Public-Private Partnership Stories Sierra Leone: Cape Sierra Hotel Photo © Ines Gesell/iStockPhoto Sierra Leone has been struggling to recover from a devastating civil war in the 1990s. One promising sector—tourism—has been held back by an acute shortage of quality hotels in the capital, Freetown. To address this problem, the government hired IFC as lead advisor for a public-private partnership to attract an international hotel operator to redevelop and operate the Cape Sierra Hotel. In August 2010, International Development Enterprise Associates [UK] Ltd. (IDEA), in a consortium with Hilton Worldwide, won a competitive bid for a 25-year conces- sion to redevelop the 200-room hotel. It will share 6.5 percent of annual revenues with Sierra Leone’s National Social Security and Insurance Trust (NASSIT), which holds a long-term lease to the property. The project is expected to cost around $40 million, will employ 400 people, and attract 40,000 guests per year. It will signifi- cantly improve the attractiveness of Freetown as a tourist destination and encourage more business travel to Sierra Leone. This series provides an overview of public-private partnership stories in various infrastructure sectors, where IFC was the lead advisor. The newly redeveloped Cape Sierra hotel is expected to attract 40,000 IFC Advisory Services in Public-Private Partnerships visitors annually and employ 400 people. 2121 Pennsylvania Ave. NW Washington D.C. 20433 ifc.org/ppp BACKGROUND NASSIT’s preferred structure was a sub-lease and concession In the 1980s and early 1990s, Sierra Leone, a coastal state in West agreement. NASSIT had previously taken equity stakes in other Africa, had a small but thriving tourism industry. But a brutal ventures in the hospitality sector and wished to limit further civil war during the 1990s kept tourists away and devastated the exposure. However, NASSIT wanted to share in the potential economy. After the war ended in 2001, the tourism industry of the hotel. Therefore, the deal was structured so that NASSIT slowly emerged, led by development and business travelers. Tourist would provide to the concessionaire the rights to redevelop and facilities, however, remained inadequate. The three main hotels operate the Cape Sierra Hotel for 25 years (with the option to in Freetown, the capital, provided only 120 rooms, about one- renew for another 25) in exchange for a share of annual turnover, quarter of the total demand. None of the hotels met international benefitting the government, NASSIT, and the concessionaire. business hotel standards. This allowed NASSIT to be removed from the operations of the The Cape Sierra Hotel, located adjacent to Lumley Beach and hotel while still enjoying the potential for increased revenue from with easy access to central Freetown, was well positioned to be improved performance. the hotel of choice for business and holiday travelers. Its prime Another principal concern of NASSIT was the timely completion location gave it the potential to become an anchor for tourism of the hotel. The transaction was structured to require the development in the country, facilitating growth and providing concessionaire to post a performance bond and provided NASSIT employment. After the war, the Sierra Leone government, which with the right to take back the hotel if the hotel was not finished owned the hotel, leased it to a private operator. Unfortunately, the within the timeframe the concessionaire indicated in its bid. hotel was poorly managed and it gradually became dilapidated. In 2009, the government terminated the lease and closed the hotel. BIDDING In 2009, the National Social Security and Insurance Trust On August 6, 2010, four bids were received. International (NASSIT) took on a 25-year lease. In conjunction with Sierra Development Enterprise Associates [UK] Ltd. (IDEA) was Leone’s 50th anniversary in the spring of 2011, NASSIT aimed to selected as the preferred bidder on the basis of its offer to attract a strategic investor to redevelop the Cape Sierra Hotel as an develop the Cape Sierra Hotel into a 200-room hotel and share international, first-class business destination. 6.5 percent of annual revenue with NASSIT. Hilton Worldwide, a leading international hospitality company, will operate the hotel. IFC’S ROLE The proposed development is expected to cost around $40 million The World Bank Group’s Investment Climate Advisory Services with a construction period of two years. group worked closely with Sierra Leone’s Ministry of Tourism to develop a strategy for rebuilding the country’s tourism sector. As a result, the government identified the Cape Sierra Hotel as an EXPECTED POST-TENDER RESULTS excellent opportunity to jump-start the tourism sector. However, • The hotel is expected to attract 40,000 visitors it needed further support to set up a concession. annually, employing 400 people. NASSIT retained IFC to find a strategic investor through • The project will attract $40 million in foreign a competitive and transparent bidding process. IFC’s PPP transaction advisory team led the transaction with support from direct investment. the Investment Climate group, which contributed tourism sector • The redeveloped Cape Sierra hotel is expected to expertise and access to its network of high-level government enhance the image of Sierra Leone and boost the contacts. development of the business tourism sector. IFC helped organize a bidder’s conference in London to introduce • Residents and businesses in the region witnessed potential investors to the project. Initially, the government the benefits of conducting sound and transparent requested that the hotel be refurbished in time for the country’s business transactions. 50th anniversary celebration. While this was technically feasible, many potential investors favored construction of a new, modern 08/2011 hotel rather than renovation of the existing structure. The outcome of the initial tender was inconclusive. IFC helped the government modify the transaction and launched a retender in June 2010, which attracted eight submissions for prequalification and four final bids by reputable international corporations. TRANSACTION STRUCTURE