Peter Kennedy, British Columbia Bureau
Globe and
Mail
Thursday,
December 31, 1998
After failing to raise cash for part of a $1-billion resort on the island, Walter Berukoff is now talking about his ventures there.
Vancouver -- Without attracting much attention, Vancouver financier Walter Berukoff has emerged as one of Cuba's largest foreign investors by sinking about $60-million into mining and real estate projects on the Caribbean island.
"Most people know very little about what I own and I'd rather keep it that way," the 55-year-old chairman of Mirimar Mining Corp. and Northern Orion Explorations Ltd. said during a recent interview in his Vancouver office.
But that could soon change as Mr. Berukoff's Leisure Canada Inc. vies with other travel industry players to finance a $1-billion (U.S.) Cuban resort project comprised of 11 hotels, golf courses and other entertainment facilities.
The son of Russian Doukhobors and friend of Cuba's President Fidel Castro, Mr. Berukoff became the first Canadian investor to bring a Cuban mine into production when Northern Orion's Mantua gold mine got up and running in January.
Mr. Berukoff has also quietly invested $400,000 (Canadian) of his own money into York Medical Inc., a private Toronto company that was set up to provide capital and marketing for drugs developed in Cuba.
But lately, Mr. Berukoff has been making himself available to reporters after failing to raise the first $75-million for the Cuban resort project, which Leisure Canada hopes to build in an equal joint venture with Cuba's state-owned Gran Caribe Hotel Corp. over the next 10 years.
At the request of CNN's Ted Turner, Mr. Berukoff has allowed his activities in Cuba to be documented in a coming edition of the U.S. network's Sunday night NewsStand: CNN & Time Magazine.
He will also come under the spotlight again in 1999, if Leisure Canada succeeds in getting its shares listed on a senior Canadian stock exchange, that Mr. Berukoff declined to name. The stock currently trades on the Toronto Stock Exchange's Canadian Dealing Network and closed yesterday at $1.80.
Mr. Berukoff says he was unable to raise the initial $75-million for Cuba because he went ahead without lining up partners for his projects.
"I received bad advice," he said. Among his backers are Robertson Stephens Investment Management Co., a San Francisco banking firm that controls 19 per cent of Leisure Canada.
"We are contemplating taking an equity position in Leisure Canada, but that hasn't been decided yet," said Peter Zeneck, Meridien's senior vice-president of development.
Travel industry officials say Mr. Berukoff faces a big challenge because he isn't the only one trying to raise money for projects in Cuba.
Leisure Canada has also hired Scotland's Gleneagles Golf Development of Scotland to provide advice on two golf courses that will form part of the $200-million (U.S.) phase 1 portion of the resort project.
Meridien Hotels & Resorts group, the French subsidiary of British leisure and media giant Granada PLC,has signed a letter of intent to manage three hotels that Leisure Canada plans to build at Jibacoa, about 60 kilometres east of Havana.
However, a Meridien official in London said any final agreement depends on whether Granada believes the deal makes financial sense.
Leisure Canada appears to be vying for financing with Canadian-based developer Cuban Canadian Resorts International, which has a $250-million deal to build 2,000 condominiums in a separate venture with Gran Caribe Hotels.
Cuban Canadian Resorts is headed by David McMillan, a former chairman of the Hotel Association of Canada, who has recruited some high-powered help in a bid to raise the first $40-million for the condominium project. Among Cuban Canadian's directors are former Canadian ambassador to Cuba Mark Entwistle and York Medical chairman David Allan. Mr. Allan is also a director of Yorkton Securities Inc., which still has a 7-per-cent stake in York Medical.
"They [Leisure Canada and Canadian Cuban Resorts] are both going after the same sources of financing," said John Kavulich, president of the U.S.-Cuba Trade and Economic Council, a New York organization that acts for about 200 companies in Canada, Europe and the United States.
They are doing it at a time when Cuba is anxious to keep control of an industry that has seen the number of visitors to the Caribbean island surge by an average annual rate of nearly 20 per cent from 1990 to 1997.
"The Cuban government doesn't want tourism to become a destabilizing force by letting it grow too quickly," Mr. Kavulich said.
As well, low commodity prices and continuing publicity over the so-called U.S. Helms-Burton law, which seeks to punish foreign companies investing in Cuban properties deemed to be confiscated from companies in the United States, are making it tough to raise money for Cuba.
Mr. Berukoff says he has gone to great lengths to ensure that his Cuban properties are not subject to any claims under Helms-Burton.
"I'm not saying [raising money for Cuban ventures] is impossible, but it's very difficult, said Eugene McBurney, managing partner at Griffiths McBurney & Partners, a Toronto investment firm that has played a leading role in raising more than $825-million for Cuban resource projects held by Sherritt International Corp. of Toronto.
"If people want to play Cuba, they can do it through Sherritt," Mr. McBurney said. "[Sherritt chairman Ian Delaney] seems to have the best relationships with the Cuban government."
However, Mr. Kavulich sees no reason that Leisure Canada can't achieve its ambitious targets even though it may take time. "Much of what they do in Cuba will depend on market conditions."
Far from being discouraged, Mr. Berukoff appears ready for another crack at raising money for the hotel projects.
"I am carefully choosing my allies, and with a mixture of debt and equity financing, I think we will be successful."
Who to watch: WALTER BERUKOFF
Position: Vancouver financier, head of Leisure Canada Inc.
What lies ahead: Mr. Berukoff's Leisure Canada Inc. will vie with other travel industry players to finance a $1-billion (U.S.) Cuban resort project comprised of 11 hotels, golf courses and other entertainment facilities.