Count down to cruise berthing

The Caymanian Compass reported back in July that 144,674 people came to
Cayman by cruise and air during July, a number that compared favourably to the
same month every year since 2004. Cruise ship arrivals were at the highest
since 2006 and air arrivals the fifth best in ten years. Compare these
promising figures to those in August and September and the story takes a
different turn. (August 2010 saw the lowest air arrivals figure at 19,097 since
2006, making them the third lowest this decade. Cruise arrivals are still
strong, however, at 115,721 for August 2010, the highest since 2006.)

It was to a crammed ballroom last
month at the Marriott Resort that Cline Glidden gave a detailed presentation on
how far the government has come in the development of cruise berthing in
Cayman. Due to time constraints, much of the information was delivered at a
rapid pace, so the Journal sat down with Glidden for an exclusive one-to-one
for a detailed look at the project

How far has the cruise berthing
plan come as at the beginning of October?

Following the signing of a MOU with
the developer Dart Enterprises Construction Co. earlier this year, in September
the government entered into a second agreement with the developer, which
outlines the framework and the scope of the development. We are now working
toward agreeing the main agreement, which will finalise the details of the
project, including its construction and cost. We hope to have this agreement
signed by the end of October.

Why didn’t government take on the
development itself? Why does the project need a developer?

Government does not have the funds
to build a project of this size, which could cost US$200 million to US$300
million. Government also has borrowing restrictions, which prevent it from
borrowing funds in the traditional way. So it had to come up with an innovative
new method of providing this much-needed infrastructure.

Why didn’t government enlist the
assistance of the cruise lines, which have injected large sums of cash into
similar projects around the Caribbean?

Back in 2003 the government was in
discussions with the cruise lines with regard to the development of cruise
berthing facilities; however the change of government in 2005 meant a change in
emphasis, couple this with the severe down turn in the economy in 2008 and
2009, which led the cruise lines to constrict their project developments and we
had to look elsewhere. 

Why
did the government choose DECCO?

DECCO is
already a significant investor in the Cayman Islands and thus the continued
success of Cayman is extremely important to them. DECCO has already undertaken
its own environmental impact assessment even before it came on board to ensure
that the project will not detrimentally affect both the area of development and
areas outside the development, such as Seven Mile Beach and the South Sound
area.  

What
was the initial scope of the project framework?

We
wanted to build two piers that could accommodate the new Oasis-sized cruise
ships. At the same time it was important to government that the project should
be entirely funded by the developer, that government (the Port Authority)
should retain complete control of the port and that existing retailers in the
vicinity of the new development should be protected.

And
now?

The
government realised that we needed to build more than just piers to attract
cruise visitors to Cayman and remain competitive; we needed to create an enhanced
world class destination and harbour that would be recognised regionally as a
world class facility. The project now includes the reclamation of land to the
size of about 8.3 acres, which will give much more scope for development.  Even with this enhanced project, however, the
protection of existing business is of crucial importance.

How
far have you come with the Environmental Impact Assessment? 

The EIA
is extensive and compliant with the components listed in the draft Terms of
Reference, prepared by the Cayman Islands DoE in April 2009. Additionally, as
part of the team’s self-imposed due diligence, it also referenced the World
Bank’s ‘Environmental, Health and Safety Guidelines for Ports, Harbours and
Terminals’ and internationally accepted standards and criteria. The EIA
included the analysis of existing data and studies; and a large number of
special investigations and studies, computer simulations, surveys, etc., with
respect to the Project site and areas affected.

It is
important to note that the EIA is not to determine whether this is the right
site or not, this is a functioning port with significant infrastructure and
business investments surrounding it on both the sea and the land sides. The
primary purpose of the EIA is to inform the design and construction
methodology. When a final design has been agreed to, the design will then
identify any outstanding areas required for study and subsequently, the full
EIAR can be completed. We intend to make a summary of the findings available.

How
does the developer make
any money?

The
government will own all the land that the cruise berthing facility sits on and
will lease the land back to the developer at an agreed rate and for an agreed
period. The developer will be able to develop any residual land that the
facility does not directly use for the berthing of passengers. Suggestions for
the use of the excess land include the possible construction of a convention
centre, an amphitheatre and diving facility/pool. The developer will also
receive head taxes from the cruise lines. Those two revenue streams will pay
for the development.

So
government does nothave
to pay anything?

If the
government decides to terminate the agreement prior to its four month expiry
(which runs until 31 December) then we have an obligation to pay half of the
developer’s expense up to a maximum of US$250,000. If agreement is reached or
if the agreement expires then the government will pay nothing but the exposure
is capped at US$250,000. That is government’s only financial exposure to the
project.

The cruise lines have already developed their itineraries
for 2011 and 2012 and those with the Oasis-sized ships (Royal Caribbean) cannot
berth in Cayman until our new facility has been opened. How does government
retain an interest from the cruise lines until we are ready to receive them?

Though
intensive discussions with the cruise lines I can say that there is still a
demand for this destination by cruise tourists – it is still a favourable and
sought-after as a destination – and they are the ones who dictate the
itineraries. That said, cruise lines shared their concerns that Cayman had
fallen behind in its facilities and that their discerning passengers were
demanding enhancement to what we had to offer. We have a commitment by the
cruise lines at the highest level to retain Cayman on their itineraries in 2012
and beyond so long as we can show them we have improved our facilities with the
new berthing facilities. This means that we will inevitably see a drop in
cruise passengers in the next two years before the facility is opened.

What
happens if the final agreement is not reached by
the end of this month?

The
developer is now working out the finer details of the construction as well as
exactly how much the project will cost. We hope that, even if they cannot
achieve this by 31 October, they will at least be able to give us a sound
estimate of pricing within a five per cent range. This means that even if we
haven’t reached an absolute agreement we can still put the project out to
tender in terms of financing and its construction. Negotiations can take place
notwithstanding the precise figures. The government and the developer then have
a further two months to agree the final master plan, as final agreement must be
reached by 31 December.

What’s
the final opening goal?

We hope
to have final confirmation that Cayman will be hosting the Florida and
Caribbean Cruise Association annual conference in November 2012 and we would
hope to have the facility up and running by then. We anticipate that the cruise
lines will have us on their itineraries again
for 2013. 

It was to a crammed ballroom last
month at the Marriott Resort that Cline Glidden gave a detailed presentation on
how far the government has come in the development of cruise berthing in Cayman.
Due to time constraints, much of the information was delivered at a rapid pace,
so the Journal sat down with Glidden for an exclusive one-to-one for a detailed
look at the project.

How far has the cruise berthing
plan come as at the beginning of October?

Following the signing of a MOU with
the developer Dart Enterprises Construction Co. earlier this year, in September
the government entered into a second agreement with the developer, which
outlines the framework and the scope of the development. We are now working
toward agreeing the main agreement, which will finalise the details of the
project, including its construction and cost. We hope to have this agreement
signed by the end of October.

Why didn’t government take on the
development itself? Why does the project need a developer?

Government does not have the funds
to build a project of this size, which could cost US$200 million to US$300
million. Government also has borrowing restrictions, which prevent it from
borrowing funds in the traditional way. So it had to come up with an innovative
new method of providing this much-needed infrastructure.

Why didn’t government enlist the
assistance of the cruise lines, which have injected large sums of cash into
similar projects around the Caribbean?

Back in 2003 the government was in
discussions with the cruise lines with regard to the development of cruise
berthing facilities; however the change of government in 2005 meant a change in
emphasis, couple this with the severe down turn in the economy in 2008 and
2009, which led the cruise lines to constrict their project developments and we
had to look elsewhere.

Why
did the government choose DECCO?

DECCO is
already a significant investor in the Cayman Islands and thus the continued
success of Cayman is extremely important to them. DECCO has already undertaken
its own environmental impact assessment even before it came on board to ensure
that the project will not detrimentally affect both the area of development and
areas outside the development, such as Seven Mile Beach and the South Sound
area. 

What
was the initial scope of the project framework?

We
wanted to build two piers that could accommodate the new Oasis-sized cruise
ships. At the same time it was important to government that the project should
be entirely funded by the developer, that government (the Port Authority)
should retain complete control of the port and that existing retailers in the
vicinity of the new development should be protected.

And
now?

The
government realised that we needed to build more than just piers to attract
cruise visitors to Cayman and remain competitive; we needed to create an
enhanced world class destination and harbour that would be recognised
regionally as a world class facility. The project now includes the reclamation
of land to the size of about 8.3 acres, which will give much more scope for
development.  Even with this enhanced
project, however, the protection of existing business is of crucial importance.

How
far have you come with the Environmental Impact Assessment? 

The EIA
is extensive and compliant with the components listed in the draft Terms of
Reference, prepared by the Cayman Islands DoE in April 2009. Additionally, as
part of the team’s self-imposed due diligence, it also referenced the World
Bank’s ‘Environmental, Health and Safety Guidelines for Ports, Harbours and
Terminals’ and internationally accepted standards and criteria. The EIA
included the analysis of existing data and studies; and a large number of
special investigations and studies, computer simulations, surveys, etc., with
respect to the Project site and areas affected.

It is
important to note that the EIA is not to determine whether this is the right
site or not, this is a functioning port with significant infrastructure and
business investments surrounding it on both the sea and the land sides. The
primary purpose of the EIA is to inform the design and construction
methodology. When a final design has been agreed to, the design will then
identify any outstanding areas required for study and subsequently, the full
EIAR can be completed. We intend to make a summary of the findings available.

How
does the developer make
any money?

The
government will own all the land that the cruise berthing facility sits on and
will lease the land back to the developer at an agreed rate and for an agreed
period. The developer will be able to develop any residual land that the
facility does not directly use for the berthing of passengers. Suggestions for
the use of the excess land include the possible construction of a convention
centre, an amphitheatre and diving facility/pool. The developer will also
receive head taxes from the cruise lines. Those two revenue streams will pay
for the development.

So
government does not have
to pay anything?

If the
government decides to terminate the agreement prior to its four month expiry
(which runs until 31 December) then we have an obligation to pay half of the
developer’s expense up to a maximum of US$250,000. If agreement is reached or
if the agreement expires then the government will pay nothing but the exposure
is capped at US$250,000. That is government’s only financial exposure to the
project.

The cruise lines have already developed their itineraries
for 2011 and 2012 and those with the Oasis-sized ships (Royal Caribbean) cannot
berth in Cayman until our new facility has been opened. How does government
retain an interest from the cruise lines until we are ready to receive them?

Though
intensive discussions with the cruise lines I can say that there is still a demand
for this destination by cruise tourists – it is still a favourable and
sought-after as a destination – and they are the ones who dictate the
itineraries. That said, cruise lines shared their concerns that Cayman had
fallen behind in its facilities and that their discerning passengers were
demanding enhancement to what we had to offer. We have a commitment by the
cruise lines at the highest level to retain Cayman on their itineraries in 2012
and beyond so long as we can show them we have improved our facilities with the
new berthing facilities. This means that we will inevitably see a drop in
cruise passengers in the next two years before the facility is opened.

What
happens if the final agreement is not reached by
the end of this month?

The
developer is now working out the finer details of the construction as well as
exactly how much the project will cost. We hope that, even if they cannot
achieve this by 31 October, they will at least be able to give us a sound
estimate of pricing within a five per cent range. This means that even if we
haven’t reached an absolute agreement we can still put the project out to
tender in terms of financing and its construction. Negotiations can take place
notwithstanding the precise figures. The government and the developer then have
a further two months to agree the final master plan, as final agreement must be
reached by 31 December.

What’s
the final opening goal?

We hope
to have final confirmation that Cayman will be hosting the Florida and
Caribbean Cruise Association annual conference in November 2012 and we would
hope to have the facility up and running by then. We anticipate that the cruise
lines will have us on their itineraries again for 2013. 

 

 

boatSM

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