Clouds Gather Over Sapphire Cove Development

By Diarmaid Condon – www.diarmaidcondon.com

Doom and gloom, rather than blue skies, would appear to be the order of the day for the proposed Sapphire Cove development in southern St. Lucia, and its shareholders which are all Irish. The project, headed up by accountant Tom Colton and run out of a now defunct Limousine Hire centre in Kilcarbery Business Park, has been in the headlines right from the start of its ambitious proposed US$380 million project on the idyllic Caribbean island. Located on 130 acres owned by the family of former prime minister, Sir Allan Louisy, it was launched in Ireland this time last year to a massive media fanfare but things have not been going to plan for the company, or its investors, since that time.

Ongoing investor unrest led the Sunday Business Post to question those closest to the project with very little joy. All lines of communication at Sapphire Cove seem to have shut down at this stage and the only people talking would appear to be disgruntled investors. The project is likely to be knocked back further with news that Chelsea and Ireland footballer Damien Duff, who was the figurehead used to launch the company’s sales campaign, has now sought to distance himself from the project and its backers. Sources close to Duff have indicated that the footballer has no contracts with Sapphire Cove and want it known by anyone investing in the project that this is the case. They are also anxious to point out that Duff has not purchased property in the project and has no intention of doing so in the future. Duff is reported to be very upset that Sapphire Cove are giving the impression that he is still connected with the project and that he has, or is likely to, purchase property there. They continued that Sapphire Cove’s behaviour has been appalling as they are duping ordinary people into investing by using Duff’s name. It would also appear that Duff received no remuneration of any description from Sapphire Cove to cover his appearance at the launch last year or subsequent references to the footballer in promotional materials circulated by the company.

How times have changed for the Sapphire Cove project since its launch. As reported in the Sunday Business Post last March, a founder member of Sapphire Cove, John Burke, lost a US court case taken against fellow Dubliner Gary Kenny over Florida building plots which Burke had given an undertaking to purchase. The former Sapphire Cove director, and current shareholder, subsequently reneged on his purchase contract but sought money from Kenny when he discovered the plots had later been sold on at a profit. A judgement for US$130,000 was given against Burke, none of which has been paid to Kenny at this stage.

Of the five original directors involved in the project, two departed shortly after the high profile launch. Burke, who was originally detailed with overseeing the development side of the project, departed after just a few weeks. Craig Livingston who was its chief architect followed shortly afterwards. Since Livingston departed no other architect has been appointed to oversee the mammoth project and Colton claims to have taken on Burke’s role, even though he admits to having absolutely no development experience. The other shareholders are solicitor Conor Mullany and Garda Gerry Coller. Colton appeared on TV in St. Lucia three weeks ago to assure islanders that the project was still on track, something which triggered a negative reaction on the front page of the local Star newspaper.

The development is to contain, according to its website, condominiums, townhomes, villas, estate homes and hotel rooms.” These it claims; “Will be built and maintained to the highest 4/5 star standard. Like wise the extensive amenities juxtaposed with the accommodation including, resort spa, multiple pool complexes, sports grounds, beach club, and a golf course that will present like no other.”

Originally the company sold ‘assignable contracts’ on 110 lots in the proposed development. Following the launch in May investors were sent letters stating “Lot prices are up from the original expected price, US$170,000 for a standard lot, US$190,000 for corner lots and US$210,000 for premium lots, we had expected US$160,000 for a standard lot, US$175,000 for a corner lot and US$190,000 for a premium lot.”

Initial contracts indicated to investors, who are overwhelmingly Irish, that they would make a profit of at least US$50,000 by simply purchasing the lots as this was the discount available on purchase. The contracts for one of the ‘standard lots’ stated; “The prospective purchasers agree to reserve (lot number) with a retail price of US$160,000 and a purchase price of US$110,000.” The 110 lots were reserved with non-refundable deposits of US$5,000 each with the balance of 20% of the ‘retail value’ paid in June of 2005, this amounted to a further US$17,000 for a ‘standard lot’. This gave Kilcarbery Limited an initial float of over US$3m. with which to organise further bank funding and bring on board a flagship hotel chain to run the resort. As of June 2006, neither has been secured and both are imperative considering the proposed financial scale of the project.

Investor deposits were paid directly to Kilcarbery Limited in St. Lucia but those clients who complained about the safety of this procedure were asked to send money to a client account held by Mullany Solicitors in Fitzwilliam Place, Dublin. Conor Mullany was a director of Sapphire Cove at the time but he has also since stepped down as a director and sought to distance himself from the project. Irish legal representation is now handled by Mason, Hayes & Curran in Ringsend. The two remaining directors, Colton and Coller, now have a minority shareholding in the company and are thus powerless to carry out any activities without the backing of at least one of the three disaffected shareholders.

When the project was launched Mr. Colton suggested that the first properties on the development would be ready in time for the Cricket World Cup next summer but he has since rowed back on this statement, declaring to the St. Lucia Star that; "We didn't give a full commitment to the organisers."

On the contracts issued by Kilcarbery Limited purchasers were informed; “The purchaser shall on the closing date agree in writing with Kilcarbery the type of unit to be constructed on the Lot, the cost of construction, the cost of furnishings and the payment schedule in relation to the construction of the unit and thereafter, within 8 (eight) weeks, Kilcarbery and the purchaser shall enter into an agreement setting out the terms and conditions in relation to same and the date for commencement of construction of the unit.” To this time no investor has ever been given any idea what can and cannot be built on the original lots sold to them by Kilcarbery Limited. There are plans for condominiums and villas on the website but these are the initial unfinished plans submitted by Craig Livingston so nobody has any idea of a finished product or where they can and cannot be built.

Investors received a letter in October 2005 stating that Kilcarbery Limited had undertaken to sell the lots purchased to a ‘company in the Kilcarbery Limited group’ for a profit of up to US$60,000 for a standard lot. They were, however, told that the transaction date would now be September 2006, even though they had originally been led to believe they could sell the lots in September 2005. No explanation was offered as to why such a simple transaction should take so long. Almost immediately following this communication, investors claim, the plans listed on the Sapphire Cove website changed and the original 110 lots disappeared. This area now shows three sites named as ‘Condo Village 1’, ‘Condo Village 2’ and ‘Townhomes’ where the lots were originally located. Investors who contacted the company to query the change were stonewalled and the Kilcarbery subsidiary was not named in the letter.

For Mr. Colton who lives in Celbridge, Co. Kildare, a project which began with such great promise is quickly disintegrating around him. Along with his involvement in Sapphire Cove he is the listed owner of a 5 bed, 5.5 bath frontline golf villa in Windermere, Orange County, Florida. The property is currently on the market for US$3.6m., US$200,000 less than its purchase price. The property is in foreclosure and listing agent, ERA, states; “seller is motivated so bring all offers to the table.” This would appear to be a trend in the company as Burke also owned two properties in Florida, the bank foreclosed on one of these last November.

We tried to contact Sapphire Cove’s main office for comment on more than a half dozen occasions last week, each time receiving nothing more than a voicemail message recorded by Mr. Colton himself stating; “Our customer service operators are currently assisting other customers. Please leave your name and number after the tone and we will get back to you as soon as possible.” We have not heard from him at time of going to press. It now appears that there are no staff employed anywhere by Sapphire Cove to run its proposed US$380 million property empire. The Limousine Hire business run by Mr. Colton also appears to have closed its doors and all cars have been removed from the premises.

 Diarmaid Condon is an independent overseas property consultant with significant agency experience. He can be contacted via his website at www.diarmaidcondon.com.

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