The termination of the sale of the Marriot seems to be more of a cover-up for the highest bidder rather than the actual realization of an insufficient offer. I say this because all bids were in the government’s possession for nearly 2 weeks therefore the shortfall of the hotel’s current value could have been publicly disclosed instead of such information being disseminated by way of a press conference by the VP at the royal palace on Robb Street. Now this begs the question: why is government business being conducted at the office of a political party? Are we returning to the PNC era of Party Paramouncy? Should this sale of the Guyanese people asset be conducted by NICIL?
From the inception in 2011 the Marriot project has been shrouded in controversy under the Jagdeo administration when he was President. Using taxpayers’ dollars and with a syndicated loan through the Republic Bank Limited of Trinidad the hotel opened its doors on April 17, 2015. Under the syndicated loan agreement, the preferred rights goes to those investors – meaning that in the event of the hotel being unable to service the loan – the unknown investors would have the first lien on the proceeds of any sale. Notably, a decision by the former administration has resulted in US$1.1 million ($226 million) of taxpayers’ dollars coming out every six months (since 2017) to service the US$27 million loan from the bank – for a 13-year period. This was after the hotel was unable to service the loan. In order to prevent the hotel from being acquired by the bank, the former Government in April 2017 made the decision to transfer the hotel’s financial.
It is noteworthy that during the 5 year construction period not a single Guyanese was given any meaningfull job; steel benders, brick layers, concrete levelers, metal fabricators etc. were all imported from China.
In regards to the issue of the value of the Marriot it will be prudent if those who hold the strings of power todeclare what price is being sought as the major issue ofvaluation seems beyond the capability of the self- anointed Chief Oil and Gas honcho, who additionally is an expert in Hydro Project, Bridge fabrication, Specialty Hospital construction, Sugar Factory building, Insurance finance restructuring…the list of doomsday schemes goes on.
The calculation of the value of real estate involvescomparative market analysis (CMA) of residential properties while, in the case of commercial properties ,3 formulas are utilized: Replacement Cost, Market Value and Income Generation.
1. Property Value = Replacement Cost – Depreciation + Land Value.
2. Property Value = Net Operating Income / Capitalization Rate.
3. Gross Rent Multiplier = Sales Price / Annual Gross Rents.
The best method is the Income Approach, also referred to as the Income Capitalization Approach and this tactic is the one most commonly used in commercial real estate transactions. The value is established here by estimating the property’s income using the capitalization rate (commonly referred to as merely the cap rate). The cap rate is the net operating income of the property divided by its current market value (or sales price).
If the Marriot has a gross potential income of $1,170,000 monthly, (10% vacancy factor for 190rooms @$125 daily = 171 rooms X $125 X 30 days =$ 6,412,000 monthly). Deducting from this the operatingexpenses of the property (say 30% (electric, labor, maintenance, etc. gives M$4,488,400). This amounts to M$ 53,860, 800 annually. Divide this by the cap rate (8%), and you will come to your fair market value price of $67.3 million. I do hope this is useful for the Chief Oil Related Human Exploration Expert(CORHEE)
Leyland Chitlall Roopnaraine
Real Estate Broker (25 years)