Freeport and the great real estate debate

First Published: 2004-12-16

Since Tough Call’s article on the real estate market a few weeks ago, a debate on the subject has erupted– complete with warnings against selling our sovereignty and/or birthright for a “mess of pottage.”

Birthright in this context means patrimony – our inheritance by right of birth. This is often referred to by Bahamians in the same breath as “sacred”.

But what does the concept of sovereignty actually mean to a territory like ours? On the one hand we are advised to face up to the challenges of globalisation, yet on the other we are warned against selling out to foreigners. On the one hand we consider Florida shopping a part of our birthright but on the other we resent the American influx.

Ironically, realtors say most of their land sales are from foreigners to Bahamians. That’s because non-Bahamians have the capital to buy undeveloped property, the willingness to risk it, and the interest to develop a saleable product.

Many commentators say they are concerned about foreign speculators squeezing Bahamians off their own property. They complain about the loss of the best waterfront and hilltop sites in the country, and the closing off of beach ac cess to Bahamians. They also object to the grant or sale of Crown land so that wealthy foreigners can build developments.

This view completely overlooks the fact that the Bahamas desperately needs legitimate deep-pocket investors to build the infrastructure and environmental protection that the government can never afford, and only pays lip service to. The alternative is for Bahamians to continue to trek to the overcrowded slums of Nassau in search of fulfilment.

Former cabinet minister George Mackey (now chairman of the Antiquities Corporation) talked about two hills on Acklins that were recently bought by a foreigner and are slated for development.

”These two hills represent some of the highest elevations on the island and clearly ought not to be made inaccessible to Bahamians…if we are not careful all those lovely beaches will most likely be gradually acquired in like manner…then a few decades hence, the natives of Acklins will be without sufficient beaches, just as we are now in New Providence.”

A bird in a golden cage is no less a prisoner. And without more balance and control, Mr Mackey says, this will be the plight of future generations – the clear implication being that Bahamians will become slaves again in their own land.

Well let’s take a look at Abaco. One of my recent ancestors lived in a three-room shack on a postage stamp plot of land at the peak of the Hope Town dune – with a fabulous ocean view. He was a seaman (what else?).

In the 1940s he sold the shack and moved to Nassau. The old homestead eventually ended up in the hands of the Kraft cheese family. Realtors say it is worth well over half a million dollars today. But to my great grandfather it was virtually worthless. No doubt he would have considered himself a bird in a cast iron cage.

Hope Town has now become a desirable place to live. But it wasn’t always like that…people invested over the years to take advantage of changing circumstances. Luck, hard work, the environment and proximity to a big market like America had a lot to do with it. This is the essence of a free market.

Perhaps our present debate can be boiled down to the question of whether or not our freedom to buy and sell property is a privilege bestowed by government. This view would support more restrictive laws to control sales and keep land prices low. Just as we have laws now to control gasoline and propane prices.

If this view has some currency, then surely we must agree that it is our mutual responsibility to develop and articulate a rational policy that addresses the key issues involved in an honest and transparent manner. And it also means accepting up front that the Bahamas requires large amounts of foreign investment to survive as a modern state.

This does not mean that we should tolerate the destruction of tiny island communities like Bimini through inappropriate development. Rather, it means the enforcement of up front zoning laws and environmental protections, the setting aside of marine reserves and open public spaces – all within the context of an integrated land use plan.

Such policies have been on the table for decades. And experts say they are absolutely necessary for orderly and productive development – particularly to avoid the issues that Mr Mackey and others like to refer to. The problem is that this is too much like work for our politicians, who can’t get off their backsides to articulate an intelligent way forward.

Their only interest, it seems, is to to create more opportunities for supplicants to come to them for approvals and favours. And you can read your own motives into that.

Freeport is perhaps the biggest case in point. Despite its somewhat sleazy history, if we had not sold our so-called patrimony 60 years ago for that mess of pottage, where would Grand Bahama be today?

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Grand Bahama at the Fork of the Road.

The two owners of the Port Authority – Edward St George and Sir Jack Hayward – are both in their 80s, and St George is reported to be seriously ill following heart surgery.

What happens to the Port – which controls 230 square miles of Grand Bahama and is the country’s chief economic player – is a matter of great importance to all of us.

Will the government seek to take over? Will the Port be acquired by the Chinese investor Hutchinson Whampoa? Will shares be offered to the public? And what will it all mean for the future?

As one well-connected political editorialist recently put it, “The government and the people would want to know to whom does that company go when these men are no longer on the scene. The answer is a serious one for The Bahamas. There does not appear to be any family member who is interested in it, or capable of taking over. No heir apparent.”

So it might be helpful to look back at the origins of Freeport…it is a fascinating context that represents both the best and the worst of Bahamian society.

The idea was born during the bootlegging years of the 1920s, when Grand Bahama was little more than a liquor warehouse for American buyers. Only a few hundred Bahamians lived there.

Records say that during this period a group of anglo-american developers leased 430 acres at West End, but failed to proceed with plans for a deepwater port and network of roads.

According to contemporary writers, the island’s proximity to the affluent Florida enclave of West Palm Beach simply begged for an offshore casino and exclusive resort/residential development.

“Grand Bahama could be the mecca of quite a sporting and yachting fraternity,” a government publication noted in 1931 “Estate developments are underway (and) British and American developers have cast their eyes on this fertile island.”

But the great depression put paid to these great ambitions. The only real economic player at the time was an American logging company that was acquired in 1946 by Wallace Groves, a Virginia financier who had recently served a prison term for mail fraud using suitcase companies set up in the Bahamas.

“When he emerged from the penitentiary in 1943, Groves gravitated to the Bahamas,” the Saturday Evening Post reported in 1967. “There was plenty of fresh water just below the coral-limestone surface. (and) deep water offshore that could accommodate the largest ships.”

British developer Sir Billy Butlin saw similar potential in an island so close to the American mainland. He bought up a large tract at West End in 1948 to build a vacation village, and had options on another 20,000 acres. But the resort lasted for only 10 months in 1950 before running out of money.

Meanwhile, Groves began thinking about diversification. He sold his lumber rights for about $4 million, and invested in the creation of a free port community in the central third of Grand Bahama. The deal has been described as “the largest concession involving the Bahamas since the grant to the Lords Proprietors in 1670”.

The original idea was to build a deepwater harbour at Hawksbill Creek as the focus of an industrial complex. In 1955 Groves’ Grand Bahama Port Authority negotiated the right to administer, plan, develop and license businesses on the island – and to be exempt from all taxes for up to a century. Critics said the government had “subcontracted its responsibility and surrendered its sovereignty”.

But the development came at a time when pent-up racial and political resentments were boiling, and it heralded the demise of the white oligarchy organised under the umbrella of the United Bahamian Party. In the 1967 general election the UBP was thrown out, in large part because of corruption charges over the introduction of casino gambling in Freeport in 1963.

According to the subsequent commission of inquiry, leading members of the government received a total of $2.5 million in personal and political payments from Groves over several years. They included the premier, senior ministers, the parliamentary speaker and others.

Newspaper accounts said the new Monte Carlo casino had been equipped and bankrolled by agents of the American mafia, who had held major casino concessions in Cuba before Castro took over. Several casino employees at Freeport were wanted in the US on racketeering charges. This created an international scandal.

But by this time Freeport had achieved major economic momentum. D. K. Ludwig’s National Bulk Carriers built a harbour with a 30-foot draft and 600-foot turning circle. The Grand Bahama Development Company built a highway and an airport, as well as Freeport city itself – the population of which was no more than 150 in 1960.

Sir Charles Hayward (chairman of Britain’s Firth Cleveland Group) became an investor and his son, Jack, went on to play a big role in future development. Edward St George was a Nassau magistrate during the 1950s and later an advisor to Firth Cleveland. In 1976 he and Jack Hayward took over Freeport’s management and in 1978 bought out Groves and others to become the exclusive owners.

Ludwig eventually sold out to US Steel which built a $50 million cement plant on the harbour – which is the property now being considered by the multinational energy firm, Tractebel, for the location of a multi-million-dollar plant to import liquified natural gas from Trinidad and pipe it to Florida.

Ludwig was also responsible for launching the tourist development of Freeport. The Bahamas Princess and Princess Towers became the largest resort complex in the country and Bahamia one of its most prestigious residential areas. A second casino and the International Bazaar set the tone for a tourist boom.

During this second phase of the port’s development, the new Progressive Liberal Party government sought to exert greater control over the development. And this was the context of Prime Minister Lynden Pindling’s famous ‘bend or break’ speech in 1969.

There was much resentment among Bahamians over the Port’s liberal immigration policy – which did not jibe with the times. So in 1970 the government moved to amend the Hawksbill Creek Agreement to establish its right to control immigration. Many Freeporters found they could not obtain permits and this led to a collapse of business confidence which, combined with a general economic slump, sent Freeport into a tailspin from which it is yet to fully recover.

Afterwards, a commission was appointed to examine Freeport’s relationship with the rest of the country. The government’s right to control immigration was affirmed and the GBPA was criticised for several failings. But the report concluded that, although it should not be considered a foreign outpost, Freeport was a good thing in and of itself.

Today some 50,000 people live and work on Grand Bahama and the Port operates the most efficient and best-planned urban area in the country. It is the country’s biggest attraction for investment capital and tourism outside of Nassau.

The column 'Tough Call' by Larry Smith is published in The Tribune every Thursday and is reprinted here as a courtesy. Mr. Smith founded and successfully grew an advertising agency over 20 years. Under his direction Media Enterprises diversified into short-run commercial printing and publishing, and is now the largest non-fiction book wholesaler in the Bahamas. He has 30 years experience as a journalist and publicist and has contributed numerous articles and columns to the Bahamian press. A former reporter at the Nassau Guardian, local correspondent for Reuters and editor at the Bahamas News Bureau, he conceived and edited the Bahama Almanac (published 2000 by Media Enterprises), wrote the commentary for Mike Toogood's Portrait of an Archipelago (published 2004 by Macmillan Caribbean), and edited the Bahamas Environmental Handbook (published 2002 by the government). In 2003 he took a year's leave of absence from Media Enterprises to lead a transition management team at the Nassau Guardian after the paper was acquired by local investors. After leaving the Guardian he was contracted by the Tribune as online manager/editor and columnist. He has a degree in political science and journalism from the University of Miami. Mr. Smith can be contacted at: larry@tribunemedia.net

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