CubaNews / February 2011
By Larry Luxner
Vancouver-based Leisure Canada Inc. en-visions at least $1 billion worth of investments in three Cuban real-estate projects — beginning with its long-delayed Monte Barreto business hotel in the center of Havana’s upscale Miramar district.
In a half-hour phone interview from Toronto, CEO Robin Conners told CubaNews that his publicly traded company, in a 50-50 venture with state-run Gran Caribe SA, is about to sign off on the luxury all-suite hotel.
“We’ve got final approvals on architecture and engineering. Some final site work needs to be done. We want to make sure there are no underground caves before we start construction,” he said.
“I know we’ve heard all this before,” Conners said, acknowledging past hype over Leisure Canada’s press releases describing projects that never materialized. “The difference is, this is a new management team with a proven track record. We’ve gone back to the market and raised substantial capital in terms of refinancing the company — just under $20 million in the last year.”
When finished, the Monte Barreto project — which occupies an entire city block — will boast 716 guest rooms on seven floors, a full conference center, commercial space, six restaurants and various bars and cafés.
“Under the old management, this project was going to be built in three phases. When we restructured the company, we decided it didn’t make any sense to build it in three phases, because that would have negatively impacted the customer experience,” he said.
“The first phase had the spa and restaurants, and because of the way it was designed, we would have had to support the other two phases even though they wouldn’t have been built yet. The efficiency would have been very negative,” Conners added.
He explained that Leisure Canada will see “fairly significant savings” in construction costs by not building Monte Barreto out over an 8- or 9-year period as originally planned.
Bidding is now scheduled to start in mid-February, a process that normally takes 90 days. Construction should then begin later this year, with completion in 30-36 months.
“We’re utilizing a building technology that has not yet been used in Cuba,” he explained. “It’s a cement pre-cast technology that’s very good for any environment where you’ve got high humidity and hurricanes. It’s been used in South Florida and other places with subtropical conditions, and is very highly regarded for this kind of application.”
Monte Barreto represents a $200 million investment, though Conners wouldn’t talk about financing arrangements.
“It’s not up to me to discuss how the partnership would choose to finance this,” he told CubaNews. “We’ve got several options, and we’re working with Gran Caribe to decide which suits best the needs of this venture.”
The next project is Jibacoa, a giant golf-and-marina complex involving $800 million in development that Conners says will resemble — and eventually compete with — Casa de Campo in the Dominican Republic.
The giant resort is located on a 5.5-square-kilometer tract of oceanfront property 65 km east of Havana and 55 km west of Varadero. It’s being built in four phases, with Phase I costing $150 million.
“Jibacoa is still in the planning stages,” he told us. “The first phase includes two golf courses, the first hotel and all the infrastructure — water and sewage treatment facilities, roads and power plant. That’s why the first phase ends up being very expensive.”
Conners said Leisure Canada wants to speed up development of the project’s two golf courses, “because it takes two years to seed, and for literally a year after you plant the grass, you can’t use the course.”
Although the first phase calls for roughly 300 units, Jibacoa is designed to eventually have 2,200 residences including a mix of apartments, casitas and hotel rooms arranged in neighborhood villages.
“As we go through the various stages of development, the product mix keeps changing and being added to. So eventually, we’ll have golf, hiking, cycling and a whole bunch of other amenities,” Conners told us.
“We will probably have at least six hotels, and we would be operating them. Our background is hotel development and resorts, so we have considerable expertise in this.”
Leisure Canada’s third venture foresees investment of $125 million in a 350-room, all-suite hotel on Cayo Largo, an island skirting Cuba’s southern coast that’s part of a network of coral reefs stretching over 100 kms. That property covers 29.5 hectares, according to the company website.
Conners, 55, is originally from Vancouver. He started in the airline business and eventually came to work for Intrawest, a large Canadian resort developer. He became CEO of Leisure Canada in September 2009, in a management shakeup that saw the departure of Vancouver financier Walter Berukoff as executive chairman.
Berukoff, 66, also resigned from Leisure Canada’s board of directors as well as its subsidiary, Wilton Properties, though he kept the title of chairman emeritus “in appreciation of his numerous contributions to the company” Conners said in a press release.
“The team we now have in place, quite frankly, has a ton of experience, so our ability to operate hotels, golf courses and resorts at a proper price and make sure they’re built well is one of the things that differentiates us from a lot of other people,” Conners told CubaNews.
“We’ve had some discussions with other operators, but we feel we’re better off operating these products ourselves.”
Conners said luxury suites at the Monte Barreto will go for around $200 a night — and that while an end to the U.S. travel ban would be nice, “our research shows that the Canadian and European markets are more than strong enough to absorb all our capacity.”
The Latin American market shouldn’t be overlooked either — nor should the U.S. market, even without run-of-the-mill tourists.
Last year, he pointed out, 600,000 Americans came to Cuba, around half of them Cuban exiles visiting their families. That number will rise dramatically, now that the Obama administration has opened the door to religious, academic and “people-to-people” travel.
“Along with the other growth Cuba has seen, all of a sudden you’ve got U.S. citizens who are allowed to visit,” he said. “And the Cubans have been extremely successful at developing the Latin American market in the last four years.”
Conners conceded that “Cuba is not a simple place to do business,” but that the potential is huge because nobody in Cuba is currently offering a luxury resort experience on par with Casa de Campo.
“Typically the market looks for 15-18% return on investment. We’re confident we can achieve those returns given the strength of Cuba’s growth in tourism. They’ve had the largest single quarter growth in the last 10 years,” he concluded. “If we didn’t feel the market was deep enough to support our projects, we wouldn’t go ahead with them.”