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| Havana Grand Theater in Old Havana |
As is the case in many developing states, the commercial legal environment in Cuba is in a formative stage and accordingly, the legal rights of the Company and its subsidiaries may not be enforceable in Cuba to the same extent as they would be in a fully developed industrialized state, parliamentary democracy or market economy. The Company’s Development Agreement with Cuba provides for arbitration of disputes in Cuba and Cuba has, in the past, properly submitted to commercial arbitration and agreed to abide by the results thereof, but there can be no assurance that it will do so in the future.
Also, since Gran Caribe is an agency of the Cuban government, it may make decisions with respect to the development properties which are driven by non-commercial considerations. There can be no assurance, therefore, that actions by Gran Caribe, in respect of the Company’s joint venture, will always be in the best interests or consistent with the interests of the Company.
Under the Company’s Development Agreement with Cuba, Wilton is responsible for obtaining 50% of the financing of each development project by way of third party debt financing, with the remaining 50% to be contributed equally by way of equity from Gran Caribe and Wilton. If Wilton is unable to obtain such debt financing on reasonable commercial terms, Gran Caribe and Wilton must contribute equally by way of equity, the entire amount required for such development project.
If either Gran Caribe or Wilton fails to contribute its portion of the required equity, the other party may make a loan to the defaulting party or may contribute the amount of the equity required directly to the subsidiary and subsequently dilute the defaulting party’s share in such development project. There is no guarantee or assurance that the Company will be able to arrange third-party debt financing for 50% of the cost of each development project. There is also no guarantee or assurance that the Company will have or be able to raise the amount it will be required to contribute to any given development project in equity.
If Wilton is unable to contribute its equity portion to any given development project, Gran Caribe is entitled under the Development Agreement to dilute Wilton’s interest in such development project. There is also no guarantee or assurance that Gran Caribe will have or be able to contribute its portion of equity required to finance any given development project, in which case Wilton would be required to contribute the entire amount required to finance the development project. There is no assurance that the Company will have or be able to obtain the equity required to any development project on its own.
The Company has made significant progress in arranging prospective sources of financing for its development projects, but definitive terms and conditions, and agreements reflecting these, have not been finalized. There is no assurance that those terms, conditions and agreements acceptable to the Company will be completed on a timely basis.
The various U.S. laws and regulations establishing the embargo have been amended from time to time, including the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, also known as the Helms-Burton Act (“Helms-Burton Act”), which extended the reach of the U.S. embargo. As a result, the Company is affected by these changing political and legal relationships between the U.S. and Cuba. Although the Company monitors and analyzes the potential impact of any anticipated changes and generally prepares to capitalize on any future opportunities or mitigate any increased risks, there is no assurance that the Company will not be adversely affected by changes in U.S. laws.
The Company is currently prohibited from accessing U.S. capital, debt, customers and suppliers, which limits its ability to mitigate the financial risks described above.
We have made every effort to ensure that the Company’s development projects are located on land which will not be subject to a claim which has been certified by the U.S. Foreign Claims Settlement Commission, the body responsible for dealing with U.S. nationals whose Cuban properties were confiscated by the Cuban government. However, there is no assurance that claims will not come to the attention of the Company or the U.S. government in the future.
We have made every effort to ensure that the Company’s development projects are located on land which will not be subject to a claim which has been certified by the U.S. Foreign Claims Settlement Commission, the body responsible for dealing with U.S. nationals whose Cuban properties were confiscated by the Cuban government. However, there is no assurance that claims will not come to the attention of the Company or the U.S. government in the future.
The Company and its subsidiaries do not hold assets located in the U.S. The Foreign Extraterritorial Measures Act (Canada) provides that any judgment given under the Helms-Burton Act will not be recognized or enforceable in any manner in Canada. It also allows a Canadian corporation to sue and recover, in Canada, any loss or damage it may have suffered by reason of the enforcement of a Helms-Burton Act judgment abroad.
Summary
So, are you ready to buy some Leisure Canada stock? Are you ready to invest in Cuban real estate development projects?
The Carbonera Club project has been offering Cuban villas for sale yet there is no groundbreaking date for that project that I know of. To be fair, I have not heard of ANY groundbreaking of any new golf, course, marina or resort project in Cuba.
The biggest hotel owner/manager is Sol Melia in Cuba. I don’t think any foreign company comes close to Sol Melia with regards to a foreign business in the tourism industry. The company will be opening yet another Cuban hotel by the end of this year.
Since joint ventures are required for ALL development projects and since qualified large-scale construction contractors in Cuba are selected by the Cuban government, we may not see any ground breaking on any project for not just months but perhaps years.
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