Wednesday, May 14, 2008

State land leads to windfall for Shivraj

State land leads to windfall for Shivraj
Stabroek News news article. Wednesday May 14, 2008

A parcel of state land assigned to businessman Omprakash Shivraj so he could invest in a hotel for world cup 2007 has netted him a windfall following the sale of the edifice bearing his name to a Turkish investor.
A secret Memorandum of Understanding (MOU) that had been signed between Shivraj and the Guyana Office for Investment had agreed that one of the government’s obligations was that on completion of the Buddy’s International Hotel and the start of operations, the government would sell him the plot of state land on which the hotel is situated for eight million dollars. It is unclear if this amount was paid over the government.
The hotel was recently sold at a price of US$25M, which is US$13M more than the cost of construction, to Turkish hotel investor Sudi Ozkan, whose hotels operate under the umbrella of the Princess Group of Companies. The hotel could soon bear the Hilton or Sheraton brand if ongoing talks bear fruit.
The source close to the government acknowledged that because of the amount for the land spelt out in the MOU, Government would only have gotten the amount fixed for the land in the lucrative sale of the property.
Noting the huge profit that the hotel’s first investor Shivraj had made, the source said that no one went to the rescue of the hotel when room rates were low and business slow. He said that this is one of the risks that large investors are exposed to.
The source confirmed that the new owner of the hotel has been given the option to buy the land. The terms of the MOU would also apply to the new investor. Questions had been previously raised as to how the government had decided to pick Shivraj for the construction of the hotel.
Efforts to reach Shivraj for a comment on why he was giving up the hotel business so soon after its construction and his interest in the hospitality industry proved futile.
According to the MOU signed before the hotel was built, Government had the option to sell the land on completion of the hotel and the commencement of operations. The hotel is built on a plot at Tract ‘BS’ Block 2, Public Road Providence East Bank Demerara.
The person this newspaper spoke with yesterday said that nothing would be transferred to the new owners until Shivraj meets all his commitments to the Government. Shivraj had also been controversially assisted with an advance from the government of $165.7M to assist in the construction of the hotel.
In an article published in yesterday’s edition of the Stabroek News, Ozkan said that he purchased the hotel on the condition that the land is transferred to him. Key also to the sale is that a licence be granted to the hotel for the operation of its casino.

According to the hotelier, he was given all assurance that Government will be backing the investment.
Ozkan said that he isn’t satisfied with the present state of the hotel which he referred to as two-star in rating. The hotel was heralded as Guyana’s first four-star.
Ozkan said that he will invest in getting the hotel up to five-star rating with a view to attracting a certain level of clientele.
During the launch of Buddy’s in February 2007, President Bharrat Jagdeo had stated that Government was prepared to support Buddy’s International Hotel since it was Shivraj who came forward with the proposal to build the hotel when Government was staring the prospect of cancelling Guyana’s participation in World Cup Cricket.
On the reason for the sale, this newspaper understands that escalating bills in the face of seasonal guests and a pull towards an attractive deal may have been the deciding factors leading to the disposal of the property.
According to another source, the hotel is very expensive to maintain and off peak periods present a challenge to pay bills, especially electricity bills.
This newspaper understands too that a number of employees were laid off after the conclusion of the Cricket World Cup period last year.
This newspaper has confirmed that the Deeds Registry has received the documents for the sale of the hotel but the final paperwork has not yet been filed and the name of the new owner is therefore not recorded.
The establishment had benefited from a five-year tax holiday and for the construction period a slew of tax concessions on equipment, raw materials and vehicles specific to the project.

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