Caneel Bay Leaseholder Wants $70 Million to Walk Away

Caneel Bay, June 2, 2019 Caneel Bay, June 2, 2019

It’s been a bit since we updated you on the situation over at Caneel Bay. Here is the latest…

As you know, Caneel Bay suffered tremendous damage during the 2017 hurricanes. Virtually no cleanup happened for 18 months, and the property and front entrance remained an eyesore for those passing by. This past March, cleanup efforts began although they haven’t been extensive. Small sales have been happening on property in recent weeks where everything from Kid’s Club items to expensive wine glasses to potentially corked wine is up for grabs.

Gary Engle, of CBI Acquisitions, is the current leaseholder of Caneel Bay. His agreement with the National Park Service expires in 2023. In May 2018, he told a group of residents at a town meeting that he was only interested in operating Caneel Bay if he could get a 60-year extension on the Retained Use Agreement that he is currently operating under. (His current Retained Use Agreement allows Caneel to operate virtually tax-free. They also do not pay rent for the 170 acres it sits on.) In late 2017, USVI Congresswoman Stacey Plaskett introduced a Bill into Congress asking for a 60-year RUE extension, and it failed last year.

Fast forward to this past weekend. The Virgin Islands Daily News reported that Engle and CBI Acquisitions want out. And this little blogger could not be happier, and I’m pretty confident that several other St. John residents feel the same. But Engle’s demands are ridiculous.

According to the Virgin Islands Daily News, Engel is “demanding $70 million to prematurely ditch the resort’s stewardship agreement with the National Park Service, and protection from any environmental liability.” The newspaper cited Congresswoman Stacey Plaskett as the source of that information.

Engle received a substantial insurance payout after the hurricanes, and now he wants an additional $70 million to walk away. And what does St. John get? A destroyed resort? Please tell me where the logic is here.

I say we take that $70 million and require Engle to divvy it up between the hundreds of locals who are no longer working at Caneel because he refuses to rebuild.

Now let’s talk about the “environment liability” Engel referenced in his letter referenced above. This little blogger reported on that very thing back in October 2018 when writing about why lease negotiations have failed. Check it out:

News of St. John, October 7, 2018 News of St. John, October 7, 2018

I ditched my real reporter hat more than a decade ago, but this little blogger only prints facts. :)

The Virgin Islands Daily News could not obtain a copy of Engle’s letter. They did, however, print a statement from Engle himself:

Statement from Engel to the VI Daily News, June 2019 Statement from Engle to the VI Daily News, June 2019

Now please go back and reread that statement…

Engel attempted to get a 60-year RUE extension through Congress and failed. Now he is attempting to circumvent Congress and get a 60-year extension using the Department of the Interior. Not cool Engle, not cool.

And now Caneel is an “eco resort” as indicated in his statement? Well that’s the first I’ve ever heard that. Funny, there’s not one mention of it being an eco resort on its website either… A new tactic perhaps?

Regarding the comments about us “suffering” – we’re not. This island has been bustling. Restaurants are full. Vacation rentals are full. Our charter boats are full. Our beaches are full. We’re fine Engle. We don’t need you personally. We’d rather wait to have someone who actually cares about this island to renovate and operate Caneel Bay.

 

51 comments for “Caneel Bay Leaseholder Wants $70 Million to Walk Away

  1. Julia
    June 3, 2019 at 8:52 am

    I’m with you

  2. Juliana
    June 3, 2019 at 9:16 am

    Just spent a week on the island and I concur. Lots of people enjoying the restaurants, bars, beaches and rentals!!’ Selfish greed not needed

    • Gwenn
      June 3, 2019 at 12:31 pm

      Juliana: And sounds like you were there in off season. Hard to beat the beauty of St. John and what was once Caneel Bay. I do hope Caneel will return to its glory. Been there several times over the years and created great memories there. Miss it!

  3. Kevin T Farrell
    June 3, 2019 at 9:48 am

    I’ve been coming to STJ since 1992, and have stayed at Caneel Bay many times. My daughter’s wedding was at Turtle Bay Point with the reception at the Turtle Bay Estate House. I loved the atmosphere of the resort and the people who worked at Caneel.

    That being said, I would tell Mr. Engel to stick it. He’s done nothing to restore the resort, pocketed the insurance money, put hundreds of loyal employees out of work and is now holding the island hostage. 2023 is not too far away. Let the lease expire, and make sure he adheres to the current lease contract in terms of maintaining the property and handing it over in the same condition as it was at the start of the lease (isn’t that common legal language in any lease?).

    Start negotiating now with other developers to restore the resort starting in 2023 with strict development guidelines set by the Park and consistent with Laurance Rockefeller’s vision. Any new lease should at a minimum REQUIRE PAYMENT FOR USE OF THE LAND.

    4 years may seem like a long time, however, right now the focus should be on the long term plan for the Caneel property. It’s sad that loyal Caneel guests will not have access to the property for many years, however, there are plenty of other places to stay on the island until Caneel reopens. Hopefully, most of the Caneel employees have found work and this delay will not be a further hardship.

    This approach will cause some short term pain, however, working with a responsible developer who values STJ will have the best results long term for the island and for future generations of Caneel guests.

    I look forward to returning to the new Caneel sometime in the mid-2020’s with my kids and grandchildren.

    • Susan
      June 3, 2019 at 8:29 pm

      Very well said Kevin. I’ve looked back at a couple of older articles about how employees were treated with their severance pay and losing their retirement funds. Wait until the current lease is up and let a true St John lover come in and rebuild an amazing resort. Good riddance Mr Engel. Shame on you.

    • Juliana T
      June 4, 2019 at 11:15 am

      Great advise here!

    • Donna
      June 13, 2019 at 5:15 pm

      Well said, Kevin. Can the blogger make sure this feedback gets to the Interior Department?

  4. Patricia
    June 3, 2019 at 9:53 am

    I say we bring a media blitz including FB, Twitter onto him personally to let everyone know, far and wide, what a small person he really is. Surely the Rockefeller Foundation would be interested in his shenanigans. He reminds me of the guy who jacked up the cost of epi pens. Funny how he went to jail… no it makes perfect sense…this is criminal type behavior and or is usually woven into the persons fabric.

    • Andrea
      June 3, 2019 at 7:10 pm

      You are right.

    • June 4, 2019 at 6:32 pm

      Actually, Heather Bresch, the CEO of Mylan, which manufactures epipens, is the daughter of Democratic Senator Joe Manchin of West Virginia. And no she did not go to jail, but rather the board raised her compensation 600%.

  5. Andy
    June 3, 2019 at 10:26 am

    My wife and I have been coming to St. John for years and call it our second home. We’ll be there again in July. In all that time we’ve never set foot on their property. The $70 million should be charged to them as a get out of jail card and tell them to not get hot by the door on the way out.

  6. Tre
    June 3, 2019 at 10:55 am

    Don’t for a second think Plaskett isn’t knee deep in these shenanigans – wish I had an island vote the next time she is up for reelection.

  7. Anne
    June 3, 2019 at 10:55 am

    AMEN to all the above comments!

  8. Fred
    June 3, 2019 at 11:23 am

    I haven’t always agreed with you on Caneel, but asking for $70m to “walk away” from a property that isn’t generating any substantial revenue for the leaseholder at the moment is just stupid and you are right to oppose it. 2023 is just 4 years away. St. John can wait 4 years and conduct an auction to get another developer if the park wants it. A well-thought-out auction of the property with the terms all understood up front would allow the national park to get the best possible operator at the best price for the island.

    That said, I’m not opposed to a long extension of the lease so long as the terms are fair to the developer and St. John. It will be exceedingly expensive to rebuild and if you’re going to make that kind of commercial investment you need to know that it will pay dividends at least as long as the building can reasonably be expected to perform. 40 years has always seemed like a good compromise since it is the IRS’s commercial building depreciation schedule.

  9. Chris S
    June 3, 2019 at 12:32 pm

    It appears STJ is doing quite well without Caneel. The island is busy, full, and some may even say crowded right now even without it operating. It doesn’t appear STJ needs a resort on Caneel to stand on its own and prosper long term and certainly isn’t dependent on it.

    How about going back and honoring the original intent of the donated land let it return to the NPS for all citizens of the US (and foreign visitors, of course!) to enjoy. Those are some prime beaches that could just enhance the whole National Park on STJ.

  10. Tom Larson
    June 3, 2019 at 12:55 pm

    I was wondering why the only clean up contactors were landscaping…..The shrubbery looks fabulous!!!

  11. Burt Harbison
    June 3, 2019 at 2:04 pm

    BRAVO, our favorite “little blogger”. Keep the heat on both Engel and Plaskett.
    We are 100% behind you. St. John does not need the likes of these people!!

  12. Minnesota Mike
    June 3, 2019 at 2:20 pm

    Illegally disposing of hazardous materials? Sounds like he should be fined $70 million!!!

    • ATL John
      June 3, 2019 at 3:40 pm

      Engel’s definition of an “Eco Resort”? Engel needs to go…..and take Plaskett with him.

      • Nancie Moore
        June 3, 2019 at 5:36 pm

        My thoughts exactly!

  13. Marco
    June 3, 2019 at 3:17 pm

    I agree with what you have said. But what’s the alternative? A ruined resort on one of the most beautiful parts of the Island that just sits there rotting away for years to come? I wish there were an answer- or someone with VERY deep pockets.

    • Jimg
      June 3, 2019 at 6:28 pm

      It has become STJs newest ruin. Let’s have NPS make signs and trails. Then our children can come to the island and learn about greed and excess.

  14. Mike Sullivan
    June 3, 2019 at 6:10 pm

    ABSOLUTELY – Get rid of them – The sooner the better!!! Lets get our beaches back, our land back and send them packing. NO WAY Congress NO WAY DOI. They lived like kings on the dole and now all the excuses come out….There will be a great resort there – and I’m sure Four Seasons, Fairmont/Accor or Marriott/Ritz Carlton – or some other luxury resort/investor will snap it up in a heartbeat. Richard Branson are you reading this?? I’ve stayed there three occasions and here’s what I say: BYE BYE Mr. Engel!!!!!!!! Are you listening Stacey Plaskett??

  15. Frank
    June 3, 2019 at 7:22 pm

    Fairly sure this guy has no leverage here. Would be fairly easy for the parks service to stonewall and then boot him for the inevitable usage infractions that stem for leaving a property to rot. He could be gone for nothing this time next year.

  16. Larry
    June 3, 2019 at 7:57 pm

    Demand Engle/CBI turn over all insurance money they received. Fine them an appropriate amount for defaulting on their lease. Tell them to take a hike, and absolutely DO NOT GIVE THEM A DIME.

    The Park Service needs to start a search for new company to rebuild and reopen the resort with a REASONABLE RUE of perhaps 15 years. It’s time for those in charge to move forward and rebuild St John’s original resort. I think that’s what the Rockefeller’s would want.

    Lastly, Congresswoman Stacy Plaskett to back this proposal—or explain why she won’t.

  17. Larry
    June 3, 2019 at 8:03 pm

    Let’s see if I got this right. 1) Engle/CBI have a current lease until 2023 and they’ve done almost nothing to rebuild the resort. 2) Engle/CBI has collected insurance money for hurricane damage. 3) Engle/CBI is not using the money (how much is it?) for repairs. Engle/CBI has paid no taxes or rent to the owner (National Park Service. (Engle/CBI now want to be paid $70 million to them ( by who?) in order to “walk away” from their obligations.
    My solution: 1) Don’t give him a dime. 2) Demand he forfeit all the insurance money he received. 3) Fine him a reasonable amount for not living up to the lease obligations.

    Look for a new leasee right now and get St. John’s oldest resort back for the people.

  18. Clif
    June 3, 2019 at 8:52 pm

    I moved to St. John 30 years ago to get away from people like Mr Engel. Unfortunately, he is not the only greedy developer to treat St. John as a commodity to be exploited for his own monetary gain. “Only after the last tree has been felled, the last stream poisoned, and the last fish eaten will you realize you can not eat money” Cree Indian testimony before the U.S. Congress.

    • Diane Gehringer
      June 4, 2019 at 8:35 am

      Clif, Agree w/ you. Been going to St. John every year since 1990, sometimes twice. People like Engel, Plackett and especially Epstein should not be able to get away with the things they do. It’s disgraceful!

  19. Steve and Gayle
    June 3, 2019 at 10:33 pm

    We miss Caneel Bay!!!! Mr. Engel should be fined for not keeping his end of the lease. It seems his company has the ability to rebuild

    Does anyone have suggestions to go that are similar to Caneel Bay while we go through this transition?

    • AngelicAtheist
      June 4, 2019 at 11:33 pm

      Half Moon Resort in Jamaica is a great alternative!

  20. Jordan Wheatley
    June 3, 2019 at 10:33 pm

    No real estate professional would rebuild on leased land without a long term new lease deal. Doesn’t matter if it’s on St. John or St. Paul, MN. Simple business really. Yes, Engle had a sweet deal, but it’s just what was offered to him and he signed up. The insurance money protected his improvements. There is nothing shocking here or out of the ordinary. I hate seeing the resort sit there just like everyone else.

  21. Steve Jackson
    June 4, 2019 at 6:10 am

    Everyone should know that for a lot less, the can have the REAL Eco- Resort, Eco-Concordia (on East End). It is for sale as the owner is 90 years old and does not want to start rebuilding

  22. Mike S
    June 4, 2019 at 7:20 am

    There has to be something in the lease that forces the lessee to keep up the property in good condition. If the current lessee is not living up to his /their responsibility then the terms of the lease are forfeited and the property becomes the responsibility of the owner. Effectively putting the lessee out on his butt. Bring in the hammer.

  23. Linda
    June 4, 2019 at 8:28 am

    Being a resident of St. John for 26 years I have watched with sadness the lack of regard for the future of our beautiful island. Imagine this; in the interim the land is turned over to the people of St. John & the Park. The rich farm land is used to grow fresh food for the locals & restaurants. Land for raising livestock – grass fed meats. The fishing bays open, the fruit trees tended, providing St. John with what it needs most, local fresh food.

    The intensity of Irma/Marie & the destruction it caused are partially due to our inability to accept that the time has come for a radical change in plans for St. John. Overdevelopment with strip cutting of the land, huge cement Mansions, more cars, is simply not sustainable for a tiny, precious Island. Thinking in terms of the preservation of the environment is of the utmost importance now. When Greed exceeds Wisdom this is what we get. Ponder Wisely, the time to act is NOW !!!

  24. Steven Holler
    June 4, 2019 at 12:16 pm

    I’m a real estate lawyer who has also worked in government (and, more importantly, I have vacationed on St. John’s several times). If anyone has a copy of the lease, I would be glad to read it. It’s probably FOIA-able or perhaps published in the Federal Register but if anyone has an accessible copy, let me know.

  25. Mike D
    June 4, 2019 at 12:32 pm

    A lot of people keep repeating things that are simply false, or things they just desperately want to be true. Jordan Wheatley is literally the only one who got the business end of this correct. (And none of this changes because Engel is being an a-hole!).

    1. Insurance doesn’t have to be used to rebuild, unless their insurance specifically said so. I don’t care if this seems unfair; it’s the truth. Unless you know otherwise, assume it doesn’t have to be used to rebuild. (Your homeowners’ insurance likely does not contain this requirement, for instance).

    2. Their lease likely also does not contain language that would be legally binding as a requirement that the property be rebuilt. Again, no matter how many of you think “it ought to”; it likely doesn’t, and it doesn’t matter how many of you have strong feelings about it. The law (contract) is the law. If it were otherwise, CBI would be behaving very differently than they are.

    3. The environmental impact of the resort is far less than that of the typical resident, in terms of CO2 emissions per capita; impervious cover per capita; etc. It’s a common problem – people in an environmentally sensitive area assume dense development is the problem when it’s actually much less intense per capita than the individual homes the current residents are in, the driving they do, etc. The “overdevelopment” mentioned in the last comment is, frankly, the villas, not the resort. The environmental impact of the island would be far better with more Caneels and fewer villas!

    • Mike D
      June 4, 2019 at 4:03 pm

      Qualification on #1 above; this may affect the value of the payout, except in states that handle it like California. Again, though, at its root it all depends on the language in the policy (the words in the contract), not what people “feel”.

    • PA Girl
      June 4, 2019 at 6:10 pm

      Well said Mike D and Jordan.

      Land leases, commercial development and insurance payouts were all areas I dealt with in prior careers.

      Caneel doesn’t technically have a land lease but the basic economics are the same – it’s too short of a remaining term for any major capital investment.

      Property insurance proceeds are paid to the policy holder or, in the event of liens or mortgages, those creditors named as payees first.

      Business interruption insurance, which is likely what everyone is talking about, is paid to the policy holder, not the entity that owns the real estate.

    • Fred
      June 6, 2019 at 3:20 pm

      I have said as much on prior posts. The time frame is not long enough to justify the investment. It could be that the hurricanes were the best thing to happen to the owners of Caneel if the buildings were about to “revert” to the National Park at the end of the lease. Depends on how the insurance policy was structured, of course…

      That said, I don’t understand the ask for $70 million to terminate the existing lease. Caneel isn’t making money today… So really this looks a bit like a hostage situation. Maybe the lease would shed more insight into the strategy the developer is taking here. What would possess STJ to pay $10 million, much less $70 million, if the resort is about to revert to the NPS in 4 years anyway?

  26. Vicki
    June 4, 2019 at 2:01 pm

    Their is no place that is like Caneel. Many many people love and miss Caneel. It is very sad.

  27. Ricky Cooper
    June 4, 2019 at 3:47 pm

    through his behavior and requests, gary engle’s is merely admitting to the world that he is either a self-serving, mean spirited sob or that he is senile

    that congressperson plaskett would try to get an additional 60 years!!!!!!! of tax free, rent free occupancy for him is merely admitting to the world that she is either getting something under the table or that she is senile

    when the resort does get re-built, beginning in 2023, it would be nice if it were less expensive so that it could be affordable to more people

  28. Steve
    June 4, 2019 at 10:12 pm

    Let him and his investment rot for the next 4 years. We are doing fine without rebuilding Caneel. Actually there is such a shortage of skilled building craftsman that Caneel couldn’t be rebuilt for 4 years if they wanted to!!

  29. MikeS
    June 5, 2019 at 9:15 am

    I’m a bit torn on this issue. The Rockefeller’s gifted the land to the national park for zero dollars. No one in their right mind would fix the resort up with out a long term lease. Insurance claims were for damage done and revenue lost. There is no rule that if your house is destroyed you must rebuild it, they pay your clam and you decide as you see fit.

    Caneel should be rebuilt, but the current tenants/owners should be compensated for the investment in infrastructure, ferry’s, etc. 70 million? Not on board with that figure but then again I haven’t heard (with facts) one way or the other how that number is either justified or outrageous.

    I guaranty you this though, the longer this goes on, the uglier it gets.

    And to the Caneel people, it was never an eco resort despite the marketing, and the rooms aren’t worth 900/night. The employees other than management were great.

    Caneel is a jewel that’s been abused by circumstances (hurricanes, etc) and now politics.

  30. Anonymous
    June 11, 2019 at 9:18 pm

    The RUE does state that the Leaseholder is responsible for damages resulting from environmental breaches. Any agreement releasing CBI from their contractual obligations is clearly the result of misdirected lobbying. Furthermore, any claim that another party entering into a new contract would take away from the percentage of local residents hired is not viable as there is currently an employment crisis due to the lack of long term housing. CBI should be ousted with responsibility to their contractual obligations and a new, open offering to prospective developers and RUE contractors be put on the table for discussion.

  31. Anonymous
    June 11, 2019 at 9:40 pm

    It is appalling that Congresswoman Stacey Plaskett continues to Lobby for the interests of CBI in the face if so
    much opposition. She is laughing all the way to the bank. So sad, as this is what she leaves as her legacy.

  32. Tonia
    June 13, 2019 at 9:46 am

    I think STJ would gladly see this man leave island. However, not with $70 million. I was just there in April and to see the beach front property (viewed only from the water now) in that condition is so very sad. The clean-up is entirely in his hands too. I can’t believe there isn’t something in a lease to that effect. Someone will make this place beautiful again and employee St. Johnians.

  33. Wood
    June 13, 2019 at 3:19 pm

    Fred’s comments are very insightful and anyone who has ever owned or run a business knows that investment requires a financial gain. Otherwise there is no incentive to invest. Most of the comments I read were off the wall remarks without knowing the actual terminology of the lease. Conjecture at best. Requiring additional land lease payments will also raise the room rates…just so you know. Although I believe that there should be a land lease fee as a percentage of the room rates.
    In 1992, hurricane Iniki devastated the island of Kauai, Hawaii. All of the hotels have been rebuilt and the island is bustling, with the exception of the iconic Coco Palms. This is the hotel where Elvis filmed “Blue Hawaii” and many other films. Where, then owner, Grace Guslander created the “tiki torch lighting ceremony” that has been copied worldwide. It still stands empty and an eyesore. It became a political football and it may never be rebuilt because everyone (especially the politicians) want their footprint on it in some fashion or another. Don’t let that happen to Caneel Bay!

  34. Capt. Jim
    June 19, 2019 at 3:19 pm

    Wow! One of the most beautiful properties in the world. From a developers standpoint it is a gem, if you could start from dry dirt, and make it as stormproof as possible, but environmental hazards, the shortness of the lease, the deterioration on existing structures due to both age and Irma, make this a really distressed property. All of the ideas are doable, some are even excellent, but one must recognize that local and federal politics are involved, so some taming of personalities and greed and aimless
    mismanagement must come together for this situation to become even remotely possible. It seems that the VI government and Park Service need to use the next four years to find a suitable tenant, develop a workable plan to get the property to Hurricane Proof status, and protect the beautiful property until a viable operator to move in.
    Marriott and most of the resort developers that I am familiar with, always do a labor survey before spending a dime and due to lost employee housing, in the current circumstance the wouldn’t touch it. The workforce housing problems must be addressed as in Panama City, FL from William and the Florida Keys from Irma. This single problem will negate progress if not addressed.
    I’ve lived on St. John as well as the Florida Keys and it is not a simple solution.
    Nashville is Hurricane free so far but I am watching the horizon.

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