Published: Friday June 27, 2008
The management of Ackendown Newtown Development Limited, a hotel company part owned by Butch Stewart but controlled by the state, is being outsourced to Sagicor Property Management Limited, formerly LOJ Property Management Company.
But yesterday, new chairman of Ackendown, Joseph M. Matalon, said the move would in no way impact the operation of Sandals Whitehouse, a 360-room hotel and Ackendown's sole asset, but would formalise the transfer of the company's management from part owner Urban Development Corporation.
"The management of Ackendown company itself was carried out by UDC before," said Matalon.
$4.2 million contract
Sagicor Property will take over all the accounting and secretarial functions of Ackendown, he said, under a $4.2 million contract.
Stewart, through his holding company Gorstew Limited, owns 33 per cent of Ackendown and, by extension, has a similar cut of the hotel, which is operated by Sandals Whitehouse Management Limited. The UDC owns 37 per cent and Development Bank of Jamaica (DBJ), 30 per cent.
Matalon has replaced former executive chairman of UDC Dr Vincent Lawrence as chairman of Ackendown. The new board also includes DBJ Managing Director Milverton Reynolds, Winston Bagaloo of PricewaterhouseCoopers Jamaica, Ann-Marie Rhoden, a representative of the Ministry of Finance, Wentworth Charles, a director of the UDC board, and Laurie Ventour.
Stewart's company has managed the Whitehouse hotel under contract since its inception in 2005 at "a minimum guaranteed rent, plus a 'kicker'," said Sandals director of finance Patrick Lynch.
Lynch gave no specifics but said the 'kicker' required Sandals to pay an additional fee for every guest who checks into the hotel.
The contract runs for five years to 2010.
"It's based on occupancy, not profits," said the Sandals executive. Indeed, Ackendown is yet to turn a profit. Its losses since start-up have accumulated to US$31million, and the company remains heavily indebted at US$89 million.
Finance Minister Audley Shaw has blamed some of Ackendown's lack of fortune on the occupancy levels of the hotel, which he suggested, in a report to Parliament, was underperforming.
Lynch on Wednesday, when asked by the Financial Gleaner, had speculated that the Sagicor Property contract might have been related to the hotel plant, saying, "It may have to do with the management of the building itself," but Matalon said that function resides with Sandals as managers of the hotel.
Sandals Whitehouse is valued at US$71 million, the hotel and land inclusive, following a US$28 million write-down of the real estate assets.
Stewart, in a quarrel with his partners that is now being fought in court, had claimed even before the hotel construction was finalised that some of the work and furnishings were substandard, and that it could potentially dilute the value of the Sandals brand.
But Lynch, in a change of tone this week, said Sandals fully endorsed the plans of Ackendown's new overseers.
"The new board has been assiduous in solving the property's problems," he told the Financial Gleaner.
Stewart has sued Ackendown for US$29.2 million, claiming breach of the shareholder agreement, as well as damage to the reputation of his hotel brand, Sandals.
Ackendown is also in the process of hiring Allied Insurance Brokers to provide insurance services at a cost of US$999,648 (J$71.9 million).
Both the Sagicor Property and Allied contracts, under procurement rules for public companies, must face Cabinet scrutiny prior to award.
Source: Jamaica Gleaner