CBI Clears First Hurdle in Bid for Non-competitive Lease for Caneel Bay

The expansive grounds of Caneel Bay Resort is seen from a North Shore overlook.


Caneel Bay Resort owner CBI Acquisitions LLC got one step closer to securing its continued operation of the hotel when the U.S. House of Representatives voted unanimously on Tuesday night, March 4, to allow the Secretary of the Interior to negotiate a non-competitive lease with CBI.

CBI, a V.I. Economic Development Commission beneficiary, purchased the 148-acre Caneel Bay Resort located within the V.I. National Park in 2004 in partnership with Rosewood Hotels and Resorts, and Howard Guja, president and chief executive officer of Roebling Advisors LLC.
Before the 2004 purchase, Caneel — originally owned by Laurance Rockefeller — had been owned by Deutsche Bank for 10 years, which  employed Guja before he started Roebling in 2000.

Since 1983, the hotel property has been operated as a Retained Use Estate (RUE). Under the RUE, which is in effect until 2023, the property is a VINP inholding owned outright by CBI. In 2023, the property will be transferred to the National Park Service.
If passed by the U.S. Senate Committee on Energy and Natural Resources as well as the full Senate itself, HR 1143 would authorize the NPS to lease the Caneel property to CBI at fair market value rent. Currently, CBI — which pays no property tax as an EDC beneficiary company — also pays no rent to the VINP because Caneel is an in-holding.

HR 1143, sponsored by Delegate to Congress Donna Christensen, sets out a number of specific terms for the lease, including prohibiting CBI to transfer, sell or convey the lease without prior approval by the Secretary of the Interior.
Under the terms, CBI would be prohibited from selling timeshares and expanding the hotel. The bill further calls for the lease to not exceed 40 years, after which the property would revert back to the NPS.

CBI intends to invest heavily in improvements to the property, which started the push for a non-competitive lease, explained Brian Modeste, Christensen’s legislative director and the House subcommittee on insular affairs’ legal counsel.

“The property was in bankruptcy for a while and improvements weren’t made for some time,” said Modeste. “CBI indicated the place needed sprucing up. But then they ran the numbers in terms of cost and to get the return on their investment, they decided there wasn’t enough time left in the RUE.”

$10 Million Invested
CBI has already invested $10 million since it purchased the property, according to Caneel managing director Nikolay Hotze.

“The property was not properly maintained until CBI acquired it,” Hotze said. “They have put in $10 million in the last three and a half years to do modifications and rebuild infrastructure. We will continue to do that but 15 years is not long enough when talking about long-term investment.”
The push for a non-competitive lease, instead of an open bidding process, also came about as the best course to maintain the current use of the property, according to Modeste.

“The lease is proposed as non-competitive because the park service concluded that, at least for the short-term, having Caneel continue to be operated as it is currently is the best thing for St. John, Caneel and the park,” Modeste said.

VINP officials also want to see the hotel continue to be operated as it is currently, according to VINP Superintendent Mark Hardgrove.
“The advantage would be that we have commercial operators who can do a much better job of providing the services,” Hardgrove said. “The effort to propose this legislation was to continue to have Caneel operate much as it is today for a longer period of time.”
Even if opened to competitive bidding, it is unlikely anyone except CBI could afford the lease, explained Modeste.

Unique Arrangement
“This was analyzed by everyone involved and, if you did a competitive bid process for the lease, the likelihood of anyone else to be in a position to successfully bid on the lease other than CBI was remote for various business reasons,” Modeste said.

“The park service came to the conclusion that if you are going to end up with CBI anyway, why go through the whole process,” added Modeste.
If approved, the arrangement would be unique, but  it is in the best interest of St. John, according to Christensen.

“It is a unique arrangement, but it works and we want to make sure that it is preserved,” said the delegate to congress. “We want to preserve the type of resort that Caneel Bay is and, it being in the park and the kind of ambiance that it offers, those were considerations.”

“We also wanted to ensure the well-being of Caneel’s employees,” Christensen said.