Baha Mar Chinese Construction Firms Pledge Assets to Stay $1.6B Legal Ruling

Posted on: November 20, 2024, 09:00h. 

Last updated on: November 20, 2024, 04:03h.

Devin O'Connor @CasinoorgDevinO Read More
Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

A Bahamas construction firm linked to the Chinese government has pledged assets it owns in The Bahamas as collateral as it seeks a stay for an October court ruling that ordered the group to pay $1.6 billion to the original developer of the Baha Mar integrated resort casino in Nassau.

Baha Mar Bahamas Chinese construction
Baha Mar is seen in April 2015 before work stopped on the integrated resort casino. The Chinese construction firms that worked on the project have been ordered to pay the original developer of the property $1.6 billion in damages. (Image: The New York Times)

CCA Bahamas, Ltd. (CCAB), one of the defendants in the litigation over the development and construction of Baha Mar, this week pledged two hotels in Nassau as collateral as it and its co-defendants CSCEC Bahamas Ltd. and Chinese Construction America (CCA) appeal the $1.6 billion verdict. CCA is the United States-focused entity of the China State Construction Engineering Corporation. 

CCAB says its two pledged hotels were recently appraised by Cushman & Wakefield Inc. and Jones Lang LaSalle at between $232.7 million and $355.1 million.

CCA became involved with Baha Mar in 2014. The construction firms were welcomed in as investors and developers of the resort after the 2008 financial crisis resulted in previous partners fleeing.

The deal required that CCA be allowed to import Chinese nationals to construct the property, despite The Bahamas at the time experiencing an unemployment crisis, and that CCA could not be terminated or bought out from the undertaking for any reason.

The asset pledges follow an October decision from Manhattan Supreme Court Justice Andrew Borrok. The New York judge ordered the CCA companies to return the property’s original developer — BML Properties and its controlling stakeholder, Sarkis Izmirlian, who first envisioned the sprawling resort in 2005 — its $845 million investment plus interest and lost revenue dating back to May 2014.

Our decision to provide this security not only underscores our confidence that we will prevail on appeal but also fully meets the conditions BML Properties itself proposed to the appeals court for a stay of enforcement of the trial court’s fatally flawed decision. Given that the security we have offered the Court is consistent with BML Properties’ proposal, BML Properties should inform the Court that it agrees to a stay and allow the judicial process to take its course,” a spokesperson for CCAB told Casino.org.

“As we have said previously, BML Properties brought about its own failures through its gross mismanagement of the Baha Mar project and the trial court piled error on error in finding otherwise,” the statement continued. 

Court Ruling

Borrok agreed with Izmirlian in his allegations that the CCA firms engaged in “massive fraud.” BML Properties argued in a New York court that the Chinese agencies purposely delayed construction to miss three scheduled openings for the resort to put further financial strain on BML. Izmirlian’s company filed for bankruptcy in 2015.

China seized control of the unfinished resort and funded the resumption of construction through its Export-Import Bank of China. CCA ultimately sold the resort, then 97% complete, to Hong Kong-based Chow Tai Fook Enterprises, a privately held conglomerate with close ties to Beijing. No sale price was disclosed between the two closely connected entities. Chow Tai Fook opened Baha Mar in 2017 after spending $200 million to finish the development.

Chow Tai Fook Enterprises has a 10% position in the late Stanley Ho’s SJM Resorts, which owns and operates casino resorts in Macau. Chow Tai Fook also owns a casino in Vietnam and a 33% stake in Queen’s Wharf Brisbane in Australia.

Borrok sided with BML on its claims that the Chinese companies colluded to force The Bahamas-based company out. Baha Mar was conceptualized by Izmirlian and then-Bahamas Prime Minister Perry Christie to increase tourism to the island country, which had experienced a 20% decline in visitation during the previous decade.

Assets Unknown

The Chinese companies are appealing the Borrok ruling. In the meantime, they’ve asked Borrok to stay his $1.6 billion decision.

As security to stay enforcement of the judgment against Defendants, CCA Bahamas would be willing to pledge its shares comprising 100% ownership interest in its subsidiaries that own two hotels in Nassau, Bahamas,” the filing read.

The CCA Bahamas spokesperson clarified to Casino.org that the named assets are the British Colonial Nassau Hilton Hotel and Margaritaville Beach Resort in The Bahamas.