Avia Collinder, Business Writer
SuperClubs and the state pension fund are headed back to court in January in a case where the hotel group is seeking compensation for business losses over what it alleges was a failure to lift a resort property managed on behalf of the National Insurance Fund to standards worthy of its brand.
Another case between the parties appears headed to mediation, this time over allegations against companies owned by SuperClubs regarding the physical state of another resort property it once managed.
Resorts Beach Development Limited (RBDL) is seeking compensation from VRL Services Limited and Caribbean Hotels Limited - for failing to maintain the former Breezes Montego Bay hotel in good repair. RBDL also claimed that the value of the property was diminished - on which it has put a price tag of US$1.25 million (J$114.4m). The total claim for damages amounts to J$283 million at current exchange rates.
The hotel is majority owned by National Insurance Fund (NIF) and NCB Pension Fund through RBDL. VRL was used by SuperClubs to lease the property, while Caribbean Hotels acted as guarantor of the obligations of VRL, according to the lawsuit.
SuperClubs, which managed the hotel for five years up to September 30, 2009, said in its defence filed in May this year that it spent more on upgrading and replacement of furniture, fixtures and equipment - FF&E - than the lease contract required and returned the hotel to its owners in better condition that it was received.
"The lessee avers that it duly expended the sum of US$500,000 upon repairing the leased premises, largely on furniture, soft furnishings and replacing slide doors to the guest rooms. In addition, during the first year of the lease, the lessee expended upon the leased premises and FF&E in excess of US$200,0000 of its own funds and at its own expense in carrying out needed repairs," the hotel company said.
It added that since 2005, the lessee spent US$100,000 in upgrading the leased premises and procuring and installing electronic locks and safes in all rooms, which "was in addition to regular on-going maintenance and replacements".
SuperClubs said any disrepair to the property delivered back to RBDL would have been due to 'natural causes and fair wear and tear' and not because of breach of covenant.
The hotel group also contends its obligation were limited to keeping the building, structures and fixtures in similar condition, description and quality as of the effective date of the lease.
"The lessee delivered up the leased premises at improved and higher quality property than when the lessee went into possession under the Instrument of lease," the court filings said.
The hotel group filed a lawsuit of its own against NIF in May 2011 relating to another property owned by the state pension fund at Braco in Trelawny. SuperClubs gave up management of the property in April 2011.
BRL Limited, a member of the SuperClubs group, alleges that NIF failed to maintain the property to standards expected of its brands and as contracted under lease. The suit names the commissioner of lands, minister of labour and social security and the attorney general of Jamaica as defendants. NIF operates as a division of the Ministry of Labour.
BRL is seeking US$$39.68 million (J$3.4 billion) or alternatively US$29.357 million (J$2.52 billion) in damages, based on different estimates.
nif denying liability
The NIF, in the meantime, has denied liability for any breach and is counterclaiming for unpaid rent and losses arising from the aborted lease.
NIF acquired the Braco hotel through the commissioner of lands from the original owner, Braco Resorts Limited.
BRL Limited said in its claim that it was agreed between the NIF and Braco Resorts Limited that the pension fund would make changes required for the hotel to operate as a SuperClubs/Grand Lido property.
The lessor, it is claimed, was also required to keep the property in "good and substantial repair." It is noted that comparatively, US$4 million was spent to bring Grand Lido Negril to the Lido standard at the time of the purchase of the brand.
"In breach of the aforesaid collateral contract and or fundamental term, and despite repeated requests by the claimant, the defendants failed to make all such capital expenditure needed to procure modifications," the claim notes.
It notes further, that despite approval of US$3 million worth of refurbishment by the investment committee, the capital was never forthcoming. The money was said to be needed for a conference room, improvements to guest rooms and bathrooms, among other things.
BRL claims further that the "high minimum rental of US$200,000 monthly was for a property operating to Lido standards and which could command certain rates."
BRL contends that "it would not be economically feasible to pay such a high rent for a hotel property below Lido standards, as the property could not command the high rates for a Lido standard hotel and BRL would not have agreed to such a high minimum rental."
Citing losses of more than US$1 million annually, which began in 2006, BRL indicated that it terminated the lease by "force majeure", citing the impact of the recession, as well as the inability of the hotel to contribute to the group's marketing budget and other financial problems originating two years prior to the financial crash of December 2008.
It is noted in the claim that several attempts to renegotiate the lease were not successful.
In its defence, the NIF counterclaims that the former landlord spent US$1 million for modifications required under the lease, and that the obligations were fully discharged by the former owner.
Further, the state pension fund is also claiming for rent allegedly owed from April 2009 to April 2011, amounting to US$4.185 million, and for repair and replacement of infrastructure and equipment of J$504.328 million.
The defendants also contends that the 15-year lease should have ended on October 21, 2012 and are claiming for losses of US$3.8 million, as well as J$23.41 million for maintenance costs incurred as a result of the closure of the property.
BRL, in its defence to the counterclaim filed July 2011, disputes the allegations and denies liability.
The parties to the lawsuits have chosen not to comment for this story; however, the Financial Gleaner was advised by connected parties that the Breezes Montego Bay matter goes to mediation and that the Supreme Court will next hear the Braco hotel matter in the new year.