AN OPEN REPONSE TO LENNOX LINTON
September 9th, 2019
Dear Lennox,
On September 3rd, 2019 on the Hot Seat, you stated in reference to matters relating to the Range/Kempinski Project: “when you examine those elements closely you seeing the outline of an elaborate scheme to cheat and steal.”
You then inferred the possibility of local developers, including myself & Secret Bay who you named directly, being involved in such an elaborate scheme:
“These arrangements that people like those responsible for Jungle Bay and those responsible for the villas at Secret Bay,
Residences at Secret Bay and the Anichi, Mr. Alick Lawrence and others are benefitting from. So we have been able to have a
window into the operations of the Kempinski by Range, these are two foreign people. But we have locals as well. Friends of the Government. Who are benefiting from the real estate arrangements that are part of the Citizenship by Investment program.
And you can understand now why is it that these agents and these people who are benefitting , these locals are keeping their
mouth shut. Nobody is speaking up for the integrity of the scheme. Nobody is speaking up for operating it properly in the public
interest. Because it appears from what we are seeing with Kempinski that there is a lot of money for these people, these locals,
these friends of Skerrit, the Sam Raphaels, the Gregor Nassiefs, the Alick Lawrences and so on. To make… There is lots of money
for them to make over and above what is needed for the hotel development. What is needed for the construction of the hotel.
There is a lot of money for them to be made given this Kempinski model, this Range Kempinski model.”
While the legal implications of these statements are being pursued, I have, at your invitation decided to “unshut” my mouth, and respond to what I consider to be at best intellectual dishonesty and at worst intellectual incompetence.
My response, again at your invitation, is intended to also provide anyone willing to read, an insider’s view of the CBI program and how it works.
Though the program is relatively complex, it continues to astound me the numerous myths and fallacies that abound about the
CBI program, and how few people really understand how the program works, and more astounding is how anyone could really
take seriously an allegation that ec$1.2b could “go missing” in an economy the size of ours.
My response, as contained herein, will be in three parts:
Part I: The Business of CBI,
Part II: The Business of Real Estate (aka
“where de money gone”) and
Part III: The Good, The Bad & The Ugly.
Forgive the long windedness of my response but based ont he recent statements you made, I have to assume the need to go back to basics.
Part I: The Business of CBI
Residence and citizenship by investment programs are now offered by over 80 countries and the global industry is
conservatively estimated to be a US$21.4 billion market that’s growing by 23% a year.
A report last week from IMI Insider
stated that “57,000+ Chinese spent more than US$44 Billion on in the last decade.” When a country enters the CBI market they
are not doing so for philanthropic reasons, they are doing it to generate revenue and investment. It’s a highly competitive
market with minimum investments ranging from us$100,000 to Euro $2 million. And those of us with romantic ideals (myself
included) of requiring our Economic Citizens to come to Dominica in order to obtain Citizenship or to demanding that they pay much higher prices for Citizenship are ignoring competitive forces and losing site of the fact that the day we move in this
direction is the day we decide to exit the industry.
One can argue as to whether one likes or dislikes the concept of “selling passports” as it is commonly termed, but so long as our Government stays in the CBI game – as each successive one has done for the past 26 years – then it is a business in which we must remain competitive. The current Government’s restructuring of the
program in 2014 has led to Dominica becoming a market leader within the Caribbean region and generating to date billions of dollars in economic activity for Dominica.
So why would people be spending us$24b a year on residence and citizenship by investment programs offered by over 80
countries? There are many factors, but the prevailing one is “an insurance policy against future uncertainty”. One of the fastest emerging source markets for second citizenship is South Africa. The currency is in a downward spiral, crime is out of control and the country’s passport is increasingly problematic for travel, so South Africans who can afford it are investing in second
Citizenship. Think of Yemen, Egypt, Hong Kong, Taiwan. Think of restrictions on freedom in China or Russia or Saudi Arabia.
We all want to be able to travel, with our family, for our children’s education, for business, and in a worst case scenario if our
country collapses, we need mobility options.
Now on the selling side of this equation, in China alone there are 27,000 “immigration agents”. Add the other major markets of
the Middle East and Africa, Russia, South East Asia and India (these “immigration agents” market and promote Citizenship or
Residency options to their clients, not to be confused with licensed “authorized agents” that process Citizenship applications).
In summary, there are 80+ countries offering one type or another of Citizenship or Residency options, of which 5 are in the
Caribbean, and there are tens of thousands of agents spread across the globe, and you should begin to get a sense of the
legitimacy, size, complexity and competitiveness of this global industry for 2nd Citizenship and Residency.
Part II: The Business of Real Estate
If after looking at the scores of programs available worldwide, a potential economic citizen looks at the Dominica program, they
are faced with two options tabled below: the Economic Diversification Fund option, also known as the “Donation” option. The
other option, called the “Real Estate” option, requires a minimum us$200,000 investment into the Real Estate project and an
additional minimum of us$25,000 into the Economic Diversification Fund. The amount going into the Real Estate project is a
minimum of us$200,000 regardless of the size of the family, while the associated amount for Real Estate going into the
Economic Diversification Fund is a minimum of us$25,000 which increases according to the size of the family:
Before I get into the statements you made surrounding Real Estate, it is important to ask the simple question: Why would a
potential economic citizen select the more expensive Real Estate option over the Donation option? A single Applicant typicallywon’t think twice because the Donation option is us$100,000 while the Real Estate option (investment plus EDF) starts at
$225,000. But as the family size grows, say a family of 4, the Donation option is $200,000 vs. the Real Estate option at us$235,000. So at a family size of 4 or more, the potential investor may consider Real Estate for the simple reason that they are investing in something tangible, an asset that they can potentially get a financial return on and potentially resell in the future,
while the Donation option is a direct contribution to the Government EDF which does not result in the ownership of an asset.
This basic point of the Real Estate investment delivering a tangible asset to the investor seems to escape you as you have used the term “free money” time and time again, recently stating for example “the handing over of the passport, in exchange for monies that end up as free money in the hands of developers to do work in Dominica”.
There is nothing “free” about the investment monies that developers attract. It is not, as you or others may believe, CBI money
that the Government has that they hand over to the Developer. It is hard won investment monies in a highly competitive
market earned by the developer. As you should be aware, that there are approximately 100 CBI real estate projects in St. Kitts,
over 40 in Antigua, almost 20 in Grenada and currently 6 in Dominica plus countless developments in European programs plus
the currently quota-restricted EB5 in the US. Why would an investor choose Jungle Bay in Dominica vs. Kimpton Kawana in
Grenada vs. Christophe Harbor in St. Kitts vs. Canelles in St. Lucia or a development in Greece or Malta or Cyprus? It’s a hard
won battle that agents and developers fight, with very significant sales commissions in the mix, and each investment is
scrutinized by the investor, because after all, they can spend less money and simply go with the Donation/EDF option. So there
is no “free money” being handed over here.
Another incredible statement from you (with Matt in the background saying “Why do you want a cut”): “I’m asking, if you are
making your fees as a seller of passports, you putting the Government’s money in the treasury, you putting the investment now
into the real estate project, why are you still taking a commission on the investor’s money, what is supposed to be the investor’s
money.” You are implying here that developers are agents “selling passports”. A ludicrous statement. Secret Bay is not a CBI
agent, we do not “sell passports” and as such we cannot and do not collect fees from anyone for “selling” or “processing”
passports. We are in the business of promoting our real estate, our villas, and attracting investments into those assets. Your
reference to “taking a commission on the investor’s money” is also mind boggling. You are using the term “commission” to
describe a developer’s profit, and implying that developer’s should not be entitled to a “profit” from selling their hotel or villas
or real estate product because they are “making fees as a seller of passports”. So using Secret Bay as an example, I spend 20
years purchasing 33+ acres of land in over 10 separate transactions, I invest tens of millions of dollars, plus borrow money from
the bank, our incredible Secret Bay team runs a hotel for eight years with all of their blood, sweat and tears, we gain
unparalleled international recognition with our “local brand” going global, we invest more and embark on building many more
villas, and our villas are being sold to both Citizenship and Non Citizenship investors, and every investment dollar we get is hard
fought and won, and you, Lennox, are telling me that we are not entitled to a profit? And you claim to be a friend of the private
sector?
It is time that you educate yourself on Real Estate development. Outside of the CBI program, real estate developers will aim for
anything between a 16% and a 20% return, which we can term a “development profit”. And within the CBI program, due to the
higher risks involved, the targeted margins can be higher. Many developments go bankrupt before they are completed, usually
because sales lag and/or due to significant construction costs overruns, and the average profit actually achieved in the end for
those that do not go bankrupt is often substantially lower.
You further stated: “There is lots of money for them to make over and above what is needed for the hotel development. What is
needed for the construction of the hotel”. Have you made any effort Lennox to understand how real estate development works?
Are you aware for example that construction costs typically account for between 50% and 60% of the total real estate
Donation Option $100,000 $200,000
Real Estate - Investment into Development (Minimum) $200,000 $200,000
Real Estate - Government Fees $25,000 $35,000
Real Estate - Total $225,000 $235,000
COUNTRY INVESTMENT OPTIO
S PRICE FOR 1 PERSON PRICE FOR FAMILY OF 4
DOMINICA
development costs in a CBI scenario, with sales and marketing expenses, particularly commissions to international marketing
agents, adding significant costs, in addition to many other line items including pre-operating costs. As you clearly need to do
some research, I suggest you read 2018 HVS Global Hospitality study and the 2018 BCQS Construction Market Trend Report for
the Caribbean& Latin America. You will note that costs for Luxury Resorts can and often do exceed us$600,000 per key/room
(this is not what it cost to build the room, it is the total construction costs divided by the number of rooms). You will also notice
construction prices per Sq. Ft. ranging between us$250 to us$550, and you should know that currently, in Dominica, to build a
major hotel requires foreign contractors and crew at significantly higher costs due to lack of available local resources. And
finally, you cannot seriously talk about profit without understanding risk. So half way through a major CBI project, the bottom
falls out of the CBI market, no more sales, everything grounds to a halt. What happens then to the developer’s investment, the
loans, the debt and the half-built project? Bankruptcy happens.
Secret Bay’s example. After 8 years of operations and multiple expansions, and then a battering by Hurricane Maria in 2017,
and an incredible effort to re-open in November 2018, we are continuing to expand and build out our resort, and CBI is but one
channel of equity financing: there is my own equity, the equity of other shareholders, bank loans, equity investments from non-
Citizenship buyers and equity investments from Citizenship buyers. Before we even applied to the Government for approval
under the CBI program, nearly ec$20m had been spent, for the land, the resort construction, master planning, design and
engineering services of every kind, major infrastructure works, and the list goes on. We applied for CBI approval in 2015 – long
after we began operating - and it took an incredible (and in my opinion shameful) 3.5 long years for Government approval which
came in February 2019. We have since opened offices in Dubai, engaged Sales Directors in Dubai and Mainland China (for
Citizenship sales) and in the Caribbean (for non-Citizenship sales) and invested untold hundreds of thousands of dollars in sales
and marketing to promote our villas, and we have already began construction works on the expansion. We have seen no “free
money” coming in yet, as you call it, but we are committed to our vision, and willing to take the risk.
“Free money”, and an “elaborate scheme to cheat and steal”? I encourage you Lennox, or any of the “Friends of Lennox Linton”
– DO IT! Buy land, produce architectural and engineering concepts, start building, investment everything, borrow money,
prepare your budgets and financial forecasts inclusive of your “developers profit”, go through an exhaustive Government
approval process, hire a global sales and marketing team, invest in and develop your brand, go out into a global market as a
newcomer, travel non-stop, take on the well-established titans, and keep going especially when there is no momentum, and all
you have on your shoulders is investment and debt, but keep the faith, keep committed, work 24x7 because now you have to
answer agent phone calls at 10pm from Dubai and 2am from China, and keep going, persevere my friend, pursue that elusive
profit! After you have done that, then come at us with your serial speculation and illogical inferences.
Now “Housing”, the 3rd option recently made available to investors. Housing is like Real Estate in that there is a private
developer involved but it is also like EDF/donation in that the investor gets no asset in return. So it’s a hybrid product, a “mix” of
the two (and note that no developer or agent is happy with it because it provides for preferential market pricing to reflect the
Government’s priority on housing). So the particular developer finds clients on their own for this “hybrid” CBI offering: the
investor invests their money, the developer uses these funds to build out Housing projects and the State, having taken zero risk,
gets the Housing assets in return, and the developer reaps a profit.
This bring us to the very important point of how money is accounted for and who “owns” what money, aka “where de money
gone”. Note that if the Government was to include in its public accounts, based on how developer contracts are structured, the
supposed “missing” money, it would be fraudulent because that money does not belong to Government, it belongs to the
developers. This is the standard in all the OECS CBI Programs. In fact, the one situation where a regional Government dared to
breach that arrangement and to use the designated funds, they were successfully litigated against by a developer. In other
words, if an investor invests us$200,000 in purchasing a Villa, and the developer transfers full title of that Villa to that investor,
how can the $200,000 be reported as Government revenue? No, ONLY the $25,000 that the investor pays to Government (refer
to table above) is what goes into the Treasury and this is what is reported in the Government’s public accounts. Incredibly, you
have not grasped this and prefer, as is traditional for you, to seek spin rather than seeking a deeper understanding and truth.
Now Secret Bay, like all developers, has an Escrow account to which the Government is a signatory. The monies from investors
buying villas at Secret Bay that gets past due diligence are deposited in this account – this is Secret Bay’s money, not the
Governments, because it is money used to purchase a financial interest in a real estate asset at Secret Bay, it is NOT money
being used to “purchase a passport”. Here is the thing you do not seem to understand: the fact that they have made the
investment in Secret Bay “qualifies” them for Dominica Citizenship, and then they must also pay the minimum us$25,000 (using
the example above) to the Government to obtain Citizenship, but their $200,000 has earned them a real tangible financial
interest in a Secret Bay villa.
Why is the Government doing this: because the Government wants its CBI program to generate money a) into its Treasury for
direct Government investments, b) into its tourism sector to ensure the country’s hotel plant rapidly expands and c) into its
housing sector to deliver a very significant number of homes to the population after two major natural disasters.
You may question the Government’s motivation for structuring the agreements and escrow accounts in this way, but Dominica’s
Real Estate program is, in general terms, no different than St. Kitts or Antigua or Grenada, in that the monies that go into those developments are not reflected in Government accounts. The program has seen the re-launch of Jungle Bay, the soon to be opening of Kempinski, and both Anichi and the Hilton are in their construction phases. You may prefer to “eliminate” the
private developer from the equation, let the Government do the hard work and let the Government take the full risk of marketing, sales, construction and delivery. I can guarantee you that this would yield a disaster in poorly managed construction
projects (aka The Morocco Hotel), massive cost overruns, deadlines going years beyond what they should and half-built or unbuilt hotels. That is why no other Government in the region has structured real estate any different from Dominica.
All of that being said, I am 100% in favor of more transparent accountability so the public has a much better understanding of
how the industry is structured and how monies are allocated, but to serially engage in the nonsensical speculation of $1.2b
“missing”, and to infer that developers like myself may be involved in an “elaborate scheme to cheat and steal” and to suggest
that this is the reason that we are “keeping our mouth shut”, is, as I have said earlier, at best intellectual dishonesty and at
worst intellectual incompetence.
Part III: The Good, The Bad & The Ugly
The Good. When Dominica instituted the Real Estate option in 2014, if differentiated itself in a number of ways. First, the
approval process is arduous. Second, it requires that all investment monies destined to a real estate project are deposited into a
developer’s escrow account which the Government has control over as a signatory, and even though that money belongs to the
developer, it is only released to the developer if there is correlating progress in the project. In other words, if the developer sells and receives 20% of the total investment, the Government does not allow the release of those funds until the developer shows 20% progress on construction. This requires the investor to financially front-load the investment – meaning to provide their own financing ahead of receiving any funds from escrow such that construction advances. I have heard developers seemingly on
the edge of a nervous breakdown because the Financial Secretary will not sign off on releasing their money to their project. But
this prevents a developer from receiving money and not putting it into construction, something that has happened repeatedly in
another jurisdictions. Also, the Government has deliberately kept the funnel of CBI real estate projects “tight” (so only a few
projects at a time) thus increasing the probability of each project completing. Look at Dominica’s pipeline of projects vs. other
jurisdictions: https://www.imidaily.com/cbi-real-estate-watch/ It’s smart policy and increases each developer’s probability of
success. And lastly, but certainly not least, Agents and Applicants alike laud Dominica’s CBI unit for its efficiency and speed of
processing while maintaining very high due diligence standards.
The Bad & The Ugly. The regional CBI programs are extremely vulnerable and one major failure in due diligence could begin to
derail it. This requires an unrelenting effort to ensure the best and most comprehensive due diligence process, and to further
enhance that, Dominica needs to implement biometric passports, a move that is, in my opinion, long overdue. The industry also
needs much tighter regulations – there are unscrupulous agents and developers making a mess of things for everyone else
offering what are known as “special deals”, completely undercutting the market and undermining the entire program and the
respective Governments are not cracking down. The special hybrid Housing offering, while beneficial to Dominica, creates a
serious challenge for the program to the point that some agents are now refusing to offer Dominica because they cannot
compete with the Housing option. The banking process of receiving funds from economic citizens is frustrating at best, and
more needs to be done to increase efficiency and customer service while applying the necessary due diligence requirements. In
summary, the five participating Caribbean CBI countries need to establish uniform regulations and guidelines, inclusive of severe penalties for those developers and agents engaged in unethical and illegal practices. Such regulations should also include minimum transparency and accountability requirements for the programs. And as a final note, we are building many, many hotels, but these projects will not deliver on the promise of a sustainable economic impact if we are unable to fill the rooms and
attract many more visitors to the island, an imminent challenge that requires a lot more focus and action.
In Closing the CBI Real Estate projects do not receive Government CBI monies, Economic Citizens choosing the real estate option are actual investors and become owners of the real estate projects, Government cannot report developer’s money as their own, “total construction cost” does not equal “total real estate development cost” and developers should be entitled to a profit for making significant investments and taking significant risks in the marketing, sales and development of real estate projects.
Finally, while it is obvious you have no serious knowledge or understanding of the workings of the real estate option, or the
terms of my agreement, I must invite you to publicly apologize for what I consider to be your insidious and baseless inferences
or innuendoes made against me as the developer of Secret Bay on September 3rd, during your discussion with Mr. Matthias
Peltier on the Hot Seat on Q95.
Time is of essence on this one as this will not be taken lightly because I must protect my reputation and that of Secret Bay.
Regards,
Gregor Nassief
September 9th, 2019
Dear Lennox,
On September 3rd, 2019 on the Hot Seat, you stated in reference to matters relating to the Range/Kempinski Project: “when you examine those elements closely you seeing the outline of an elaborate scheme to cheat and steal.”
You then inferred the possibility of local developers, including myself & Secret Bay who you named directly, being involved in such an elaborate scheme:
“These arrangements that people like those responsible for Jungle Bay and those responsible for the villas at Secret Bay,
Residences at Secret Bay and the Anichi, Mr. Alick Lawrence and others are benefitting from. So we have been able to have a
window into the operations of the Kempinski by Range, these are two foreign people. But we have locals as well. Friends of the Government. Who are benefiting from the real estate arrangements that are part of the Citizenship by Investment program.
And you can understand now why is it that these agents and these people who are benefitting , these locals are keeping their
mouth shut. Nobody is speaking up for the integrity of the scheme. Nobody is speaking up for operating it properly in the public
interest. Because it appears from what we are seeing with Kempinski that there is a lot of money for these people, these locals,
these friends of Skerrit, the Sam Raphaels, the Gregor Nassiefs, the Alick Lawrences and so on. To make… There is lots of money
for them to make over and above what is needed for the hotel development. What is needed for the construction of the hotel.
There is a lot of money for them to be made given this Kempinski model, this Range Kempinski model.”
While the legal implications of these statements are being pursued, I have, at your invitation decided to “unshut” my mouth, and respond to what I consider to be at best intellectual dishonesty and at worst intellectual incompetence.
My response, again at your invitation, is intended to also provide anyone willing to read, an insider’s view of the CBI program and how it works.
Though the program is relatively complex, it continues to astound me the numerous myths and fallacies that abound about the
CBI program, and how few people really understand how the program works, and more astounding is how anyone could really
take seriously an allegation that ec$1.2b could “go missing” in an economy the size of ours.
My response, as contained herein, will be in three parts:
Part I: The Business of CBI,
Part II: The Business of Real Estate (aka
“where de money gone”) and
Part III: The Good, The Bad & The Ugly.
Forgive the long windedness of my response but based ont he recent statements you made, I have to assume the need to go back to basics.
Part I: The Business of CBI
Residence and citizenship by investment programs are now offered by over 80 countries and the global industry is
conservatively estimated to be a US$21.4 billion market that’s growing by 23% a year.
A report last week from IMI Insider
stated that “57,000+ Chinese spent more than US$44 Billion on in the last decade.” When a country enters the CBI market they
are not doing so for philanthropic reasons, they are doing it to generate revenue and investment. It’s a highly competitive
market with minimum investments ranging from us$100,000 to Euro $2 million. And those of us with romantic ideals (myself
included) of requiring our Economic Citizens to come to Dominica in order to obtain Citizenship or to demanding that they pay much higher prices for Citizenship are ignoring competitive forces and losing site of the fact that the day we move in this
direction is the day we decide to exit the industry.
One can argue as to whether one likes or dislikes the concept of “selling passports” as it is commonly termed, but so long as our Government stays in the CBI game – as each successive one has done for the past 26 years – then it is a business in which we must remain competitive. The current Government’s restructuring of the
program in 2014 has led to Dominica becoming a market leader within the Caribbean region and generating to date billions of dollars in economic activity for Dominica.
So why would people be spending us$24b a year on residence and citizenship by investment programs offered by over 80
countries? There are many factors, but the prevailing one is “an insurance policy against future uncertainty”. One of the fastest emerging source markets for second citizenship is South Africa. The currency is in a downward spiral, crime is out of control and the country’s passport is increasingly problematic for travel, so South Africans who can afford it are investing in second
Citizenship. Think of Yemen, Egypt, Hong Kong, Taiwan. Think of restrictions on freedom in China or Russia or Saudi Arabia.
We all want to be able to travel, with our family, for our children’s education, for business, and in a worst case scenario if our
country collapses, we need mobility options.
Now on the selling side of this equation, in China alone there are 27,000 “immigration agents”. Add the other major markets of
the Middle East and Africa, Russia, South East Asia and India (these “immigration agents” market and promote Citizenship or
Residency options to their clients, not to be confused with licensed “authorized agents” that process Citizenship applications).
In summary, there are 80+ countries offering one type or another of Citizenship or Residency options, of which 5 are in the
Caribbean, and there are tens of thousands of agents spread across the globe, and you should begin to get a sense of the
legitimacy, size, complexity and competitiveness of this global industry for 2nd Citizenship and Residency.
Part II: The Business of Real Estate
If after looking at the scores of programs available worldwide, a potential economic citizen looks at the Dominica program, they
are faced with two options tabled below: the Economic Diversification Fund option, also known as the “Donation” option. The
other option, called the “Real Estate” option, requires a minimum us$200,000 investment into the Real Estate project and an
additional minimum of us$25,000 into the Economic Diversification Fund. The amount going into the Real Estate project is a
minimum of us$200,000 regardless of the size of the family, while the associated amount for Real Estate going into the
Economic Diversification Fund is a minimum of us$25,000 which increases according to the size of the family:
Before I get into the statements you made surrounding Real Estate, it is important to ask the simple question: Why would a
potential economic citizen select the more expensive Real Estate option over the Donation option? A single Applicant typicallywon’t think twice because the Donation option is us$100,000 while the Real Estate option (investment plus EDF) starts at
$225,000. But as the family size grows, say a family of 4, the Donation option is $200,000 vs. the Real Estate option at us$235,000. So at a family size of 4 or more, the potential investor may consider Real Estate for the simple reason that they are investing in something tangible, an asset that they can potentially get a financial return on and potentially resell in the future,
while the Donation option is a direct contribution to the Government EDF which does not result in the ownership of an asset.
This basic point of the Real Estate investment delivering a tangible asset to the investor seems to escape you as you have used the term “free money” time and time again, recently stating for example “the handing over of the passport, in exchange for monies that end up as free money in the hands of developers to do work in Dominica”.
There is nothing “free” about the investment monies that developers attract. It is not, as you or others may believe, CBI money
that the Government has that they hand over to the Developer. It is hard won investment monies in a highly competitive
market earned by the developer. As you should be aware, that there are approximately 100 CBI real estate projects in St. Kitts,
over 40 in Antigua, almost 20 in Grenada and currently 6 in Dominica plus countless developments in European programs plus
the currently quota-restricted EB5 in the US. Why would an investor choose Jungle Bay in Dominica vs. Kimpton Kawana in
Grenada vs. Christophe Harbor in St. Kitts vs. Canelles in St. Lucia or a development in Greece or Malta or Cyprus? It’s a hard
won battle that agents and developers fight, with very significant sales commissions in the mix, and each investment is
scrutinized by the investor, because after all, they can spend less money and simply go with the Donation/EDF option. So there
is no “free money” being handed over here.
Another incredible statement from you (with Matt in the background saying “Why do you want a cut”): “I’m asking, if you are
making your fees as a seller of passports, you putting the Government’s money in the treasury, you putting the investment now
into the real estate project, why are you still taking a commission on the investor’s money, what is supposed to be the investor’s
money.” You are implying here that developers are agents “selling passports”. A ludicrous statement. Secret Bay is not a CBI
agent, we do not “sell passports” and as such we cannot and do not collect fees from anyone for “selling” or “processing”
passports. We are in the business of promoting our real estate, our villas, and attracting investments into those assets. Your
reference to “taking a commission on the investor’s money” is also mind boggling. You are using the term “commission” to
describe a developer’s profit, and implying that developer’s should not be entitled to a “profit” from selling their hotel or villas
or real estate product because they are “making fees as a seller of passports”. So using Secret Bay as an example, I spend 20
years purchasing 33+ acres of land in over 10 separate transactions, I invest tens of millions of dollars, plus borrow money from
the bank, our incredible Secret Bay team runs a hotel for eight years with all of their blood, sweat and tears, we gain
unparalleled international recognition with our “local brand” going global, we invest more and embark on building many more
villas, and our villas are being sold to both Citizenship and Non Citizenship investors, and every investment dollar we get is hard
fought and won, and you, Lennox, are telling me that we are not entitled to a profit? And you claim to be a friend of the private
sector?
It is time that you educate yourself on Real Estate development. Outside of the CBI program, real estate developers will aim for
anything between a 16% and a 20% return, which we can term a “development profit”. And within the CBI program, due to the
higher risks involved, the targeted margins can be higher. Many developments go bankrupt before they are completed, usually
because sales lag and/or due to significant construction costs overruns, and the average profit actually achieved in the end for
those that do not go bankrupt is often substantially lower.
You further stated: “There is lots of money for them to make over and above what is needed for the hotel development. What is
needed for the construction of the hotel”. Have you made any effort Lennox to understand how real estate development works?
Are you aware for example that construction costs typically account for between 50% and 60% of the total real estate
Donation Option $100,000 $200,000
Real Estate - Investment into Development (Minimum) $200,000 $200,000
Real Estate - Government Fees $25,000 $35,000
Real Estate - Total $225,000 $235,000
COUNTRY INVESTMENT OPTIO
S PRICE FOR 1 PERSON PRICE FOR FAMILY OF 4
DOMINICA
development costs in a CBI scenario, with sales and marketing expenses, particularly commissions to international marketing
agents, adding significant costs, in addition to many other line items including pre-operating costs. As you clearly need to do
some research, I suggest you read 2018 HVS Global Hospitality study and the 2018 BCQS Construction Market Trend Report for
the Caribbean& Latin America. You will note that costs for Luxury Resorts can and often do exceed us$600,000 per key/room
(this is not what it cost to build the room, it is the total construction costs divided by the number of rooms). You will also notice
construction prices per Sq. Ft. ranging between us$250 to us$550, and you should know that currently, in Dominica, to build a
major hotel requires foreign contractors and crew at significantly higher costs due to lack of available local resources. And
finally, you cannot seriously talk about profit without understanding risk. So half way through a major CBI project, the bottom
falls out of the CBI market, no more sales, everything grounds to a halt. What happens then to the developer’s investment, the
loans, the debt and the half-built project? Bankruptcy happens.
Secret Bay’s example. After 8 years of operations and multiple expansions, and then a battering by Hurricane Maria in 2017,
and an incredible effort to re-open in November 2018, we are continuing to expand and build out our resort, and CBI is but one
channel of equity financing: there is my own equity, the equity of other shareholders, bank loans, equity investments from non-
Citizenship buyers and equity investments from Citizenship buyers. Before we even applied to the Government for approval
under the CBI program, nearly ec$20m had been spent, for the land, the resort construction, master planning, design and
engineering services of every kind, major infrastructure works, and the list goes on. We applied for CBI approval in 2015 – long
after we began operating - and it took an incredible (and in my opinion shameful) 3.5 long years for Government approval which
came in February 2019. We have since opened offices in Dubai, engaged Sales Directors in Dubai and Mainland China (for
Citizenship sales) and in the Caribbean (for non-Citizenship sales) and invested untold hundreds of thousands of dollars in sales
and marketing to promote our villas, and we have already began construction works on the expansion. We have seen no “free
money” coming in yet, as you call it, but we are committed to our vision, and willing to take the risk.
“Free money”, and an “elaborate scheme to cheat and steal”? I encourage you Lennox, or any of the “Friends of Lennox Linton”
– DO IT! Buy land, produce architectural and engineering concepts, start building, investment everything, borrow money,
prepare your budgets and financial forecasts inclusive of your “developers profit”, go through an exhaustive Government
approval process, hire a global sales and marketing team, invest in and develop your brand, go out into a global market as a
newcomer, travel non-stop, take on the well-established titans, and keep going especially when there is no momentum, and all
you have on your shoulders is investment and debt, but keep the faith, keep committed, work 24x7 because now you have to
answer agent phone calls at 10pm from Dubai and 2am from China, and keep going, persevere my friend, pursue that elusive
profit! After you have done that, then come at us with your serial speculation and illogical inferences.
Now “Housing”, the 3rd option recently made available to investors. Housing is like Real Estate in that there is a private
developer involved but it is also like EDF/donation in that the investor gets no asset in return. So it’s a hybrid product, a “mix” of
the two (and note that no developer or agent is happy with it because it provides for preferential market pricing to reflect the
Government’s priority on housing). So the particular developer finds clients on their own for this “hybrid” CBI offering: the
investor invests their money, the developer uses these funds to build out Housing projects and the State, having taken zero risk,
gets the Housing assets in return, and the developer reaps a profit.
This bring us to the very important point of how money is accounted for and who “owns” what money, aka “where de money
gone”. Note that if the Government was to include in its public accounts, based on how developer contracts are structured, the
supposed “missing” money, it would be fraudulent because that money does not belong to Government, it belongs to the
developers. This is the standard in all the OECS CBI Programs. In fact, the one situation where a regional Government dared to
breach that arrangement and to use the designated funds, they were successfully litigated against by a developer. In other
words, if an investor invests us$200,000 in purchasing a Villa, and the developer transfers full title of that Villa to that investor,
how can the $200,000 be reported as Government revenue? No, ONLY the $25,000 that the investor pays to Government (refer
to table above) is what goes into the Treasury and this is what is reported in the Government’s public accounts. Incredibly, you
have not grasped this and prefer, as is traditional for you, to seek spin rather than seeking a deeper understanding and truth.
Now Secret Bay, like all developers, has an Escrow account to which the Government is a signatory. The monies from investors
buying villas at Secret Bay that gets past due diligence are deposited in this account – this is Secret Bay’s money, not the
Governments, because it is money used to purchase a financial interest in a real estate asset at Secret Bay, it is NOT money
being used to “purchase a passport”. Here is the thing you do not seem to understand: the fact that they have made the
investment in Secret Bay “qualifies” them for Dominica Citizenship, and then they must also pay the minimum us$25,000 (using
the example above) to the Government to obtain Citizenship, but their $200,000 has earned them a real tangible financial
interest in a Secret Bay villa.
Why is the Government doing this: because the Government wants its CBI program to generate money a) into its Treasury for
direct Government investments, b) into its tourism sector to ensure the country’s hotel plant rapidly expands and c) into its
housing sector to deliver a very significant number of homes to the population after two major natural disasters.
You may question the Government’s motivation for structuring the agreements and escrow accounts in this way, but Dominica’s
Real Estate program is, in general terms, no different than St. Kitts or Antigua or Grenada, in that the monies that go into those developments are not reflected in Government accounts. The program has seen the re-launch of Jungle Bay, the soon to be opening of Kempinski, and both Anichi and the Hilton are in their construction phases. You may prefer to “eliminate” the
private developer from the equation, let the Government do the hard work and let the Government take the full risk of marketing, sales, construction and delivery. I can guarantee you that this would yield a disaster in poorly managed construction
projects (aka The Morocco Hotel), massive cost overruns, deadlines going years beyond what they should and half-built or unbuilt hotels. That is why no other Government in the region has structured real estate any different from Dominica.
All of that being said, I am 100% in favor of more transparent accountability so the public has a much better understanding of
how the industry is structured and how monies are allocated, but to serially engage in the nonsensical speculation of $1.2b
“missing”, and to infer that developers like myself may be involved in an “elaborate scheme to cheat and steal” and to suggest
that this is the reason that we are “keeping our mouth shut”, is, as I have said earlier, at best intellectual dishonesty and at
worst intellectual incompetence.
Part III: The Good, The Bad & The Ugly
The Good. When Dominica instituted the Real Estate option in 2014, if differentiated itself in a number of ways. First, the
approval process is arduous. Second, it requires that all investment monies destined to a real estate project are deposited into a
developer’s escrow account which the Government has control over as a signatory, and even though that money belongs to the
developer, it is only released to the developer if there is correlating progress in the project. In other words, if the developer sells and receives 20% of the total investment, the Government does not allow the release of those funds until the developer shows 20% progress on construction. This requires the investor to financially front-load the investment – meaning to provide their own financing ahead of receiving any funds from escrow such that construction advances. I have heard developers seemingly on
the edge of a nervous breakdown because the Financial Secretary will not sign off on releasing their money to their project. But
this prevents a developer from receiving money and not putting it into construction, something that has happened repeatedly in
another jurisdictions. Also, the Government has deliberately kept the funnel of CBI real estate projects “tight” (so only a few
projects at a time) thus increasing the probability of each project completing. Look at Dominica’s pipeline of projects vs. other
jurisdictions: https://www.imidaily.com/cbi-real-estate-watch/ It’s smart policy and increases each developer’s probability of
success. And lastly, but certainly not least, Agents and Applicants alike laud Dominica’s CBI unit for its efficiency and speed of
processing while maintaining very high due diligence standards.
The Bad & The Ugly. The regional CBI programs are extremely vulnerable and one major failure in due diligence could begin to
derail it. This requires an unrelenting effort to ensure the best and most comprehensive due diligence process, and to further
enhance that, Dominica needs to implement biometric passports, a move that is, in my opinion, long overdue. The industry also
needs much tighter regulations – there are unscrupulous agents and developers making a mess of things for everyone else
offering what are known as “special deals”, completely undercutting the market and undermining the entire program and the
respective Governments are not cracking down. The special hybrid Housing offering, while beneficial to Dominica, creates a
serious challenge for the program to the point that some agents are now refusing to offer Dominica because they cannot
compete with the Housing option. The banking process of receiving funds from economic citizens is frustrating at best, and
more needs to be done to increase efficiency and customer service while applying the necessary due diligence requirements. In
summary, the five participating Caribbean CBI countries need to establish uniform regulations and guidelines, inclusive of severe penalties for those developers and agents engaged in unethical and illegal practices. Such regulations should also include minimum transparency and accountability requirements for the programs. And as a final note, we are building many, many hotels, but these projects will not deliver on the promise of a sustainable economic impact if we are unable to fill the rooms and
attract many more visitors to the island, an imminent challenge that requires a lot more focus and action.
In Closing the CBI Real Estate projects do not receive Government CBI monies, Economic Citizens choosing the real estate option are actual investors and become owners of the real estate projects, Government cannot report developer’s money as their own, “total construction cost” does not equal “total real estate development cost” and developers should be entitled to a profit for making significant investments and taking significant risks in the marketing, sales and development of real estate projects.
Finally, while it is obvious you have no serious knowledge or understanding of the workings of the real estate option, or the
terms of my agreement, I must invite you to publicly apologize for what I consider to be your insidious and baseless inferences
or innuendoes made against me as the developer of Secret Bay on September 3rd, during your discussion with Mr. Matthias
Peltier on the Hot Seat on Q95.
Time is of essence on this one as this will not be taken lightly because I must protect my reputation and that of Secret Bay.
Regards,
Gregor Nassief
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