Caneel Bay, Virgin Islands National Park, before the 20017 hurricane season/Carolyn Sugg via flickr

Editor's note: The Caneel Bay Resort, a private inholding at Virgin Islands National Park, was heavily damaged last fall by back-to-back hurricanes. While the resort's founder, Laurance S. Rockefeller, had intended for the resort to be transferred to the National Park Service in September 2023, U.S. Rep.  Stacy Plaskett, D-U.S. Virgin Islands, has been working with the resort's current owners, CBI Acquisitions, to push legislation to give CBI a 60-year "Retained Use Estate" agreement. CBI officials maintain they need such a long-term agreement to attract loans and investors for Caneel Bay Resort's rebuild. While the National Park Service has been working since 2010 on a more traditional lease agreement with CBI, the company's managing director has said those talks have lacked substance. National Parks Traveler early this year filed a Freedom of Information Act request to obtain Park Service documents relating to those talks to assess how substantive they were, or weren't. While the documents were to have been produced by April 16, as of August 19 they have not been delivered. Closely following this issue as been The Virgin Islands Daily News. The paper recently ran a column with a series of questions regarding the future of the Caneel Bay Resort. In response, Mr. Engle provided answers. The Traveler is providing those columns to you with the newspaper's permission.

Questions For CBI And Its 60-Year Caneel Deal

The Daily News is aware of the vital importance of Caneel Bay Resort to St. John, to St. Johnians, to the V.I. National Park — in which the resort is located — and to the V.I. economy. The Daily News has raised serious concerns about H.R. 4731, a bill introduced in Congress by Delegate Stacey Plaskett that would give the current operator, CBI, a 60-year extension to operate the resort. On April 30, The Daily News asked a series of questions and for over three months continually sought answers from CBI.

These two pages provide the background of our campaign for answers and present the answers that CBI eventually offered.

1. Why is CBI not required to pay a minimum annual rent under the terms of Plaskett’s bill?

Under the current RUE, CBI has not paid rent since it acquired control of Caneel Bay in 2004. Plaskett’s bill originally provided for rent of 1.2 percent of gross revenue, less a list of specified deductions.

In testimony before the Subcommittee on Federal Lands of the House Committee on Natural Resources, Gary Engle, managing member of CBI, stated he proposed the 1.2 percent figure that found its way into Plaskett’s bill. During the hearing, that 1.2 percent figure was challenged as excessively low compared to rents at other national parks.

During full Committee consideration, the 1.2 percent figure was changed to “fair market value.” Supporters of Plaskett’s bill tout this change as an improvement in the bill. That may not, however, be true.

Plaskett’s bill allows CBI to deduct “preservation, maintenance, restoration, improvement, repair and related expenses” from the “fair market value” rent.

Will the nearly $100 million of insurance proceeds CBI is slated to receive to rebuild Caneel Bay be deducted from the “fair market value” rent? If so, it could be a very long time before Caneel Bay is paying any rent under the Plaskett bill.

Moreover, Engle is reported to have stated that CBI is just beginning to see a return on its initial investment after 13 years. If it has taken CBI that long to show a return without having to pay any rent, will it ever actually pay any rent under Plaskett’s bill?

Commercial rents typically have a minimum rent the tenant is required to pay. It is not uncommon for a tenant to also pay “additional rent” if its revenue exceeds the amount upon which the minimum rent is based.

2. How many St. Johnians actually work at Caneel Bay?

In the subcommittee hearing, Delegate Plaskett testified that Caneel Bay employed 300. In a letter to constituents, Plaskett stated the resort had “400-plus employees.” We have seen published reports claiming Caneel Bay has up to 500 employees. We suggest CBI disclose the number of St. Johnians it employed when the hurricanes hit last September, the number of Virgin Islanders from St. Thomas and St. Croix, and the number of non-Virgin Islander employees.

It is important to know how many jobs for actual Virgin Islanders are at stake.

3. Why does Plaskett’s bill contain no deadline for re-opening Caneel Bay and no penalties for failing to meet that deadline?

Plaskett testified before the sub-committee that “my constituents need expedited job security in order to begin the process of rebuilding their lives.” Yet when questioned by Virginia Congressman A. Donald McEachin, Mr. Engle refused to commit to any deadline for rebuilding and reopening Caneel Bay. Caneel Bay employees have already been without jobs for eight months. It has been estimated that it will take a minimum of two years before CBI could rebuild and reopen Caneel Bay. Does anyone really believe that the former Caneel Bay employees can afford to wait that long to resume their jobs?

4. What experience does CBI have in developing and constructing resort properties?

Mr. Engle testified that Stoneleigh Capital, the parent company of CBI, “makes investments in real estate, hospitality and hotels and financial services.” However, it is important to note that making investments in resorts is very different from developing the property and constructing the buildings. Engle also stated, “I can make money, which is my line of business. I can make money running the resort.” He made no mention of developing or building resorts.

If Engle or Stoneleigh have actually developed and constructed resort properties, they should disclose them.

If they have no actual experience in developing and constructing resort properties, they should disclose that important fact.

5. Does Stoneleigh/CBI have the financial resources to develop and rebuild Caneel Bay?

In 2016, Stoneleigh dropped out of a project to refurbish a hotel in New York because it could not obtain the necessary financing and never began work on the hotel, reported The Broadsheet, Fortune’s internet newsletter about business, finance and other news.

Stoneleigh/CBI should disclose their financials to provide some assurance to Virgin Islanders that they have the financial strength to rebuild Caneel Bay.

6. Why doesn’t Plaskett’s bill contain safeguards to prevent CBI from “flipping” the proposed RUE extension — for a multimillion dollar profit — to a major hotel developer such as Four Seasons, Ritz Carlton/Marriott or Rosewood?

A 60-year extension is worth a fortune, especially with no minimum rent requirement.

7. How much in insurance payouts has CBI already received and how much more does it expect to receive?

Engle has stated he needs approximately $100 million to rebuild Caneel Bay. He’s also stated that there is a “substantial amount of insurance proceeds that will be coming to us.”

CBI representatives declined to provide The Daily News with the dollar amounts of their insurance claims or how much in insurance payouts they have received to date. They have, however, stated their claims for both Irma and Maria amount to “upper 8 figures” (meaning $50 million to $99 million) for property damage and “low 8 figures” (meaning $10 million to $49 million) for business interruption. CBI’s total insurance claims therefore amount to between $60 million and $148 million.

8. What are the sources of CBI’s estimate of $100 million to rebuild Caneel Bay and of their professed need for a 60-year extension of the RUE?

Engle claimed in Congressional testimony that a “60-year extension will provide the sufficient amount of time to generate the return on capital required.” Yet he has failed to provide any financial documents to support these claims.

Before further consideration is given to H.R. 4731, CBI should be required to disclose its plans and costs for rebuilding Caneel Bay, its operating revenues, expenses and profit from 2004 to date and its projected financial performance going forward.

9. Do we really want to rush to judgment on a bill that could impact $9.6 billion of economic activity for the territory over the next 60 years?

CBI representatives have estimated that the “multiplier effect” of the estimated $65 million in direct annual spending by Caneel Bay amounts to an annual loss of economic activity in the territory “in excess of $160 million.” Multiplying that figure times the proposed 60-year extension amounts to $9.6 billion.

10. Was the $330,000 CBI spent on lobbying between April 20, 2017, and Jan. 22, 2018, to extend the RUE for Caneel Bay? If not, what was it spent for?

11. How much money has CBI paid to the government of the Virgin Islands in taxes, fees or for any other reason since taking over Caneel Bay Resort in 2004?

12. How much money has CBI spent to provide food, clothing, shelter or other assistance to its St. John employees since the twin hurricanes hit in September 2017?

13. Why does Plaskett’s bill switch Caneel Bay Resort rent revenue away from the Virgin Islands National Park?

Plaskett’s bill puts the rent into the U.S. General Treasury, thus changing the long-standing law that directs the money to the Park to benefit St. John and all the Virgin Islands.

CBI Responds To Questions Regarding Plaskett's 60-Year Caneel Deal

Gary Engle is CEO and chairman of Stoneleigh Capital, the parent company of CBI, which in turn has the rights to operate Caneel Bay Resort until Sept. 30, 2023. During June and July, Engle provided the responses below in written communications to The Daily News.

1. Why is CBI not required to pay a minimum annual rent under the terms of Plaskett’s bill?

Engle: The methodology for rent payment is that which was proposed by the National Park Service and is, as we understand it, standard for leases and concession agreements within that agency.

2. How many St. Johnians actually work at Caneel Bay?

Engle: Approximately 161 employees are from St. John and 180 from St. Thomas, however total employee count increases to 400 during season.

3. Why does Plaskett’s bill contain no deadline for re-opening Caneel Bay and no penalties for failing to meet that deadline?

Engle: We have a material economic incentive to reopen Caneel Bay resort as quickly as possible and I have repeatedly expressed our intent and commitment to do so, but the reality is that such reopening is contingent on many factors beyond our control, including local regulatory approvals.

4. What experience does CBI have in developing and constructing resort properties?

Engle: Yes, I do have hands-on experience in developing and constructing resort properties. I was an owner of two ski resorts, located in Colorado and California and directly involved with the expansion and development of Kirkwood Mountain Resort as well as Durango Mountain Resort; I was a senior executive at Arvida Corporation, a national resort and community development firm; I was a senior executive of and board member of Disney Development Company, a wholly owned subsidiary of the Walt Disney Corporation; and most recently, I have presided over the construction and renovation of parts of Caneel Bay.

5. Does Stoneleigh/CBI have the financial resources to develop and rebuild Caneel Bay?

Engle: We have successfully owned and operated Caneel Bay since 2004 and believe our track record speaks for itself.

6. Why doesn’t Plaskett’s bill contain safeguards to prevent CBI from “flipping” the proposed RUE extension — for a multimillion-dollar profit — to a major hotel developer such as Four Seasons, Ritz Carlton/Marriott or Rosewood?

Engle: As designed by Mr. Rockefeller, the RUE provides for a possible sale of the resort to qualified buyers. Mr. Rockefeller recognized that business circumstances change over time and flexibility is imperative to assure the long-term success of the resort. The National Park Service has, and will continue to have, notice rights under any proposed sale of the resort and any subsequent owner must assume all obligations under the RUE. However, as I have repeatedly said, we have no intention of selling or flipping the asset.

7. How much in insurance payouts has CBI already received and how much more does it expect to receive?

Engle: This is proprietary information, which we will not disclose.

Editor’s note: Based on information CBI representatives previously disclosed to The Daily News, CBI’s property damage and business interruption insurance claims total between $60 million and $148 million. CBI’s refusal to disclose the actual amount suggests that it may well be in excess of the $100 million CBI claims they need to rebuild Caneel Bay Resort.

8. What are the sources of CBI’s estimate of $100 million to rebuild Caneel Bay and of their professed need for a 60-year extension of the RUE?

Engle: As part of our hurricane damage assessment experts estimated it will cost $100 million to rebuild Caneel, which is believed to be a conservative estimate. The 60-year RUE extension is based on a number of factors. The simplest explanation is it will take an extended period of time to generate a reasonable return on a $100 million investment.

9. Do we really want to rush to judgment on a bill that could impact $9.6 billion of economic activity for the territory over the next 60 years?

Engle: I am very aware of the problem identified in this question, but I have no easy answer for this problem. Any undertaking of this magnitude, particularly involving all of the constituents herein, will take considerable time to complete. Economic harm to St. John is now unavoidable, which is precisely why time is of the essence in moving this forward.

10. Was the $330,000 CBI spent on lobbying between April 20, 2017, and January 22, 2018 to extend the RUE for Caneel Bay? If not, what was it spent for?

Engle: This is proprietary information which will not be shared.

Editor’s note: Lobbyist disclosure reports filed by CBI’s lobbyists with the U.S. House of Representatives and U.S. Senate confirm the $330,000 CBI spent on lobbying in 2017 was related to the extension of the retained use estate (RUE) CBI is seeking for Caneel Bay Resort. During the first half of 2018, CBI spent an additional $215,000 on lobbying for the RUE extension, for a total of $545,000 reported to date.

11. How much money has CBI paid to the Government of the Virgin Islands in taxes, fees or for any other reason since taking over Caneel Bay Resort in 2004?

Engle: CBI complies with all federal and USVI laws including tax obligations. This data is not readily available and is otherwise proprietary.

12. How much money has CBI spent to provide food, clothing, shelter or other assistance to its St. John employees since the twin hurricanes hit in September 2017?

Engle: Caneel Bay paid over $1 million in severance payments to employees as a result of the hurricanes.

13. Why does Plaskett’s bill switch Caneel Bay Resort rent revenue away from the Virgin Islands National Park?

Engle: This is a legislative decision which we understand is dictated by the federal government.

Postscript:  Late last month Rep. Plaskett returned to the Virgin Islands with the following colleagues. According to the Daily News, among the delegation's stops was the Caneel Bay Resort. 

House Democratic Leader Nancy Pelosi
Congresswoman Nydia Velázquez (D-NY)
Congresswoman Shelia Jackson-Lee (D-TX)
Congressman Jim McGovern (D-MA)
Congressman Gregory Meeks (D-NY)
Congresswoman Betty McCollum (D-MN)
Congresswoman Terri Sewell (D-AL)
Congresswoman Michelle Lujan Grisham (D-NM)
Congressman Raul Ruiz (D-CA)
Congresswoman Robin Kelly (D-IL)
Congressman Dwight Evans (D-PA)
Congresswoman Val Demings (D-FL)
Congressman Adriano Espaillat (D-NY)

Additional coverage of this story from the Traveler:

* Caneel Bay Resort Renting Out Rooms At Virgin Islands National Park

* Caneel Bay Resort's Future At Virgin Islands National Park In Limbo

* House Committee Approves Legislation Supporting Caneel Bay Resort

* Questions Remain Unanswered Over Caneel Bay Resort At Virgin Islands National Park

* Corporate Welfare At Caneel Bay In Virgin Islands National Park?

* Laurance Rockefeller Wanted Caneel Bay Resort To Go To Virgin Islands National Park