The U.S. Virgin Islands’ largest hotel, Marriott Frenchman’s Reef on St. Thomas, has been sold to an affiliate of New York-based private investment firm Fortress Investment Group.
The sale includes the 478-room Frenchman’s Reef Marriott Resort & Spa and Noni Beach, Autograph Collection project. The hotel and related properties have been financially strained by the 2017 hurricanes, which shut the hotel for repairs, the rise of Airbnb as a player in the field, and a drastic drop in visitation in 2020 due to the COVID-19 pandemic. Those stresses led owner DiamondRock to pause renovations, mark down its future value and put it up for sale.
Word of a potential buyer was made public during an April meeting of the Economic Development Commission where the hotel asked for extensions to waivers of some of DiamondRock’s obligations as a beneficiary of the program that grants tax breaks to companies that qualify – namely that it keeps a minimum of 415 full-time employees and makes at least $90,000 in charitable contributions annually.
As a consideration, DiamondRock has reportedly received an upfront cash payment as well as a participation right in the future profits of the hotel once certain return targets are achieved. According to a release from Fortress, the company will complete the rebuilding and reopen.
“We are extremely excited to steward this important property through the completion of its ambitious rebuilding and, ultimately, to its reopening as a global destination with unrivaled facilities and amenities,” Thomas W. Pulley, global head of the Fortress Credit Real Estate business, said in the company’s release.
“This is a remarkable property—an irreplaceable asset that we are thrilled to add to our portfolio. We welcome the opportunity to contribute to the long-term vibrancy of the St. Thomas economy, and look forward to working closely with USVI officials and engaging with the people of St. Thomas as an important employer,” he said.
Founded in 1998, Fortress reportedly managed $52.7 billion of assets as of Dec. 31 on behalf of roughly 1,800 institutional clients and private investors worldwide across a range of credit and real estate, private equity and permanent capital investment strategies.