Growing uncertainty over the fate of St. John’s hurricane-damaged Caneel Bay Resort has led owner CBI Acquisitions to seek a premature termination of its lease agreement — with a not-so-subtle ultimatum.
In an April 30 letter obtained by The Daily News, CBIA President Gary Engle writes to Department of the Interior Secretary David Bernhardt, requesting a termination of the resort’s retained use estate, the contract that allows leaseholders of Caneel Bay Resort to operate on park land — virtually tax-free — until 2023.
Engle, touting a “strong desire” to rebuild, said doing so would require a $100 million investment and a level of certainty from the federal government to continue operations beyond the RUE expiration date.
Certainty, however, has proved elusive.
“It is within the Department of Interior’s power to extend the RUE, either through a leasehold or through legislation, but prior negotiations on both fronts have not proven productive despite EHI and CBIA’s good faith efforts to reach an agreement,” Engle writes.
EHI Acquisitions is the parent company of CBIA.
“Given this situation, EHI cannot risk a $100 million investment to rebuild a property that it may not have the right to use beyond 2023,” Engle added.
Engle’s request states that — upon the Interior Department’s acceptance of the offer — EHI will terminate the RUE one year from the date of the receipt of the termination notice.
The request, however, comes with two conditions: payment of $70 million to CBIA to cover the value of property improvements; and protection from any environmental liability.
Engle states the request is “explicitly contingent” on the Interior Department satisfying both conditions, and that a refusal would mean EHI would acquire all rights of ownership over the premises.
Engle indicates the conditions are not only consistent with terms outlined in the RUE but the only viable option for a company trying to avoid “further economic and reputational harm caused by this stagnation.”
“Despite its strong preference to rebuild, EHI cannot do so when its future status in Caneel Bay is uncertain,” Engle writes.
Others, however, see cracks in Engle’s argument.
According to St. John resident and attorney Dave DiGiacomo, Engle’s request for $70 million for property improvements doesn’t make sense, largely because property upkeep is already a requirement for the resort operator, as stated in the RUE.
“There is nothing that I found in the RUE that says he is entitled to be paid for that stuff,” DiGiacomo said. “It’s very clear that the original owner, Laurance Rockefeller, intended that whoever was going to operate this place was going to have to take care of it — which Engle hasn’t. I’d say he’s violated the terms of the RUE and he should be evicted anyway.”
DiGiacomo also questioned Engle’s use of conditions in his request, labeling it as “clever lawyer talk” and — again — not in keeping with the RUE.
“He’s hoping someone is going to bite on this deal and pay him $70 million and relieve him of his environmental obligations,” DiGiacomo said. “There are no conditions in the RUE allowing him to do a conditional tender — it wasn’t even contemplated.”
Engle writes that while the RUE provides Bernhardt 180 days upon receipt of the notice to respond, he would request a response within 30 days, due to “increasing uncertainty” which has become “untenable.”
The Daily News reached out to the Interior Department for details about its response, but did not receive a reply by press time Wednesday.
Earlier this month, V.I. Delegate to Congress Stacey Plaskett penned a letter to Bernhardt, requesting “full transparency” and engagement with the Virgin Islands be achieved before the department responds to Engle’s request.
The RUE, which dates back to 1983 when Rockefeller donated the 170-acre parcel where Caneel Bay sits to the National Park Service, has allowed resort owners to pay zero rent to the federal government for using park land, under the assumption the resort will transfer to park ownership in 2023.
Since hurricanes Irma and Maria badly damaged the resort in 2017, CBIA has requested a 60-year extension to the RUE as an incentive for the amount of capital, time and resources necessary to rebuild and recoup their investment.
CBIA has claimed that if they do not make the investment, there will not be an operating resort on Caneel Bay until 2028 at the earliest, and possibly not until 2030.
Legislation authored by Plaskett to grant the extension failed to pan out, and has yet to be reintroduced.