CBIA Seeks to Terminate Lease for Caneel Bay Resort

Caneel Bay Resort photographed in April.
Caneel Bay Resort photographed in April, 2018.

The leaseholder of Caneel Bay Resort, the iconic St. John hotel that was destroyed by Hurricane Irma, has sent an offer to the Department of Interior to terminate its agreement to manage the hotel.

CBI Acquisitions, LLC, took over management of Caneel Bay Resort in 2004 after purchasing a Retained Use Agreement—essentially a lease with the federal government— set to expire in 2023.

In a letter dated April 30, 2019, CBIA asked the Department of Interior to pay $70 million and to be held harmless for any environmental damage in exchange for relinquishing the property to the federal government four years prior to the lease’s expiration.

Gary Engle meets with employees of the Caneel Bay Resort.
Gary Engle, principle of CBI Aquisitions.

CBIA owns the structures–but not the land–on the 180-acre resort located within the Virgin Islands National Park. The Retained Use Estate is set to expire in four years, but CBIA’s negotiations with the National Park Service and the Department of Interior to determine the resort’s future have been unsuccessful. They also have generated much controversy.

V.I. Delegate-to-Congress Stacey Plaskett sent out a press release late last week announcing CBIA’s offer to the DOI in April, which was not made public.  She formally requested that the Department of Interior provide her office with a copy of the letter, which it did, and called for transparency in discussions.

Delegate Stacey Plaskett (File photo)
Delegate Stacey Plaskett (File photo)

“Noting that the future of the Caneel Bay property is an integral part of the economic recovery of St. John and the broader economic viability of the Virgin Islands, I have asked that the Department of the Interior engage with Virgin islanders and that my office be provided with a copy of the Department of Interior’s response,” Plaskett said in the press release.

Nigel Fields, superintendent of the Virgin Islands National Park, said he was not aware of any response issued by the Department of Interior (the federal department that oversees the National Park Service.) Given the unprecedented nature of the request and the complexity of the situation, Fields said he expected a formal response would take some time.

While the RUE states that the federal government has six months to respond to an offer to terminate the agreement, CBIA has requested “a final decision and response to this Offer on an expedited basis and within 30 days of receipt of this Termination Notice.”

The termination letter states that EHI Acquisitions, LLC, the authorized representative of CBIA, has “a strong desire to rebuild Caneel Bay” and outlines unsuccessful attempts to negotiate an extension of the RUE.

The letter further states, “Despite a strong preference to rebuild, EHI cannot do so when its future status in Caneel Bay is uncertain.”

Caneel Bay Resort’s damaged gift shop.

The letter outlines dire consequences if the government cannot reach an agreement about the hotel, which it characterizes as an “eco-resort.”

“Given the current economic and environmental challenges facing the U.S. Virgin Islands, St. John, and the local community, it is important to determine the path forward for the Eco Resort. EHI and CBIA would like to start rebuilding the Eco Resort immediately. Rebuilding the Eco Resort will require an investment of at least $100 million. EHI’s desire to rebuild the Eco Resort is fortified by its understanding that if EHI does not make this investment, there will not be an operating resort on Caneel Bay until 2028 at the earliest and possibly not until 2030. This ten-plus-year delay—during which time St. John will be unnecessarily deprived of 400 jobs through direct employment, $160 million in annual economic activity, and additional jobs in related industries—is the result of the time required for the DOI to: a) administer the required competitive bidding processes for constructing and running the resort; b) negotiate a contract; and c) start the process of designing, developing, permitting and constructing the resort.”

Some community members find much to fault with CBIA’s termination offer.

They say there’s no provision in the RUE to compensate CBIA for terminating the agreement early, so the $70 million buyout offer is preposterous.

They say there have been longstanding disputes between CBIA and the Park Service regarding compliance with environmental issues, so absolving CBIA of any liability before damage can be assessed is not likely. “It has been incredibly frustrating dealing with Caneel Bay,” said one former Park Service employee.

They say although Caneel Bay’s management may have implemented some environmentally sustainable practices, it would be a mis-characterization to call it an “eco resort.”

They say that CBIA has exaggerated its economic benefit to the territory.

And they say CBIA is already at fault for two years of delay in reconstruction.

While most other resorts have made strides to rebuild after 2017’s hurricanes, CBIA let most of the Caneel Bay property languish while issues regarding insurance payments—rumored to be at least $100 million and possibly twice that— were resolved.

Damage remaining at Turtle Bay at Caneel Bay Resort in May, 2019.

A small portion of the property was made habitable and was used by hurricane relief workers for nearly a year following the storms, but the beachfront units along the main beach and at Scott Bay were decimated. In March 2019, CBIA announced that a local company had been contracted to clean up debris and storm-related damage, but recent photos of Turtle Bay show much clean up remains to be done.

Laurance Rockefeller donated much of the land that now makes up the Virgin Islands National Park in 1956. Although he retained the use of the property which is now Caneel Bay Resort until he transferred it through the RUE in 1983, environmentalists say Rockefeller never meant the hotel to be operated much beyond the 40 years granted in the RUE.

The RUE states, “It is the Grantor’s expectation and intention that at some future time to be determined… the Retained Use Estate will be terminated and extinguished in order to carry out the long standing objective of the Grantor that the premises ultimately be an integral part of the Virgin Islands National Park…for the use and enjoyment of visitors to the Park….In keeping with this objective, at all times prior to the termination of the Retained Use Estate…Grantor will use and maintain the premises in such a manner that will a) be consistent with the preservation of such outstanding scenic and other features of national significance and b) preserve the Premises to the extent feasible in their natural condition for the public benefit.”

Some local environmentalists contend that CBIA has forfeited its right to maintain control of the property because CBIA has violated the RUE– not only because of the property’s current derelict condition, but also because public access to most of the property has been denied since the hurricanes.

On social media, some community members have argued that St. John has survived the worst of the economic impact related to the resort’s closing, and the RUE should be left to expire.

Other members of the community believe Caneel Bay Resort should be rebuilt, but not necessarily by CBIA.

“The proposal by Mr. Engle is clearly a negotiating tactic; the issue is his timing couldn’t be any more unfavorable,” said Senator-at-large Steven Payne. “Mr. Engle says, ‘Let me make a very high offer and over the next decade make a more reasonable offer.’ Are these the actions of a community-minded investor? Do we actually want to support giving Mr. Engle a lease? Maybe it’s time to let our voices be heard in Washington and to [tell] the Park Service that the property should go out to bid.”

Todd Sampsell, president of the Friends of the Virgin Islands National Park, said his organization is not in support of paying $70 million to release CBIA from the RUE.

“We are in support of 2010 legislation that extends the lease for 40 years because that agreement ensured protection of the natural resources, and we saw that as a benefit to St. John,” he said.

The legislation that Sampsell referred to, passed when Donna Christian-Christensen served as the V.I.’s delegate to Congress, outlined the terms that were being unsuccessfully negotiated before Hurricane Irma struck. After the storms, Engle said in 2017 he was no longer willing to negotiate with the Park Service.

After the hurricanes, CBIA worked with Del. Plaskett to pass H.R. 4731. Drafted by CBIA and introduced in Congress in December 2017, it gave CBIA the right to extend its control of the property for 60 years. That legislation contained no clear provision for CBIA to pay rent for use of the property and provided few restrictions for further development. The proposal passed the House of Representative’s Natural Resources Committee but never made it on to the floor for a vote.

Proponents of the bill said it would fast track the reconstruction of Caneel Bay. Opponents said it was a sweetheart deal that offered little in the way of protection for natural and cultural resources. Former Caneel Bay employees testified at a public hearing that work conditions had become steadily worse since CBIA took over Caneel Bay and did not support Engle’s bid to continue to operate the resort. Sampsell said the Friends of the VINP was always opposed to the proposed legislation.

NOTE: The Source reached out to CBIA for comment about its letter to the Department of Interior but is still awaiting a response.

Print Friendly, PDF & Email

Support the VI Source

Unlike many news organizations, we haven't put up a paywall - we want to keep our journalism as open as we can. Our sites are more popular than ever, but advertising revenues are falling - so you can see why we could use your help. Our independent journalism costs time, money and hard work to keep you informed, but we do it because we believe that it matters. If everybody who appreciates our reporting efforts were to help fund it for as little as $1, our future would be much more secure. Thanks in advance for your support!