23 June 2022

Grenada Citizenship-by-Investment – what happened to the Kawana Bay Resort and what it means for CBI Investors.

Instituted in 2017, Grenada’s CBI program is one of the more expensive citizenship-by-investment programs in the Caribbean. However, it is also highly sought after thanks to some unique global mobility benefits offered by a Grenadian Passport – specifically the 30 day visa-free travel to China and access to the US through the E2 Investor visa.

According to the government of Grenada, “One of the options available to applicants seeking to obtain citizenship by investment in Grenada is to invest in a Government-approved project. Currently, these projects encompass real estate developments such as hotels, villas, and resorts. Because of the growth of the tourism industry, there is rising demand for tourist housing facilities. Real estate developments are thus fantastic opportunities for investors looking for high returns.

But all is not well with one of the projects for Grenada’s Real Estate Investment option – specifically – the Kimpton Kawana Bay Resort. What should have been luxury 5 star condos and a resort overlooking Grand Anse beach, is now a partly completed ‘white elephant’ and source of contention.

The Kawana Bay Resort – what happened in 2020 to stall its completion

In May 2017, the Kimpton Kawana Bay Project was approved by the government of Grenada for CBI investment to the amount of $99.28 million. It was to be the biggest CBI funded resort project to date. Everything appeared to be on track between 2017 and August 2020, when the government of Grenada reaffirmed the original budget allocation.

However, in December 2020, the Prime Minister of Grenada withdrew the budget approval, and the project stalled. This was despite the fact that the resort was almost complete, with $59 million raised from CBI at that time, and a further $40 million approved by Grenada in August 2020 required to complete the project. According to the plaintiffs in the resulting arbitration, there were no issues with the construction, no cash flow problems to prevent completion of the project with the remainder of the approved funding, and no misappropriation of funds. In essence – none of ‘the usual suspects’ that might normally stall a development of this nature.

So what happened? And what is the future for Kawana Bay (and its investors)?

The Kawana Bay vs Grenada Arbitration

The developer of Kimpton Kawana Bay, US company True Blue Development Ltd, is involved in arbitration with the government of Grenada through the ICSID – the World Bank mechanism for arbitration against a Sovereign State. This dispute was made public in 2021, after an impasse with the Grenadian Prime Minister Keith Mitchell that ultimately saw True Blue CEO Warren Neufeld resigning from a diplomatic post as an ’ambassador at large’ for Grenada.

As stated on the website set up specifically for this arbitration, https://kawanabay.com:

True Blue Development (“True Blue”), along with two affiliated entities and its U.S. Shareholders, have brought an arbitration before the International Centre for the Settlement of Investment Disputes (“ICSID”) against the Government of Grenada. The arbitration is based upon the bilateral investment treaty between the United States and Grenada.” (https://kawanabay.com/icsid-arbitration/)

Dr Keith Mitchell – Grenada’s Prime Minister and Minister for National Security – has since cited the ‘integrity of Grenada’s Citizenship-by-Investment program’ as his reasoning for withdrawal of funding to True Blue for the Kawana Bay Resort project.Mitchell’s response has been that the CBI ‘Approved Project Investment’ regulations must ensure there isn’t misappropriation of funds – as happened previously with the 2018 ‘shrimp farm debacle’. In this case, CBI investors lost their money when funds ‘went missing’ and the project stalled.

Though not related to True Blue’s development, the Shrimp Farm project is referenced as a situation that the Grenadian government wants to ensure is not repeated – particularly within the current context of current exclusions to CBI applications by ‘non-desirables’ – including Russian citizens. This response is based on Grenada’s primary reason for halting funding to True Blue: changes to the project that pushed back its completion date from the original 2019 to 2021 (referred to as ‘discrepancies’), and funds redirected by to True Blue Services Ltd, an affiliate of True Blue Development Ltd.

Grenada also claims that the approved budget was to cover construction costs only, not the entirety of the development – with construction costs typically making up less than 50% of any development project. True Blue is countering with its claim that the money they still need is part of the original approved budget. True Blue also denies that any funds were misappropriated through this redirection of funds. They are arguing that True Blue Services Ltd handles the construction costs for True Blue Development Ltd, and that 100% of funds received have, and would continue, to go into Kawana Bay.

According to the True Blue (as affirmed by their auditors, PFK International, and per their submissions to Grenada’s CBI Committee – see (https://kawanabay.com/faq/) ): “Any allegations regarding misappropriation of funds by the developer are ABSOLUTELY FALSE and WITHOUT MERIT. All funds received from CBI investors have been properly used for Kimpton Kawana Bay project costs.”

What this means for Grenada’s CBI investors

While the government of Grenada did not expressly stop the completion of the project because of any problem with construction, the withdrawal of the original funding approval (and resulting ‘squeeze’ on funding, has left True Blue unable to continue to completion.

This has left CBI investors in the Kawana Bay Resort in limbo. With the project due to have been completed by now, those who invested in 2017 would already have been looking for a potential return on their investment in 2022. (The Grenada CBI program requires investors to retain ownership of their Real Estate interest for a minimum of five years after citizenship is granted.)

Where does this leave the investors? Will they ever see a return on their investment? At this time, it seems that no-one has the answer.

It seems impossible to contemplate a situation where Kimpton Kawana Bay remains an unfinished eyesore on prime property overlooking the magnificent 2,5 km Grand Anse beach – a major tourism draw. However, at the time of writing, the completion of Kimpton Kawana Bay rests on the outcome of True Blue’s case against Grenada – as does the citizenship status of the Kawana Bay CBI investors.

With other projects available in Grenada, the Real Estate investment option remains open for CBI as does the other option of a donation to Grenada’s National Transformation Fund.

A positive takeaway (pending the outcome of the arbitration) would be that the Kimpton Kawana Bay affair is the result of increased tightening of regulations to do with the Real Estate investment in private/public partner Real Estate developments funded by CBI. If so, one can assume that this will lead to better assurances – and related mechanisms – for CBI investors in the future, rather than the other way around.

And if one reads between the lines (considering we don’t know who the individual CBI investors in Kawana Bay area, or where they come from), it may well be part of a general directive to ‘clean up’ Grenada’s Citizenship-by-Investment. This fits with Grenada’s need to keep their CBI program going amidst international pressures on the investment migration industry, in line with regional regulations and due diligence for Caribbean CIP (Caribbean Investment Programs), and to keep Grenada offering one of the world’s Top 5 Citizenship-by-Investment schemes.

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