in Bermuda. How have things changed in the time you’ve been here?

My father started coming here with Pan Am in the 1930s.

Bermuda really blossomed after the war. It was the only place anyone wanted to go on vacation. There was no Caribbean travel industry at that point Bermuda was pretty much it. When you look at things today it is a real tragedy Bermuda was not able to maintain its position as a world leader.

In Hawaii they started building hotels like this one [Tucker’s Point], Bermuda never kept pace. The last new hotel built in Bermuda was the Southampton Princess in 1972. Bermuda has not been welcoming to investors.

People have questioned the wisdom of supporting a development like this when tourism is clearly still in decline. What if the tourists don’t come back at all?

There are people out there that say it doesn’t work so why bother trying to fix it? That is just giving jobs away. Bermuda doesn’t have anything else to fall back on.

It has international banking but as with tourism the world is a competitive place and Bermuda no longer has the edge. Bermuda needs to ensure that tourism survives and grows and is welcoming to development.

But where do you draw the line between allowing development and protecting natural resources?

You draw the line where you can’t control it, but what we are proposing isn’t that. A lot of the building is planned for brown-field sites — the parking area at the stables, the water-catchment area, an old tennis court — that’s 10,11 acres of concrete.

We won’t go near a Yellowwood tree; where we are taking down a Mexican Pepper we will replace that with an endemic tree, there will be a net gain in terms of forestation. We plan to reforest part of the site with Cedars. When people come here for weddings and honeymoons they will have the chance to plant their own cedar tree.

People have also taken issue with the loss of views. Is the scenery not an important part of our tourism product?

I don’t see it as a loss of views. Look at what we have done around the resort. Where we have put houses we have also put vegetation. The houses blend into the vegetation. Good Bermuda architecture is a nice thing to look at. It can be done in a way that is attractive and compatible with the landscape. Of the 78 houses we are talking about, a lot of that is on Catchment Hill on top of the water catchment. There are only four or five houses in areas that are controversial in terms of their location. We will manage that process so that at the end of the day there is reforestation and protection of the caves — it will fit in with the scenery.

The last thing we want is for this to look like a Florida condo development. That doesn’t do us any good — we have too much invested here to build badly.

Have you been surprised at the strength of the opposition?

A few were very well organized and it did surprise me, yes. We met with BEST and the National Trust and the Tucker’s Town Historical society. We met with all these groups and had constructive open dialogue.

If the SDO is passed we would welcome Dr. Iliffe [cave expert] and Dr. David Wingate to have input in how we proceed.

What about the concerns expressed by CURB and other race campaigners about the black families that gave up land in Tucker’s Town?

We can’t reasonably be held accountable for what happened in the 1920s.

In the 60 years we have owned the land since then we have been accountable, we have been respectful of the history. We restored the graveyard and we accept we need to do more with that.

But people gave up their homes on this land to allow tourism to develop — they were asked to make sacrifices in the national interest.  It would be disrespectful to those people who gave up their homes for this to fail and their great grandchildren were unable to find jobs in the tourism industry they gave so much to develop.

So the survival of Tucker’s Point is that crucial to the tourism industry as a whole?

The same people who are critical and want to see us fail have to realize that in asking for us to fail they are asking for their grandchildren not to have jobs in the tourism industry.

Lantana was ready to go — its been shelved. Park Hyatt is not going to go, with the rhetoric they are hearing. What we are hearing in this debate is that Bermuda doesn’t want new investment. It is impossible to fund these developments with Bermuda capital now — we have to send the right message to foreign developers that Bermuda is welcoming to investors. At the moment we are telling them the opposite.

Some people will see that as scaremongering — can you back it up?

Ask the lenders. I was told there were three investment groups sitting on the sidelines watching how Bermuda votes. If the vote is against development it sends a very negative message to the global investment community. Investors have choices where to invest and at this stage Bermuda is not on the priority list.

How was the development at Tucker’s Point funded?

We made around $400m of investment in the hotel, golf course spa, fractional ownership clubs over the past decade. That broke down as $140m from lenders (e.g. HSBC, BF&M), shareholders put in $30m and the balance came from real estate that was sold and re-invested. Around 90 per cent of the capital that went into the building came from local companies and investors.

Do any members of the Government have investments in Tucker’s Point?

No members of the Government have any investment in Tucker’s Point whatsoever. There was a rumour some years back that we had given Jennifer Smith a house here. It was insulting to her and insulting to us and of course it is not true. There is no Government investment, no ministerial investment. Not only would it be a huge conflict of interest if it was done in a less than honest way, we would be violating U.S. law. There’s no conflict. We buy milk from Michael Dunkley – that’s as close as we get.

How does it make sense to add more development if the hotel is struggling?

The hotel struggled in the first year and one-half. We forecast a strong 2011 and stronger performance once Rosewood is on board.

The new development strengthens the resort - additional hotel rooms strengthen the operations of the hotel —  88 keys is a very small hotel for the amenity base that we have created.

New vacation homes strengthen the resort bringing additional guests to use the facilities and amenities, and the sale of vacation homes to wealthy individuals allows TPC to reduce, over time, its debt.

The opportunity is there to expand the hotel — that won't happen for a while. We need to get our balance sheet straightened out and repay some of our loans. That has to come first. At the end of last year we had 70 fractional units still to sell (from the original development). The proceeds should have brought us $26million. The recession came and we had to cut prices — we will end up with closer to $14million.

How will the development be paid for? More loans?

It is self-financing. A prospective purchaser comes to Tucker’s Point and we negotiate a purchase and sale agreement, which is normally provided for a phased payment over time — during the construction period. The purchaser funds the cost of construction. There will be no new loans other than small amounts for infrastructure and environmental studies.

How many homes/fractional units have you built already and how many remain unsold?

We built 34 fractional units to sell to 340 fractional buyers. Each is sold to 10 unit fractional owners - each owning a 1/10 unit shares.

Including the 34 fractional units we have built approx 90 units. We have 10 condominiums to sell and about 65 fractional units.

What gives you confidence that these will sell when there are current homes and fractional units at Tucker’s Point (and Newstead and the Reefs) that remain unsold?

We still have demand – four fractional units are now waiting to close. Even in the recession we have sold new sites and market interest is strong.

We’ve had several readers suggest that if we (the public) are going to allow an SDO for Tucker’s Point, we should be given access to your books to determine independently that this is a gamble worth taking.

We have given access to our books, forecasts, all financial data to our lenders, their investment advisors and the financial and real estate investment advisors to the Government. There have been very smart advisors who understand our industry and looked at TPC very closely. We do not want our books and records, with much confidential market and financial information, to be in the public domain. We are a private company and our confidential information needs to be respected.

If Tucker’s Point did go under, couldn’t someone else take it over at a knockdown price and not have the same financial liabilities? In other words Bermuda would still have a hotel at that location run by somebody else... Is that not the best deal for Bermuda in this situation?

The people who take over in these situations are investment bankers. They are not committed to Bermuda. They buy it so they can flip it, get the profits — they terminate staff, squeeze costs in the short term to maximize profits over a 2-3 year period. Most distress buyers are looking for bargains with an opportunity to cut costs, improve profitability and sell on. In the process the fragile real estate market which we have developed will vanish, and Rosewood who will add great value to Tucker’s Point and Bermuda will withdraw, and jobs will be at risk. 

How does Tucker’s Point create jobs?

There are 800 contractors who made a lot of money on the building and development of Tucker’s Point. There are six companies that were founded and created by the work we gave them. This is a small real estate market. If we build five houses a year that is $10m into the economy – that’s contractors, its suppliers, cement manufacturers, it creates work for landscapers. The construction benefits are very significant. We will hire a lot of experts to advise us on woodland, caves to move this process forward.

Special report: Tucker's Point

• SDO in hands of three Senators
• Protestors to lobby Senate on Friday
• Property seen as symbolic: A 'poignant reminder' of a key event in our history
• 'There is a demand for high-end properties right now'
• 'We can't prosper without growth'
• Outcome of debate rests with these three Senators
• Letter: The Trippes have been respectful and I support the SDO
• Letter: Bermudian jobs will be lost unless the SDO is approved