Notes From The Margin

April 4, 2008

Beachfront Development In Barbados, A Look Into The Future…

Now that the dust has had a chance to settle, we on the margin have been reflecting on the sale of Cheffette Holetown. At $40 Million for the site Cheffette would have taken the offer. How many years of profit is that from the Restaurant? Further that’s enough money that they could build a second restaurant nearby and still have money left over. As a business deal this is fairly straight forward, Cheffette got an offer that was simply too good to turn down and that is that.

From an economic point of view, the Holetown site in condos will contribute more to the economy than it would as Cheffete. Certainly it would be part of the foreign exchange earning sector rather than being a user of foreign exchange. Economically this is good for Barbados as well.

However one of the very few remaining windows to the sea will close when condos go up on the site. Locals will have to go in either at the Holetown Police Station (the old Pizza House restaurant) or go all the way up past Sandy Lane to access the beach. Heading south after that we believe the next opportunity for beach accesss is Paynes Bay.

Now we on the Margin can’t argue with Condos, but we do have a specific issue with beach development. The development of a condo project allows the developer to make his money back quickly, with relatively little risk. A hotel means that the developer takes the business risk and all of the headaches that come with running a hotel. So if you are a developer, a condo is lower risk for a higher return and an extremely quick payback period. This is why hotels are closing for condos, we on the margin doubt that anything the new administration does will change this. (Despite what Mr. Loveridge says)

The other factor at work here is that there’s only so much beach front land in Barbados. The simple law of supply and demand means that prices for land on the coast will skyrocket in the face of huge demand fed from outside of the island. Hence we can hear about $40 million being paid for a relatively small piece of land. Remember all of those little chattel houses in the Garden in St. James? Little gold mines each one of them.

Now because the land costs are skyrocketing developers need to do two things 1. increase the value of each condo unit and 2. increase the number of units on the lot. This means that development along the beach is going to be high value, and is going to maximise the land use (so much for beach access for locals) and further is going to go up and up and up. This results in what we are seeing at Paynes Bay in St. James where the people on the land side of highway one stop seeing the sun around 3.00pm in the afternoon each day.

If you watch the BTA advertisement above it talks about

“…an island that hasn’t been homogenised and supersized and commercialised away from even being Caribbean anymore”

While these words are being said images of high rises next to the beach are being shown.

Ironic isn’t it?

We think that there is a need for a policy intervention by Government that puts the brakes on this form of development. Now this will have to be done with a light touch otherwise we run the risk of killing the goose that laid the golden egg. One possibility is restricting future high rise structures to the land side of the road. We are not saying no to development of the coast, we are simply saying if we continue as we are going now we will end up being one of those islands that no one wants to go to. The economics of it are inexorable.

Now is the time for an enlightened policy response.

Marginal

March 5, 2008

Sir Charles Williams on Apes Hill and Agriculture

 

A couple of days ago we were listening to the mid day call in programme and heard Barbadian construction magnate Sir Charles (COW) Williams call in. After he had made his point, the moderator David Ellis took the opportunity to ask him about the progress of his Apes Hill project.

Never one to miss an opportunity for promotion Sir Charles proceeded to wax lyrically about the great success that Apes Hill is becoming. Apparently the sales of lots has been so great it has forced them to accelerate their business plan to keep up with demand.

Then Sir Charles made an insightful point, when Apes Hill was a dairy farm, it employed approximately 12 persons at minimum wage, in its current state of construction it’s employing close to 400 persons (we were driving so we didn’t have the opportunity to write this down so if the numbers are slightly off don’t scream for our scalps) and those 400 are employed at much higher salaries.  One can reasonably assume that as the project completes it will occupy much more than 12 persons.

Now this opens an interesting point, is moving land out of agriculture necessarily a bad thing for society? Obviously there are limits on how much of this you can do but, is society better off with Apes Hill in agriculture or with it in tourism and golf courses? Similar questions could be asked about Royal Westmoreland.

It is unfortunate that there wasn’t an opportunity for this point to be discussed more on the call in programme.

Marginal

February 20, 2008

Strike off – What Happens Now?

Now that the BWU has climbed down from the threat of a National Strike, what has changed? Minister of state in the Ministry of Labour is setting up a mediation panel to review that matter. However we on the Margin hold out little hope for this. Both employers in this issue have been very firm in not wanting to rehire the workers, given the Union’s climbdown from the national strike, it seems unlikely that they are going to budge from their positions at this point. The union may well be forced to seek a deal for the best severance package available.

At the core of the Sandy Lane issue there seems to be a fundamental point on the legitimacy of the use of wildcat strikes. On Brass Tacks today noted HR consultant Elsworth Young seemed to suggest that wildcat strikes are a part of IR practice in Barbados. This would seem to be reflected by Sir Leroy Trottman’s views given earlier

The employers on their part seem to be taking the view that a collective agreement spells out procedures for handling grievances, and is binding on both parties, hence why should they accept conduct that is clearly outside of the scope of the agreement?
We on the Margin cannot help but feel that this entire incident is an example of how the system of volunteerism is becoming outdated as the Barbados industrial relations environment becomes more complex. Perhaps it is time to consider other options. One thing is clear… given the entrenched nature of the positions and the peculiarities of the entities involved, it seems that this is unlikely to end well for the workers in question.
Marginal

February 19, 2008

STRIKE OFF – Picking Up The Pieces….

At the eleventh hour the Barbados Workers Union deferred the strike action after taking the country to the brink of a National industrial action. Sir Roy Trottman, indicated that the action (or deferment of action) was taken due to the “newness of the current administration” . This dramatic climbdown came after a week of deadlocked talks, where both sides became more and more entrenched in their respective positions.

We on the Margin always felt that the Union had painted itself into a corner by reaching for the “big gun” prematurely. The lateness of this climb down also has several knock on effects that may be more long lasting.

American Airlines cancelled flights today and tomorrow into Barbados, stranding some Bajans in Puerto Rico. It is not clear how many tourists this has affected.

Cruise ship handlers had indicated that in the event of a strike the cruise ships scheduled for Barbados calls on Wednesday would divert to other nearby ports.  At the time of writing, it is unclear if they have diverted or if they will make their regularly scheduled call.

Certainly in looking at our WordPress data we can see that much of the traffic we have picked up is be people looking for informaition on strikes. We believe that many of these queries originate outside of Barbados and we have to wonder if the uncertainty will result in potential tourism business going elsewhere.

In short, even though the strike action is off, we on the Margin are deeply concerned about the impact the strike will have. We are concerned that this matter was allowed to develop to this stage and was not resolved earlier. Even though we may have dodged the strike we still stand to be affected.

This whole sorry episode will do nothing to enhance the reputation of the Union, or the new administration for that matter, who we think should have intervened in some form far earlier than they did.

We can only hope that this issue (which is still ongoing) will now be resolved in an amicable fashion.

Marginal

February 18, 2008

Down to the wire….

A national strike does seem to be about to happen in Barbados, (barring a last minute settlement by the intervention of the  Prime Minister) In both cases of dispute (Sandy Lane and the Royal Shop) no one seems to be shifting their position. The intervention of the Chief Labour Officer does not seem to have moved the disputes closer to any form of resolution and that leaves only one other arbitrator available the Minister and Prime Minister David Thompson.

 

 

 The entrenched nature of the positions was highlighted by a story in today’s Nation which highlighted comments by Sir Leroy Trottman:

Sir Roy added: “Why could they not have said before, that it is indecent to fire these numbers of people for what is an everyday occurrence in this country, which the BWU helps to resolve in a matter of hours, but always in less than a day.

The Union’s position is an absolute, they are pressing for full reinstatement of all the workers in both cases. The mood in the private sector is considerably at variance with that expressed by Sir Roy. The BHTA has thrown it’s full support behind Sandy Lane, who seems to have taken the position that can be summed up in saying that if the workers do not honour the collective agreement in place there are consequences.
While Sir Roy may consider wildcat strikes to be an “everyday occurrence” to an employer a wildcat strike is incredibly disruptive and costly. One of the reasons for entering into a collective relationship is to ensure the incidence of strikes is minimised.
In the case of the Royal Shop, there appears to be a hardened resolve NOT to rehire the workers. The company is offering full severance, but is not budging on its position.
To us here on the margin, it appears that the Union may have erred tactically in going for a general strike. The Royal Shop and Sandy Lane may both take the position that the Union will suffer more loss of good will than they will if the strike goes ahead. Indeed, for Royal Shop a national strike will hardly make a difference to their current situation.
To stretch a metaphor we used in an earlier post; national strikes are like atom bombs, they are great weapons to threaten with, but actually using them makes both combatants losers.
It is unfortunate, but it would seem that we are about to see that played out before us.
Marginal

 

February 17, 2008

Does Barbados Need An Industrial Court?

I run a small business (approx. 10 employees) if this general strike comes off next week it will cost me a significant amount of money. I have no part in this BWU/Royal Shop/Sandy Lane, and yet I will suffer a direct economic consequence of what is a Union action! In theory the Union must carry some civil liability for this cost, but in reality there is no way that I can recover this cost.

Why should I (along with everyone else) be penalised for one company’s perceived intransigence? The threat of a general strike is irresponsible and shows why we need to have an industrial court in this country.

Small Business Owner

Above is a comment by a small business owner and he asks what in our opinion is a valid question.

Historically industrial relations in Barbados has relied on a system of volunteerism. That is that collective agreements aren’t actually legal contracts but are considered to be more along the lines of “gentlemen’s agreements”; that is that either side can breach the agreement at will. Collective agreements are usually enforced by the relative power of the union and the business owner. Now here’s the funny thing… as INSANE as this system may sound, in Barbados it has actually worked! While industrial courts are well established throughout rest of the Caribbean, we in Barbados continue to function on a volunteerism basis, and have had a relatively stable IR climate for a long period of time. ‘

Now of course there are certain features of the Barbados system that make this workable, you have a very small number of very large powerful unions, and you also have a relatively homogeneous private sector. This has meant that historically, everyone knew the rules and how the game was played and everyone was prepared to give and take to make the overall system work.

Now in 2008 we still have a small number of large unions, however the private sector is no longer as monolithic as it was in the past. We have new international investors, we have regional investors, we have relatively new local players. In short we have people who are accustomed to functioning a more “rules based” industrial relations culture. They don’t know how we play the game “’bout here”

This of course leads to all sorts of complications, issues of recognition, issues of wildcat strikes. The Sandy Lane Showdown is a prime example of this. Is there a penalty for workers breaching the collective agreement? Where historically local employers have accepted the occasional wildcat strike as par for the course, someone accustomed to an environment where collective agreements are contracts will expect to be able to terminate wildcat strikers for “abandoning the job”.

Issues such as this will continue to come up. So we on the margin ask the question

Is it time that we retired the volunteerism system?

Do we now NEED an industrial court?

We think it deserves serious consideration.

Marginal

December 6, 2007

Sandy Lane Your Slip Is Showing!!!!

Looking in the Nation Newspaper today you’ll see an ad for the post of Culinary Director. (It’s on page 48) The ad has a deadline of December 7th 2007.

That’s all very well and good but…..

Here’s a clip from a website called “The Vegas Eye” entitled “Chef Grant Has Left The Building”

“As most of you know by now Wynn Resort and Casino’s executive Chef Grant McPhearson has left the building. I received a call from Grant today as he was getting ready to leave for London to meet Jimmy Page and catch the Led Zepplin performance on December 10th at the O2 Arena in London, honoring Atlantic Records founder Ahmet Ertegun. McPhearson just landed a new position at Sandy Lanes Hotel in Barbados as the Culinary Director re-concepting 3 restaurants and running the Food and Beverage.

It would seem that the new Culinary Director is common knowlege in Las Vegas even though the position is still being advertised in Barbados.

Things that make you go hmmmmmmm

Marginal

November 19, 2007

Is The Barbados Property Market A Bubble?

We on the margin have been observing the skyrocketing prices of real estate in Barbados, especially on the Platinum coast. We can well understand the logic of investing in real estate particularly on the coast in Barbados, after all there’s only so much land and they aren’t making any more of it. Traditionally real estate has been seen to be… as safe as houses.  (sorry for the pun) the old bajan saying of “Land don’t spoil” has been a truism that traditionally could be counted on as readily as the sun coming up tomorrow.

The legions of real estate agents will tell you that land has never declined in value in Barbados. In fact the tremendous appreciations in property values has attracted international attention, with international agents who market to the affluent UK market.  Now here’s where things get interesting….

The price of premium property in Barbados is out of the reach of all but a very few Bajans. And further if we’re honest much of it is already owned by BVI corporations to get around the issues of property transfer tax. The reality is that the demand for Barbados property is being driven not by the Barbados market but by the UK economy.  Suddenly things don’t look so rock solid any more.

If we then factor into the picture the possible effects of a global economic slowdown (keep an eye on that sub prime mortgage crisis) it is VERY possible that in such a scenario, Barbados’ overvalued beachfront could become just so much seawater and sand.

August 24, 2007

Barbados and Foreign Investment

Was reading a post over on Barbados Underground today much of which centred on a Company Bacassa investments. (Going, Going And The West Coast Of Barbados Is Gone!) I have to say that I thought much of the original post made alot of sense, many of the responses however I wonder about.

The article touches on the company Bacassa investments and their four major projects.

Banyan Plantation-Black Best, St. Peter

Permission given to develop the site in 2005. A hotel, Spa, Golf Course, one hundred and twenty Villas (120) and eighty (80) Town Houses.

Battaley’s Mews – Mullins, St. Peter

Permission given to build thirty (30) Town Houses approx: 2000 square feet each. The property will be outfitted with tennis courts, plunge pool and other facilities.

Porters Development – Porters Sugar Factory, St. James

Permission given to construct twenty (20) apartments on a complex which will also have four (4) retail shops, one (1) food court, (1) supermarket/convenience store one (1) cafe and in Phase II the construction of one two storey building to accomodate thirty (30) apartments which incluse gym, tennis court and other facilities.

Turtle Nest-Mullins, St. Peter

A private beach front cottage. Rates listed on the website ranges between USD725-950 per night.

 

Let’s look at the economic impact of  one of these projects:

 

Porters Sugar factory is currently derelict it contributes effectively nothing to the economy.

Permission given to construct twenty (20) apartments on a complex which will also have four (4) retail shops, one (1) food court, (1) supermarket/convenience store one (1) cafe and in Phase II the construction of one two storey building to accomodate thirty (30) apartments which incluse gym, tennis court and other facilities.

 Yes the profits are likely to go out of the country back to foreign investors. However what stays here.

During construction money from the project flows into the Barbados economy. (We’ll assume work permit laws are followed here). On the sale of the apartments government gets Property transfer tax and property taxes will be paid annually by the purchasers. The purchasers while they are here will consume goods and services which brings money into the economy. This market offers opportunities to Barbadian entrepreneurs to tap. The shops even if they are foreign owned will generate VAT and other revenue for the government. They also will generate jobs which will cause income taxes to be paid. The Gym will also generate other  employment and other economic activities. The alternative to the above is to have a derelict sugar factory that generates NOTHING.

 

Yes this is a fairly simplistic explaination, but we feel that it needs to be said given many of the comments appearing in both major Bajan blogs Barbados Free Press, and Barbados Underground.

 

YES Barbadians need to fight against the erosion of the structure of regulations that ensure that Foreign Investment does not flow back out in it’s entirety. However in the face of 7% unemployment we will have to accept that foreign workers will become more of a reality in Barbados. Now HOW that happens is what we have to be careful about. We need to be very concerned about the policies put into place to facilitate foreign investment and we need to keep the government on it’s toes  when it deviates from those policies.

 

But let’s be clear, Barbados needs foreign investment to suggest otherwise just doesn’t make sense.

 

Marginal

August 7, 2007

Barbados’ Sandy Lane Hotel Sued – Does Pennsylvania Law Apply?

Filed under: Barbados,Capitalism,Caribbean,law,Sandy Lane,tourism,USA — notesfromthemargin @ 2:12 am

Sandy Lane Hotel is currently being sued by a customer who fell from the table while receiving a massage in the hotel spa. The guest a Mr. Patrick O’Connor sued the hotel when he got back home, and he did so in the courts at home. Sandy Lane successfully argued that the US state court had no jurisdiction over an event that happened in Barbados. Mr. O’Connor appealed and the appeals court ruled that because the transaction was arranged by the O’Connors at home and the hotel mailed them a brochure that sufficient activity had taken place in the Pennsylvania jurisdiction for the court to have standing.

Now of course courts in Barbados like most courts in the British Commonwealth do not award damages for emotional pain and suffering. Of course Pennsylvania courts do (as do all US Courts) Also a US jury is more likely to be swayed by the hometown plaintiff against the foreign defendant. Both sides are likely to fight this one to the finish

The implications of this case are wide reaching, any company selling services to American citizens from anywhere on the planet may find themselves subject to a United States court. In effect will the US court system set itself up as being a global arbiter?

Would the US be willing to let American citizens be subject to foreign courts if the circumstances were similar? I think not.

You can bet this will be appealed again (and again)(and again) it will be an interesting one to watch.

For further reading check out:

Barbados Advocate: Based on Recent Ruling Sandy Lane May Have To Fight Its Case in Pennsylvania

Wall Street Journal: Law Blog: Civil Procedure Final Exam Question: Personal Jurisdiction

Law.com: Firm Founder’s Shower Fall Leads to Significant Jurisdiction Ruling at 3rd Circuit

MoreLaw.com:Patrick J. O’Connor and Marie M. O’Connor v. Sandy Lane Hotel Co., Ltd.

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