RBC curtails funding for expensive Palmyra receivership

Published: Friday | February 15, 2013 Comments 0
A section of Palmyra Resort & Spa under construction in 2008. - File
A section of Palmyra Resort & Spa under construction in 2008. - File

Janet Silvera, Senior Gleaner Writer

WESTERN BUREAU:

Delinquencies among condo owners at Palmyra Resort & Spa, which is managed as a strata, have climbed to more than US$400,000, creating a shortfall in funds needed to operate the property, the Financial Gleaner has learned.

"Delinquency is one of the challenges the property faces, forcing both banks that own the property, the National Commercial and RBC, to fork out US$6 million in 2012 to maintain the property," Ken Tomlinson, the receiver said this week, while indicating that the initially reported US$450,000 cost per month to fund the property in receivership was understated.

About 55 per cent of the unit owners reportedly owe some fees, according to well-placed sources. Collections last year were said to amount to US$500,000 from US$900,000 owed.

Condo owners' fees are based on the size of their units, which could be two or three bedrooms at the 299-room condomium resort.

Palmyra was placed in receivership in July 2011 by NCB and RBC Royal Bank Jamaica, who accused the developers of defaulting on their loans.

The developers, led by Robert Trotta, have denied breaching their loan agreements and sued the banks and receiver Ken Tomlinson of Business Recovery Services Limited.

The banks and the receiver are preparing to fight the lawsuit, which was filed in January 2013.

A number of the condo owners are refusing to pay maintenance fees, claiming that not all the facilities promised when they acquired their units have been delivered; some have claimed that the receivership is hurting their chances at earning rental income from their investment.

Responses from the head of the Palmyra strata management to emailed queries were unavailable up to press time.

The development was unfinished at its takeover by the banks which arranged loans amounting to US$110 million for Palmyra, and the receiver is attempting the sell the property to new investors to complete the project. Some 82 units were reportedly already sold at the takeover.

No individual meters

Palmyra is also the only known strata development in Jamaica that has no individual meters installed at the property to track the usage of utilities.

"The persons living here have no water, light or cable meter, meaning their neighbour could travel for a year and leave their electricity and air condition on; and everyone on the property would be paying their bill," said our source.

A property registered as a straight hotel business does not need metering, but a strata does.

NCB and RBC Jamaica have been covering some of the costs to manage the property. The receiver forks out more than US$180,000 per month to maintain an independent power plant that services the development. When the banks took over, the electricity bill was approximately US$300,000 per month, while the upkeep for the property, including the power plant and hotel, was costing US$1 million per month.

"The bills have mounted so high, one of the two banks - RBC - gave instructions to cut funding to the resort as at February 3," said the source, adding that this resulted in the implementation of a system which sends emergency electricity supply to only sections of the property now.

The notice by the receiver was to advise of the curtailment of supplies, and while some condo owners say the outcome of not having access to electricity was occupants eventually moving out of the units, no one was evicted as previous reports suggested.

One owner, a lawyer who wrote to the receiver, said Tomlinson's action amounted to "an outrageous decision to constructively evict all residents".

Tomlinson, as receiver/manager, is a member of the Palmyra strata executive.

"The domestic water supply, lobby, stairwells, basement and some public areas gets 17 hours of electricity per day, while the homeowners have access to four hours of light in their apartments," said the source.

The resort was not wired to take electricity from the national grid operated by Jamaica Public Service Company. Connection to JPS power grid at this stage would cost about US$3 million.

NCB, which is holding the larger part of the Palmyra loans, will continue to fund the receivership Tomlinson said.

janet.silvera@gleanerjm.com

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