Avia Collinder, Business Reporter
A deal between state agencies the National Health Fund (NHF) and the Urban Development Corporation (UDC) for the sale of the Oceana complex on Kingston's waterfront has fallen flat, with each partyappearing to blame the other.
The UDC suggested Tuesday that NHF has backed away from its J$350 million offer to buy the former hotel property. The transaction was already approved by Cabinet.
"The purchase of the Oceana by NHF will not now be concluded; you may wish to check with them for their reason for not pursuing the matter," said UDC communication manager, Lorna Clarke, on Tueasday.
"The Corporation has reissued an invitation and is prepared to accommodate public-private-sector partnerships which can further galvanise the redevelopment of downtown Kingston," she said.
Several efforts to speak directly to NHF as well as health ministry officials were unsuccessful. Wednesday Business was advised that NHF chairman, Sterling Soares, and acting chief executive officer, Cecil White, were both unavailable for comment, but last night, an email from White, through his executive assistant, appeared to cast blame on the UDC for the derailment of the transaction.
"The UDC expressed a preference to divest the property to a private enterprise and keeping the plans to return the building to a hotel," it said.
No down payment was made on the property by NHF.
Other sources in the know say the NHF is currently facing cash-flow challenges linked to underperforming 'sin' taxes that fund its operations and disappointing performance relating to the Drugserv network of pharmacies.
Finance ministry figures indicate that the agency was originally expecting income of J$2.8 billion from pharmacies, but collected only J$1.2 billion in the fiscal year just ended. The NHF is projected to make a loss of J$314 million this year, coming from an estimated J$694 million of profit at yearend March 2013.
On the weekend, UDC placed the property back on the market for outright sale, but also indicated that it was willing to take on an equity partner. Investors have until August 30 to respond to what is now the fourth offer to investors in five years.
NHF's bid to buy Oceana was made five months ago. The former hotel, located at 2-4 King Street, currently houses the offices of the Ministry of Health.
The NHF indicated at the time that its plans included refurbishment of the building.
In March, Soares said the repairs, including the roof, would begin by mid-year and wrap up by year end.
He said then that the plan for the building included housing accommodation on two to three floors and commercial activities on the ground floor. A medical facility was also contemplated for the location.
The Ministry of Health was also expected to continue occupying the building in improved facilities.
The Oceana Hotel was opened in 1977 with 388 rooms. The building was modified in 1996 and leased to the health ministry in 1997. The former hotel sits on more than 7,600 square metres of land and has 12 floors.
It was first advertised for sale by UDC in 2008, re-advertised in 2009, and again in 2012, at which time the NHF stepped up as the buyer.
NHF is funded through 20 per cent of the taxes on tobacco; five per cent of special consumption taxes; income from the NIS payroll tax; sales of products, and charges for services including management fees.
Last year, revenues amounted to J$4.6 billion from taxes and J$3.8 billion from its own operations.
The key problem faced by the Health Fund, sources state, is the underperformance of tax revenues, which have declined as tax rates climb and, more lately, because of falling tobacco sales due to the ban on smoking.