Grenada Citizenship Investors Urged to Exercise Caution
There is growing concern among international investors in Grenada’s citizenship-by-investment program about the attempt by the government to seize a foreign-owned resort. A court in Grenada has temporarily blocked the government’s plan to forcibly end a 99-year lease and expropriate the Grenadian by Rex Resorts, a 172-room hotel located on the island’s southern tip.
“It would be disastrous if this happened,” said a regional lawyer and CBI agent who did not wish to be named. “Expropriations by governments really do affect investment decisions of developers, while the perception will affect the decisions of CBI agents and, in turn, CBI applicants. It would leave a bad smell for 20 years. Why bother with Grenada when you can have a safe ride in one of our sister islands?”
Government officials said property managers haven’t fully complied with the lease agreement and argue the resort has become run down. The government also said it is intent on collecting taxes and feels the property is not being operated in the people’s best interest.
UK developer Rex Resorts rejects those claims, saying the hotel is running at nearly 90 percent capacity and that it has invested more than $4 million in the last five years to renovate the property. It also said it is up to date on all lease payments, taxes and fees owed to the government.
“Whatever the rights or wrongs of this individual case, the government is acting like a strongman,” said an investor. “People will be holding off making investments in the country until they see how this dispute turns out.”
Rex Resorts signed the lease agreement with the government in 1991 and has operated the Grenadian for 25 years. It is understood that calls have been made to Whitehall, the British government headquarters, to come to the defence of the beleaguered British company. There are even calls to reconsider the continuation of the country’s visa free treaty with the United Kingdom.
According to a Grenadian government website, applicants seeking to obtain citizenship by investment in Grenada must invest at least US$350,000. They need keep the real estate for at least three years following the grant of citizenship. There is a list of 13 developments that qualify for the scheme, including the Grenada Resort Complex, Kawana Bay Resort and Mount Cinnamon.
“The government has not said what it plans to do with the Grenadian by Rex Resorts, though we suspect that they want to sell it on, and a judge has sealed files in the case,” said a source. “The court will hold another hearing in May but, until then, many investments will be put on hold. If the government can do this to a company that has been there for 25 years, how will it treat an individual who just wants to buy a piece of real estate and a second citizenship?”
People in the Caribbean with long memories recall the shadow cast over development in Antigua when the government acquired the Half Moon Bay hotel. In June 2007, after 12 years of broken promises and legal arguments, the London-based Privy Council delivered a decision allowing the powers of eminent domain to be used by the government of Antigua under the Antiguan Land Acquisition Act to expropriate the Half Moon Bay Resort.
The only action initiated by the attorney general was to take physical possession of the property in the name of the people of Antigua. With neither maintenance nor security, it took very little time for the property to fall into disrepair. Ten years after expropriation, the case continues in the courts, while the beach is now a garbage dump.
This grim story does not seem to deter the Grenadian government. Oliver Joseph, Grenada’s minister of economic development, said that private investors have expressed interest in the Rex property. This reportedly includes Jamaican hotel magnate Gordon “Butch” Stewart.
However, according to local sources, a private Canadian company, Sunwing Travel Group, the largest integrated travel company in North America, which is partially owned by a publically traded German company (TUI Group) is working with the government of Grenada to seize the fully operating hotel.
In the meantime, the resort will keep operating as usual, unless and until a judge issues a contrary decision following the new hearing set for May.