Fortress Caribbean Property Fund: Do We See Rats Jumping Ship?

Geoffrey Cave, Chairman of Fortress Fund

Geoffrey Cave, Chairman of Fortress Fund

There is the old saying that one should always follow the money. In the case of Barbados one can say that when the money-class in Barbados begins certain machinations others less positioned should sit up and take careful note.

A report which appears in the Barbados Today makes for interesting reading – Fortress Fund initiates major move to safeguard investors as property market sags. While the newspaper has done a good job of reportage, it is unfortunate the dearth of financial analysis by the Barbados media. Another indicator one can use to measure the quality of our education system and media fraternity, another blog perhaps.

Barbadians have always been spoiled by the idea that property value and rental income will never decline. The fact that the report by Barbados Today acknowledges that principals at Fortress Fund are warning about negative impact on the real estate market is interesting for many reasons.


The big question BU has for Geoffrey Cave and Son is how could property values not have declined in the last five years?

The Fortress Caribbean Property Fund is proposing to split the fund into two, a Value Fund to comprise of income producing assets and Development Fund to include “properties held for development and resale”. The BU household encourages BU brainiacs to explain how the propose split to shareholders is designed to ameliorate the concern which Fortress Fund has about the Caribbean Property Fund.  Note the share price has declined from about $2.50 in 2008 to about $0.50 – Performance as at 31 July 2013.

Will the existing shareholders not continue to be stuck with the slow performing properties shifted to the Development Fund?

Continuing the point about when rats begin to jump ship the need for those in the environs to take note. Knowing the way Barbados operates BU is of the view that senior management at Fortress have reacted based on information which is not currently available to other investors and potential investors.

There are a couple properties in the portfolio which have caught the eye:

Limegrove Hillside Villa  Location: Limegrove, St. James  Carrying Value: $1.35 Million  Property Type: Residential Unit

Limegrove Hillside Villa
Location: Limegrove, St. James
Carrying Value: $1.35 Million
Property Type: Residential Unit

The Fund owns Limegrove Hillside Villa 6 and title will be legally transferred in the near future. The Fund has possession of the unit during the year and commenced rental of it, to defray costs, in July 2011. The unit is listed for sale with multiple real estate agents. Real estate available for re-sale was adjusted to its net realizable value of $1.35 million, resulting in a $457,000 impairment loss (2011 – nil).

Canouan  Location: Canouan Island, St. Vincent and the Grenadines  Carrying Value: $3.0 million  Property Type: Undeveloped Residential Lands

Canouan Location: Canouan Island, St. Vincent and the Grenadines Carrying Value: $3.0 million
Property Type: Undeveloped Residential Lands

 The Fund purchased a 35% interest in this 3.92 acre site with spectacular views of the Grenadines. The land has been classified as an investment in an associated company and is carried at cost which is lower than its net realisable value. The Fund’s portion of the cost is $3.0 million. A spectacular 5 star new hotel at this resort will be opened in the early part of 2013 and it is anticipated that there will be substantial interest in this lot at values well above current carrying cost.

  Thanks to Due Diligence for doing the research for this blog.


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72 responses to “Fortress Caribbean Property Fund: Do We See Rats Jumping Ship?

  1. millertheanunnaki

    @ pieceuhderockyeahright | September 9, 2013 at

    He hates me because I dare to persistently challenge his blind partisan ignorance of the wider world. He can see the world only through a “(D)ense” lens through which his amoeba-like inchoate intellectual capacity can never pupate from the dark cocoon of the propaganda cesspit in George St.

    We also notice he has taken the naively stupid puerile approach of attacking you; a man a million light years his senior in both knowledge through graft (hard work) and wisdom through learning from life’s experiences.

    We all know he is not the sharpest knife in the box so we would see him as just a silly little boy; shouldn’t we?

    “A wise son brings joy to his father,
    but a foolish son brings grief to his mother.” Proverbs 10:1

    We must give our commiserations to Carson’s mum Eustine.


  2. Nire | September 9, 2013 at 1:50 PM |

    Who are the owners of DGM Bank & Trust Inc.?

    I don’t believe DGM Bank & Trust is a local entity, it was managed by a Canadian who passed away last year, i do believe it is a Canadian offshore company.


  3. DGM Bank & Trust owners

    See website link

    Board is dominated by Cave Shepherd execs.


  4. re DGM Directors

    Philip Armstrong, Chairman of Jovian Capital Corp (Toronto) is one of two DGM Bank & Trust Directors who appear on the surface to be independent of Geofrey Cave/Cave Shepherd.

    Based on April 2012 and July 2013 articles in The Globe & Mail (Toronto) copied below, it looks like he fits right in with the Cave and the other Barbados interlocking Directors who look after themselves first, and the ordinary investor last. Indeed, Armstrong can probably teach them a trick or two.

    Jovian execs cut themselves $12-million cheque Add to …
    The Globe and Mail
    Published Monday, Apr. 30 2012, 3:35 PM EDT

    Two months after managers at Jovian Capital Corp. disclosed that they cut themselves an extra $12-million cheque, top executives have yet to explain where the money came from, and how they decided on the amount that was doled out.

    In its last quarterly earnings, released in February, the company included a $12.2-million provision for the “Jovian senior management profit plan,” which it said was the result of both “continued and discontinued operations.” Not exactly the most precise description.
    When pressed for more details by shareholder Scott Reid of Stornoway Portfolio Management, management didn’t add much, other than to say that it had been underpaid for some time. No explanation where the money came from. No proven justification of why it was paid out.
    The easiest explanation, and this is just a guess, is that Jovian had a chunk of cash on its balance sheet after selling off its stake in BetaPro Management to a South Korean firm last year. Jovian also recently sold off its mutual fund subsidiary to Desjardins Financial Security for $27-million.
    But you can’t be sure, because Jovian has yet to comment. Calls and e-mails left with the company were not returned.
    Mr. Reid is perturbed because he personally believes that management doesn’t deserve the payout. “Since the creation of Jovian in its current form on July 9, 2003, Jovian’s shares have declined by 6.2 per cent, or 0.72 per cent on an annualized basis,” he wrote in a public letter. “In comparison, over the same period of time, the TSX Total Return Index has appreciated by 114 per cent, or 9 per cent on an annualized basis.”
    He is also annoyed that few details have been provided, and that because the payment wasn’t in the form of securities, it doesn’t have to be put to a shareholder vote. That means the company can hand out about 10 per cent of its equity value to “unidentified ‘senior management,’” Mr. Reid wrote.
    In management’s defence, it also paid shareholders $4 per share earlier this year. However, this handout wasn’t a special dividend; it was a return of capital. If you held shares at $10, theoretically, and the return of capital is $4, you are given 40 per cent of your investment back. You aren’t paid a 40 per cent special dividend.
    Mr. Reid has talked to both Philip Armstrong and Jason Mackey, Jovian’s chief executive and financial officers, but that hasn’t gotten him anywhere. If he had it his way, Jovian would make a copy of the payment plan available for public consumption and execs would reconsider the payments.

    Industrial Alliance strikes asset management acquisition Add to …
    The Globe and Mail
    Published Wednesday, Jul. 17 2013, 11:08 AM EDT
    Last updated Wednesday, Jul. 17 2013, 11:13 AM EDT

    Banks aren’t the only companies chasing asset managers.

    Consistent with its strategy to beef up its asset management arm, insurer Industrial Alliance is scooping up Jovian Capital, a holding company that owns stakes in a number of small asset managers, for $94-million. The deal adds roughly $7-billion of assets to the insurer’s existing $45-billion portfolio.
    Like many of its Canadian peers, Industrial Alliance has been trying to diversify its revenue mix. In this era of low interest rates, insurers are having a hard time proving that their current market returns will ultimately allow them to pay out their long-term liabilities, so they’re branching out into areas such as wealth management.
    At first glance, Jovian may seem like a bit of an odd choice. The company hasn’t produced positive cash flow in the past few years, and it posted a $7.5-million loss from continuing operations in 2012.
    Plus, last year some shareholders were outraged after Jovian’s management team cut themselves a $12-million compensation cheque amidst the weak performance. Shareholders wanted this cash for themselves.
    However, it appears there’s a way for Jovian to become profitable under Industrial’s umbrella.
    “To the extent IAG can eliminate holding company costs (primarily holding company management compensation and administrative expenses), it will start from a baseline of positive earnings before interest, taxes, depreciation and amortization,” noted National Bank Financial analyst Peter Routledge, adding that backend synergies will also help.


  5. When the DLP was in opposition its housing spokesman told parliament that there were 30000 people needing homes. Presumably a large number of these people – many living two, three and four generations under one roof – still need housing.


  6. Well, we can now see a pattern here, the local minorities look to sit on each and every board of local and foreign companies, that should tell the majority blacks on the island something. Form your own companies, stop letting others control your future and that of your offspring, stop letting others control your money. Stop letting minorities and foreign self-interest groups control your money. By the way, Canada is taking a nasty hit from the recession, i am sure they will be the first to recover however, in saying that, no surprise to see rats jumping ship.


  7. Where is the FSC in all this?


  8. @Hal

    The point has been made by Caswell and we agree, the FSC is underresourced.


  9. Why is it under-resourced. The cost of the FSC should be met by a levy on all financial services companies and individuals.
    There is a difference between being under-resourced and incompetence. How can you allow a fund manager, whose chairman and CEO are related, to buy property from a company, chaired by the same chairman and whose relative (the ceo of the fund manager) is on the board and not declare a conflict of interest.
    By the way, yesterday DeLoitte was fined £14m for failing to mange a conflict of interest – and it was nothing like Fortress and Cave Shepherd. What else does the FSC want.
    They must priortise their work, and this looks like a top priority.


  10. @Hal

    You have to understand that the FSC has had to build from ground up. This is an agency which has risen from nothing, ie.institutional knowledge.


  11. David,
    You need proper primary legislation, good regulations and well trained and competent staff. What training in regulation did the top staff receive, including the former acting CEO, recruited from the bumbling NIS, just look at the auditor general’s reports.
    This gross incompetence and willingness to turn a blind eye is civil service seepage.
    Trade unions – and the press (BU excepted) should be scrutinising all these bodies – the regulators and the regulated.


  12. The two of wunna could really hush up.
    Wunna getting on like if wunna don’t know the answers to the shiite questions wunna asking one another….

    What FSC what?
    That is just a SHAM front formed by Arthur out of embarrassment with the damn supervisor of Insurance ( a chicken feed maker) and CLICO, after applying for an international FOREX loan and being told that there were no effective financial controls in place.
    They were FORCED to form the FSC.
    The banks and white people then get vex and mek them include the Credit Unions for spite….
    …and the ONLY group that this FSC are able to influence, manipulate, retard is … guessed it….

    As to the interlocking directorships….
    Man what interlocking directorships what…Wuh dum only got effectively ONE board bout here….. And that does meet in Cattlewash or bath pun weekends.
    All the rest are brass bowl rubber stamps…….. So what if they interlock…?

    Wuh wunna still fail to get is that only a Pachamamma style revolution can fix what we have….


  13. David | September 10, 2013 at 7:39 AM |
    You have to understand that the FSC has had to build from ground up. This is an agency which has risen from nothing, ie.institutional knowledge.

    This from The Nation

    “THU, NOVEMBER 24, 2011 – 1:09 PM
    SOME 3 500 APPLICATIONS have flooded the Financial Services Commission for 30-odd posts in the regulatory institution. 

    Minister of Finance Chris Sinckler, disclosed this in an interview at the opening ceremony of the FSC at Warrens yesterday.                          

    He said that the Commission’s recruitment drive had been done locally and at Barbados’ embassies in London, Washington, Miami and New York in order to ensure that its officers reflect the highest level of competency, skill and propriety.

    He said appropriate staffing was the immediate objective of the FSC, which was started in April to regulate non-banking financial institutions including mutual funds, securities, insurance and credit unions.”

    Almost two years ago then the MOF said that “appropriate staffing was the immediate objective of the FSC”

    Surely the MOF would not lie or mislead.

    Surely there must have been some among the 3,500 applicants to fill the 30-odd posts who have some institutional knowledge.

    Surely after almost two years the 30-odd officers “with the highest level of competency, skill and propriety.” hired should have bonded as a team and developed some institutional knowledge to:

    Establish standards for institutional strengthening, for the control and management of risk in the financial services sector and for the protection of customers of financial institutions as well as creditors and the public; and to supervise and regulate the operation of financial institutions.

    The above cut from FSC website.

    Inciidentally, one would expect to see the names of Officers and Directors listed in an organization’s the website; but did not see that info at

    Bush Tea | September 10, 2013 at 8:32 AM |

    What FSC what?

    That is just a SHAM front formed by Arthur out of embarrassment with the damn supervisor of Insurance ( a chicken feed maker) and CLICO, after applying for an international FOREX loan and being told that there were no effective financial controls in place.
They were FORCED to form the FSC.

    This is from the FSC website:

    The Financial Services Commission “the Commission” was established on the 1st April, 2011 pursuant to the Financial Services Commission Act 2010-21 “the FSC Act” and is responsible for supervising and regulating the non-banking financial services sector in Barbados.

    You may be correct about FSC being a SHAM front, but it was in fact created by an Act of Parliament in 2010-2011 and not by Arthur; though it may have been created in response to events that occurred in the Arthur era.


  14. @DD

    The article supports BU’s point.


  15. I am not trying to do down the organisation, but the remit is flawed. I cannot recall any advertisements in the UK, although that does not mean much.
    However, I would be very surprised if anyone trained in the UK in financial regulation and with an influential position at the FSC has not raised questions.
    I know of at least one Barbadian based in New York working in fianncial regulation (he reads thisa forum) who came to Barbados last year with a prepared papoer on the subject at the Diaspor conference and was virtually ignored.
    All I am saying that the more ideas the better the outcomes. We are all in this together – not point scoring.
    Why did we have an academic economist as the founding chairman of a financial regulatory body?


  16. Hal Austin | September 10, 2013 at 11:39 AM |
Why did we have an academic economist as the founding chairman of a financial regulatory body?

    Good question – politics perhaps?

    Maybe this article from The Nation – titled “Take it slow” explains the Chairman’s mindset and why FSC is so slow doing stuff.

    BY DAWNE PARRIS | FRI, JULY 12, 2013 – 12:11 AM
    The chairman of Government’s Council of Economic Advisers has a different view from Central Bank Governor Dr Delisle Worrell’s of how the Freundel Stuart administration should close its $400 million deficit gap.
    While Dr Worrell suggested on Wednesday that adjustments should be sharp and swift, Sir Frank Alleyne is adamant that Government should take it slow.
    “Any economist who’s worth his or her salt would advise the Government that these things have to be phased in. The Government of Barbados is the single largest buyer of goods and services in this economy. If you go and chop out $400 million – one chop like that – you risk imploding the economy unless you have a plan. This thing has to be managed,” he said on VOB’s Down To Brass Tacks yesterday.
    “Government must have access to what major foreign exchange projects are in the pipeline in Town and Country Planning. A prudent Government then would say ‘look, this is the cut we’re implementing in this timeframe over the next three months; let us sit down with the fellas in Town and Country Planning, see what foreign exchange projects we can bring up to scratch and make sure they’re ready to go in that time period so that when we withdraw, they come in. That is what proper economic management is about.”

    This Government has been taking it slow for 5 1/2 years.

    If the fellas at Town and Country Planning are counting on The Merricks and Pure Beach as “major foreign exchange projects” to solve problems they are going to have to go REAL SLOW.


  17. @ Mr Diligence
    Thanks for the Nation reference.
    Bushie stands corrected…..but perhaps you can find another reference to support the fact (according to the inference drawn) that these laws were conceived, drafted and enacted in the two years after the DLP had won office…and while Thompson was sick….

    Skipper….the ONLY laws that were passed in Barbados in under 10 years were the world cup sunset laws (which were needed in order to get the surveillance equipment and training :) )……and the CSME laws – which basically says that in Barbados, a Bajan ain’t no better than anyone else….

    Even seat laws were marathons…. and dem ain’t even finish yet.


  18. Bushy
    No inference was intended.

    That law could have been conceived in the prior 14 years, or in the 7 years before that; but I am guessing conception was some time after 1997.

    But, I do find it hard to believe DEM would pass into law something drafted by BEEs, without substantial amendments – unless of course both of them were simply using the same existing law from another jurisdiction as the model.

    In any event it is what it is.

    Here is another Nation article.

    “MOU to boost financial system

    THU, SEPTEMBER 05, 2013 – 8:00 AM

    THE CENTRAL BANK of Barbados and the Financial Services Commission have signed a memorandum of understanding (MOU) aimed at cementing their ongoing relationship and strengthening the financial system.
    The objectives of the agreement include providing detailed parameters for cooperation in relation to the exchange of information, the monitoring of financial soundness indicators for banks, insurance companies and credit unions within Barbados and for the development of early warning systems and conducting of stress tests.
    Speaking during a signing ceremony at the bank last Thursday, legal counsel Sadie Dixon said the MOU also established an oversight committee comprising principal functionaries of both entities including the chief executive officer of the FSC and the Central Bank Governor.
    The committee is expected to meet regularly to discuss and formulate the financial stability report and to closely monitor and respond to developments within the financial system.
    FSC chairman Sir Frank Alleyne said the financial sector played a pivotal role in enhancing the quality of life of all citizens and residents of Barbados.
    Maintain integrity
    “Our country has one financial system where operations within it are very much intertwined, and clearly as regulators we need to collaborate to ensure the system’s integrity is maintained,” he said.
    Sir Frank noted that a number of areas had to be properly addressed including surveillance and development of early warning indicators of financial stress, the thorough assessment of households’ and corporates’ balance sheets, indebtedness, and vulnerabilities, and ensuring that there is no fragmentation within the regulatory and supervisory framework.
    Meanwhile, Central Bank Governor Dr DeLisle Worrell said Barbados had a history of cooperation among financial regulators that went back decades, with the Central Bank lending its regulatory expertise to the regulators of credit unions, insurance companies and securities traders for many years.
    “In partnership we will continue to blend our best efforts towards the best health of our financial system in these uncertain times,” he said. (NB)”

    As has been said repeatedly in BU, the key is in the execution. not who conceived or drafted or passed the legislation.

    Lets hope it does not take the FSC and Central Bank 10 years to execute in collaborating to ensure the system’s integrity is maintained.


  19. the seven deadly sins.left to your interpretation.

    A proud look
    A lying tongue
    Hands that shed innocent blood
    A heart that devises wicked plots
    Feet that are swift to run into mischief
    A deceitful witness that uttereth lies
    Him that soweth discord among brethren


  20. DD said

    Re The Cable & Wireless Building
    Question – How much of that 85,000 square feet C&W contracted for 12 years ago in the analogue era when it had no competition, does LIME now need In this competitive digital era, What happens if they walk away?

    Article in Nation today said

    More than 200 workers at telecommunications company LIME have been informed that September 30 will be their last day of work.

    The WEEKEND NATION understands that in addition to the 200 employees from the service support and delivery and associated customer support teams who will be going home as a result of a deal with global provider Ericsson, 12 others from various departments have been given their walking papers as the company looks to either outsource their jobs or make their positions redundant.

    LIME outsourcing, positions redundant.

    This is not good news for Fortress Property Fund investors


  21. The following interview with Roger Cave appeared in Monday’s Business Advocate.


  22. As I read the question and answer interview with Roger Cave (one of the weakest and most unpopular methods of journalistic interviewing) in one of the local papers I though of some questions I would like to ask him and his colleagues.
    Who are the shareholders voting at this special meeting on September 26? Will they be A shareholder, B shareholders or both?
    Do you have any institutional shareholders, if so what class of shares do they own? And are they happy with the division of voting and restricted voting shares?
    If the value of the portfolio, presumably residential and commercial, has been devaluing over the years, what strategy do you have to reverse this?
    Eugene Fama, the outstanding financial economist, states that prices reflect all available information. Are you happy that your funds are transparent enough?
    You talk of cash flow, when Lehman Bros went bankrupt it has assets of US$600bn, but no cash flow. Is your fund insolvent, do you have cash flow to meet your bills?
    You say you have been in contact with the FSC. Have your fund ever been stress-tested by the FSC, and if so, what has been the outcome? You also mentioned poor cash flow. What is the regulatory capital requirement for your property fund?
    How do you internally measure performance? Do you produce annualised performance statistics, either for internal or external use, so that investors have as better idea of the fund’s performance? Value at Risk is forward-looking. Do you use VaR when estimating future fund performance?
    What risk-adjusted performance measures do you use? What is the total expense ration of the property fund and have you calculated what William Sharpe calls the arithmetic of investment expenses?
    What about fund governance?


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