Sandals gets multi-year tax breaks on La Source acquisition
Grenada has offered a raft of incentives to Sandals Resorts Inter-national (SRI) in exchange for an agreed US$100-million investment in the financially strapped La Source hotel for which closure would have meant the loss of some 200 jobs.
This is Sandals' first investment in the Spice Isle.
Sandals CEO Adam Stewart confirmed to Wednesday Business that the agreement between SRI and the Tillman Thomas-led government was priced at EC$270 million or US$100 million, covering the cost of acquisition, planned expansion and development over 10 years; plus additional lands to be acquired from the Taylor family, former shareholders in the La Source hotel.
Stewart said SRI would add at least 65 rooms in the first year of the agreement; his father and SRI Chairman Gordon 'Butch' Stewart said the first phase may be even bigger at 80 or more rooms.
Under the agreement, Sandals gets close to three decades of corporate and other tax breaks, most of which Finance Minister Nazim Burke said are not peculiar to the La Source deal.
Sandals gets a waiver on corporate taxes for 29 years; on property taxes for 25 years; and customs duties on all capital inputs for 25 years — all of which Burke said last Thursday at the announcement of the agreement were "not new".
Sandals also gets an extension on the duty waiver on alcohol from the usual 15 years to 25 years.
"We recognised we were doing something that was special, but we had to do it," said Burke, citing the jobs that the deal represents.
Sandals will invest US$29 million in the first phase, creating 100 construction jobs in the process and leading to the re-employment of most of the 225 La Source workers, he said. The agreement calls for the addition of 65 rooms by December 2013, bringing the total room complement to 165 and staff complement to 335, while the final tranche of of US$46 million will grow the room count to 250 and job count to 400.
"We had no option but to say yes to Sandals," the finance minister said in St Georges last Thursday.
La Source, which is located on Pink Gin Beach, will be rebranded Sandals La Source Grenada Resort & Spa.
"We are committed to 65 rooms but we will probably build more than that in the first phase — probably between 80 and 105," said Sandals Chairman Gordon 'Butch' Stewart at the Grenada media event.
The La Source acquisition is the culmination of a 10-year search, the chairman said in a company-issued release. It becomes the 14th property in SRI's portfolio, which is spread across Jamaica, Antigua, St Lucia, The Bahamas, Turks & Caicos Island, Cuba and now Grenada.
The planned enhancements to the resort include some of Sandals' signature dining establishments — such as the beachfront Neptunes; Café de Paris, which serves gourmet pastries; and Spices for authentic Caribbean cuisine - as well as a full-service Red Lane Spa, among other features.
"We did not buy a distressed government asset. We bought a private-sector company. The entire process was very transparent," said Adam Stewart.
"Grenada has a population which is well educated, and there is no crime. We are pleased with our acquisition," he said.