Land grab?

The Saipan Tribune article, “Legislature OKs deal for $300M Tinian casino” dated March 10, 2009, seems to be an excellent summary of the recent lease of public land to Neo Gold Wings Paradise. When I read the article it occurred to me, “Was this a good deal for the CNMI or the investor? Using only the information cited in the article I decided to take a look to see who benefits from the lease, especially short term.

A total of 300-hectares of land, or 3,000,000 square meters (about 741 acres or 1.16 square miles, which is 2.8 percent of the total landmass of Tinian) were leased. The first and second year payments are only $72,000. There are no guarantees that the “grandiose” development ever will be completed. The lease will be voided only if development is not done in 30 months.

If the land is valued at $30 per square meter (which seems reasonable) that means the value of the land is roughly $90,000,000. The investor gains control of the land with this value for at least two years at $72,000/year. The investment leverage ratio is about 1/1250 or $1 from Gold Wing for $1,250 CNMI land value. Many venture capital investors are happy with investments at a ratio of 1/22, which means this is a very good deal for Gold Wing investors.

Neo Gold Wing can hold the land hoping that land values will go up or that they can sell the lease to others for a large financial gain. (Perhaps the lease agreement would prevent this from happening?) Not a good deal for the CNMI! At least a 5-percent deposit on the land value demanded up front would have been fair and would help keep the investor honest to deliver on their promises.

Recent land lease history in the CNMI should have raised serious concerns regarding investors with no track record, no marketing plans, no revenue projections in their business plan, many unknowns even as to who the investors really are, and these should have raised a flag for going forward with the deal. Rep. Tina Sablan is correct to raise concerns. I too am afraid that the diligence to evaluate the deal was not done properly. I understand the push by the Senate and House members to find money at the end of the rainbow. But only if we keep our eyes open can we find anything.

I sincerely hope that this deal is real and not just another land grab.