24553 - Courtyard Caribe

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Summary of Proposed Investment

Project Number

24553

Company Name

CARIBE HOSPITALITY SA

Date SPI Disclosed

Mar 28, 2007

Country

Caribbean Subregion

Industry

other

Projected Board Date

Apr 30, 2007

Status

Completed

Sector

City and Business Hotel

Department

Gbl Ind, Manufact, Agribus & Services

Environmental Category

C - No Impact

Previous Events

Approved : May 14, 2007
Signed : May 15, 2007
Invested : May 5, 2008

Project Description

The project entails the creation of a funding facility to support greenfield development over the 2007-2012 period of five hotels, which would be operated under the Marriott Courtyard brand, and one hotel, which would be operated under the Marriott Residence Inn brand, in the following locations:

- Managua, Nicaragua;
- San Jose, Costa Rica;
- near the San Jose International Airport, Costa Rica;
- Playa del Coco, Guanacaste, Costa Rica;
- Kingston, Jamaica; and
- Bridgetown, Barbados.

The project will address the shortage of quality mid-tier hotel rooms in the relevant local markets. The hotels will be constructed and owned by specially-incorporated hotel development companies, which will be controlled by Caribe Hospitality S.A., the sponsor of the project (see the details below) and minority-owned by IFC and local investors.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	23.0
Equity	5.0

The six properties are expected to be located in the following markets:

- Costa Rica:

- Residence Inn: San Rafael, Escazu (San Jose metropolitan area). The 28,000 square feet site for the proposed Residence Inn is located within a large mixed-use project under development by the sponsor’s other real-estate company. The overall development comprises the Residence Inn, leased office space, residential condominium lofts, a medical center, a health club and movie theaters. The site is directly opposite the Courtyard San Jose built by the sponsors in 2002. The property is adjacent to the IFC-financed CIMA hospital as well.

- Marriott Courtyard near the San Jose international airport: Alajuela, greater San Jose Metropolitan Area. The site for the Courtyard comprises a vacant lot situated on the main road between the town of Alajuela and the San Jose International Airport. The city is located 14 miles west of San Jose but, due to the extensive urban and industrial sprawl, it falls within the Central Valley’s metropolitan area.

- Marriott Courtyard in Playa Del Coco, on the Pacific Coast of Costa Rica, Guanacaste province: close to several of the new, large integrated resort developments in this region. The Courtyard will be part of a mixed use development covering 3,000m2 of beachfront land to include a plaza with restaurants and a retail center. It is located in a small, under-developed fishing village. As part of the overall development Caribe Hospitality and its sister real estate company hope to help regenerate this small village and plan to rebuild/improve a local park adjacent to the hotel/retail development.

- Nicaragua:

Marriott Courtyard in Managua: The site for the Courtyard comprises a vacant lot on the main highway in the Bolonia section of Managua, the capital and largest city in Nicaragua; while this area was once a residential district, since the old center city was destroyed by an earthquake in 1972, most of the new development (offices, banks, embassies) has taken place towards this part of the city; the Courtyard will be adjacent to the new headquarters of the largest bank in Nicaragua, BANPRO, two-three freestanding restaurants, an existing PriceSmart store and a small shopping center.

- Jamaica:

Marriott Courtyard in Kingston: CH and their partners are currently looking for a site.

- Barbados:

Marriott Courtyard in Barbados: The proposed Courtyard is located in the town of Hastings on the southern coast of the island, about two miles south of the capital, Bridgetown This is the Historic Garrison District of Barbados with a mix of small to mid-size hotels, restaurants, retail shops and some office space. The site is located on the main coastal highway but across the street from the beach.

Development Impact

The project will help meet increasing demand for high-quality mid-tier hotels linked by common management and onward reservations in Costa Rica, Jamaica, Barbados and Nicaragua. It will make a significant contribution in the improvement of the business hotel infrastructure especially in Managua, Nicaragua; Playa del Coco, Costa Rica and Kingston, Jamaica, where the level of such infrastructure is noticeably lower than in other project locations. The expansion of business hotel chains will, in its turn, support local trade and business development. In addition, the Caribe Hospitality concept ran by Central American sponsors, has an important development impact in demonstrating that regional investment schemes, when supported by cross-border capital can be successfully implemented in Central America and the Caribbean. Through their participation in the hotel companies, local and regional investors are also able to expand and diversify their business activities.

Provision of financing :

- IFC will provide equity financing for the project. This proposal is qualitatively different from standard equity financing proposals from institutional financial investors in the region, which generally involve limited risk sharing, with downside protection, which then often amounts to an expensive loan;
- IFC will provide debt with tenors and grace periods tailored to the underlying structure of cash flows. Such instruments are not readily available to the sponsor in the relevant markets;
- IFC’s investment is structured as a facility covering several hotel properties. In the previous four properties developed by the sponsor, they had to negotiate financial packages for individual hotels. This distracted managerial attention from other aspects of the business and imposed non-uniform terms and conditions on each of Caribe Hospitality’s hotel companies;

Structuring and Advice:

- As part of the appraisal work, IFC provides valuable insight and technical advice to improve the project’s long term viability as well as to better address downside risks;
- The proposed investment will allow the sponsor to internalize IFC’s knowledge of environmental and social issues. Thus, the sponsor expressed interest in having its environmental specialist getting additional training by IFC; and

Resource Mobilization:

IFC is expected to play an important role in raising the additional funding on reasonable terms consistent with the project’s needs. IFC’s experience in the Courtyard project in Trinidad & Tobago was that several local banks were hesitant to invest in Greenfield hotel developments. IFC’s steady presence in the six properties is expected to attract local or regional co-lenders, thereby streamlining and expediting the development of these properties.

This project is treated as an Environmental Category C project, since the master facility agreement in its own right will have no environmental or social impact. However, the individual loan and equity investment agreements to be signed with individual hotel development companies are expected to be Category B projects.

The master facility agreement is structured to require the sponsor to undertake social and environmental assessment of each individual property, and to require environmental and social management of the property in compliance with local requirements and IFC’s Performance Standards on Social and Environmental Sustainability.

IFC’s review of satisfactory environmental assessment of individual projects, definition of environmental action plans as well as appropriate publics disclosures, are conditions of IFC’s commitment to invest in and lend to the individual hotel development companies.

Contacts

For Inquiries About the Project, Contact

Daniel Campos Lara
Caribe Hospitality Director of Development and Asset Management
Telephone: +506-228-3478
E-mail: dcampos@caribehospitality.com

For Inquiries and Comments About IFC, Contact

General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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