Investors shying away from small indebted Jamaican hotels
KINGSTON, Jamaica, Thursday, March 15, 2012 - The Development Bank of Jamaica (DBJ) has been finding it difficult to offload smaller indebted tourism properties as serious investors shy away due to a lack of economies of scale.
This is in the opinion of DBJ managing director Milverton Reynolds who recently revealed that the bank has been left holding three debt-ridden resort properties because investors apparently fear they may be too small to be made commercially viable.
"Larger properties allow purchasers to pursue economies of scale," Reynolds has been quoted as saying as he commented on why larger properties such as the 304-room Jamaica Pegasus in New Kingston and the former Hedonism III with 226 rooms have attracted competitive bids while small properties languish.
Pegasus was sold in 2010, while a buyer is being selected for Hedonism III from bids that closed January 31. However, several unsold small properties held by the DBJ are in receivership.
The development bank recently put the 96-room 'N' resort in Trelawny, formerly FDR Pebbles, back on the market. It has been trying to sell the property since 2010 to recover US$4.5 million borrowed by owners from the DBJ to construct and equip the hotel.
The asking price is US$10 million as listed on the website of receiver Ken Tomllinson's company, Business Recovery Services Limited.
The DBJ is also still trying to recover JAM$34 million owed on the 34,000-square-foot, five-cottage Parottee Beach Resort in St Elizabeth owned by Carl Miller's M&M Corporation. The property is listed for JAM$70 million on the Tomlinson website.
The third hotel, Ocean Sands Resorts, located at James Avenue in Ocho Rios, St Ann, has 34 rooms and US$1.4 million is being asked for that on the Business Recovery Services website.