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Reforming UDECOTT

Published Thursday February 24th, 2011

Last week’s cover story in this paper was of the same title.  Readers were treated to a two-page article introducing UDeCOTT’s new Board of Directors and offering several views from the re-appointed Chairwoman, Jearlean John.

As a long-time UDeCOTT-watcher, I was really pleased to see their new Board appointed, but John’s opening quote in that article was provocative in the extreme.  Speaking about the scandalous International Waterfront Centre (IWC), UDeCOTT’s flagship project, John is reported to have mused “…Whatever else he did, he did that…”  Ms. John was referring to the now-departed Calder Hart.

Truer words were never spoken, but yet it was a provocative opening.  How so?

Despite the regime change, it seems that the IWC remains UDeCOTT’s flagship project.  On the one hand, its admirers point to the architectural merits of the complex and the repeated claims that it was completed on time and within budget.  On the other hand, it is a monument to a chronically-flawed process of project conception and approval, being one of those classic ‘white elephant’ projects, with a ‘break-even’ point at some point in the distant future, if ever. 

The IWC represents a serious paradox in the entire UDeCOTT fiasco, but more interestingly, it offers an insight into the extent of the issues facing that State-owned company.  Yes, there is an unbroken thread of unreason through this flagship project to the bigger picture.

I will move from the general to the particular.

To begin at the very basic level, UDeCOTT has published no audited accounts since the end of 2006.  Yes, that company, one of the hugest in the country,  was operated throughout its period of greatest activity without audited accounts.  Quite seriously, that indicates a far larger failure in terms of the rules and guidelines for State Enterprises, the oversight of the Parliament and of course the sheer dereliction of the Cabinet.  At one point in the Uff Enquiry, UDeCOTT's attorneys stated that it was a $12Bn company.  Of course, the last Prime Minister repeatedly told the public that UDeCOTT was a leading State Enterprise.

At the Uff Enquiry, Calder Hart was questioned under oath by Alvin Fitzpatrick SC, the JCC's attorney – the relevant extract is at this link – and said on 28th January 2009 that all the issues with UDeCOTT's accounts had been resolved.  He went on to say that the accounts would be published within shortly.  Of course that has never happened, so we have to ask why.

In March 2010 I made yet another public call for the publication of those accounts.  But even worse, according to a Newsday article on 18th March 2010, Jearlean John, the newly-appointed Chairwoman said

...Explaining that she adheres to “good corporate governance” in her professional life, John said Udecott will adhere to the law and the standing accounting practices as outlined by the law...

see link

That published promise was never delivered.

The simple fact is that we cannot continue talking about performance and good governance, far less change, without knowing the condition of our largest State Enterprises.

That is a serious and inescapable point.  We were sorely disappointed by the wanton mismanagement of the last regime and its consequences on the State Enterprise sector.  The State Enterprises cannot and will not function if the actual strategy is unsound.  The State Enterprises are meant to be servants to the Central Government.

I expect better from you both, Minister Mary King and Chairwoman Jearlean John.  Much better.  No continuation of the past follies and shameless excuses.  I am saying plainly to you, Ms. John, that you promised us these accounts nearly a year ago and we have nothing.  Sad to say, but a little further and your statements on this important matter could echo Hart's, as he told his tale. 

That article in last week's BG stated that the new UDeCOTT Board would consider financials for 2008, 2009 and 2010 at its first meeting.  No mention of 2007 and I hope that was a mis-print.

Where are the UDeCOTT accounts?  What is the mystery?  Are the issues resolved or not?  Is there yet another 'Code of Silence' surrounding this nexus between Calder Hart, the PM's office and PriceWaterhouse Coopers?

But what does the IWC have to do with all this?

You see, the various UDeCOTT supporters have continued to applaud this project as the flagship and a leading example etc. etc..  Even Jearlean John seems to be going in that direction.

So here are a few facts on that project -

·         The break-even rent – This is the rent a project needs to earn to repay its cost (those costs include land, professional fees, construction and finance – they do not include for profits or maintenance).  In the case of the  IWC, that break-even rent was calculated by me, in this column and prior to the Uff Enquiry, as being of the order of $30 per sq. ft.  Please note that rents of good quality space in POS at the time this project was approved would have been in the $12 psf range.

·         The Feasibility test – I questioned Calder Hart under oath at the Uff Enquiry and he stated that only one UDeCOTT project had been the subject of a feasibility test-  the very IWC.  He stated that its 'break-even rent' was '...under $20psf...', but when I questioned what was the value he had attributed to the land, he replied 'NIL'.  Bogus and unprofessional approaches to massive investments.  Hart was prepared to omit the property in order to carry out a feasibility test on a property development.  That is the sheer scale of the failure we are looking at.  All these projects were approved by the Cabinet, according to Manning's 13th May 2008 statement to the Senate.

·         The financing model – UDeCOTT's 2006 Annual Report was strong on the point that that project in particular did not require a State letter of comfort or guarantee.  It was meant to demonstrate the scale of achievement and independence.

·         When will the IWC break even? - The best offices in POS are rented in the $15 psf range and the IWC comprises some 900,000 sf of offices – that is about nine times the size of the Nicholas Towers on Brian Lara Promenade.  Due to its size, it would be reasonable to expect the IWC to fetch a rent of about $12-13psf now, if one were fortunate.  Given that background, it seems that this project will never break even.

If UDeCOTT's best project will never break even, the entire company must be insolvent or so close as to not make a difference.

If their best project is a big-time loser, it is no wonder that the last administration was a reluctant to publish UDeCOTT accounts.  The very year (2006) that project started was the very year the accounts stopped being published.

The profitability of the Hyatt, which was reportedly cited by John in last week's article, needs to be backed up by those accounts.  In any case the unprofitable offices far eclipse the Hyatt.

It is clear that UDeCOTT's new Board have a heavy task before them in terms of fixing its many ills, but hey need to start with an honest and straightforward approach.  If the country has to count our losses, you need to  do so now, Chairwoman John.  Do so.

There is no right way to do the wrong thing.

 

Afra Raymond is Managing Director of Raymond & Pierre Limited and President of the Joint Consultative Council for the Construction Industry (JCC).  www.afraraymond.com or www.raymondandpierre.com.

Afra Raymond - Property Matters

If UDeCOTT's best project will never break even, the entire company must be insolvent or so close as to not make a difference.

If their best project is a big-time loser, it is no wonder that the last administration was a reluctant to publish UDeCOTT accounts. 

The very year (2006) that project started was the very year the accounts stopped being published.

The profitability of the Hyatt, which was reportedly cited by John in last week's article, needs to be backed up by those accounts.  In any case the unprofitable offices far eclipse the Hyatt.

It is clear that UDeCOTT's new Board have a heavy task before them in terms of fixing its many ills, but hey need to start with an honest and straightforward approach. 

If the country has to count our losses, you need to  do so now, Chairwoman John.  Do so.

There is no right way to do the wrong thing.