‘Financing structure was Four Seasons downfall’

The Four Seasons Resort & Private Residences failed because of its financing structure, according to banker and former President of the Barbados Bankers Association Horace Cobham.

Without mentioning the Four Seasons development by name,  Cobham said there was nothing wrong with the concept but that the financing structure  was“suspect”.

Consequently, he warned local officials to pay close attention to how current and future hotel projects are bankrolled.

“We have one very notable one here in Barbados, which is a full-service type hotel, but it didn’t perform. But, again I say, one has to look at the structure of the financing around that, rather than the fact that it was a hotel project that failed. And I think if one were to look at particularly that hotel, [one] would see that the problem was not the concept that failed; it is the financing approach to that particular project that caused it to fail,” he said, acknowledging that hotels were expensive to finance.

“The concept was great and, to me, very workable, but the structure to the financing around it was very suspect. That concept needed everything to work well and sometimes everything doesn’t work well, and when things don’t work as well as they were projected then things start to fall apart,” Cobham explained.

“When you are in the throes of a construction project and building is taking place, you have to finance the cost and when the funds aren’t there to finance the cost you have a major problem. I think that is what happened with that particular project,” the former banker added.

Construction on the Four Seasons, which had been anticipated to be a stomping ground for the rich and famous from around the world, ground to a halt in 2009 because financing dried up and the sales of the private villas slowed.

After failed attempts by the developers to secure new funding, the then David Thompson-led Government announced in early 2010 it would guarantee a $60 million loan from a Caribbean bank.

That same month it was reported that the Inter-American Development Bank (IDB) had withdrawn its support, cancelling $160 million in loans it had committed to the hotel component of the venture more than two years earlier.

Cobham, who made it clear that he was  in favour of banks financing hotel projects, said while most commercial banks saw the hotel industry as high risk, they should examine each model and finance them on their own merits.

“I would say that with some degree of consternation it was agreed that we [banks] could enter into the industry. But we entered into the industry and we agreed that we would enter into the financing of the industry at the four to five star levels of hotels,” Cobham, who played a key role in the financing of a number of projects across the region when he worked in the commercial banking sector, said.

“One has to look at the specifics of the ones that didn’t make it and try to understand why. But I will maintain that any major financial institution in Barbados and, for that matter, in the region has to be prepared to finance the hospitality industry; otherwise it is not supporting the development of the region,” he contended.

Cobham recently retired from commercial banking to operate in another area of financial services. He acknowledged that hotels were “very challenging” to finance unless they were a part of a brand known for strong performance.

However, he was quick to note that the hospitality industry had developed to the point where officials were more creative in going after business, pointing to condo hotels as an example.

3 Responses to ‘Financing structure was Four Seasons downfall’

  1. jrsmith August 10, 2016 at 5:46 am

    As any politician get involve with any business project look out its doomed , bad news . they cant be trusted…thats why Barbados is becoming less attractive for certain business people… the world sees Barbados at its worst when the Barbados , (AUDIT GENERAL ) publish a damming report how crooked is becoming, then comes the excuse its becoming hard to do business in Barbados..

    Our nation is being block from prosperity because the rum, biscuits and corned beef politicians is standing in its way….

  2. Donild Trimp August 10, 2016 at 10:27 am

    Quoting JR “Our nation is being block from prosperity because the rum, biscuits and corned beef politicians is standing in its way….”

    That is it right there, the truth and nothing but the truth.

  3. Chris Wright August 10, 2016 at 9:54 pm

    “Our nation is being block from prosperity because the rum, biscuits and corned beef politicians is standing in its way…”

    Even though I left Barbados many years ago, I have observed the political system there because it’s the country of my birth.
    The politicians mentioned on the quote are all gone, those were the men and women of the past who after buying the rum, corned beef and biscuits, you would see the driving through and at times even living in their communities they represent.
    Politicians can no longer live by the “rum, corned beef and biscuit” agenda, the cost of living and the support of their lifestyles needs much more than that. nuff said.


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