CBIA, LLC tried time and again to extend the Retained Use Estate that let it operate the Caneel Bay Resort in Virgin Islands National Park/Carolyn Sugg via Flickr
On the sun- and surf-splashed north shore of Virgin Islands National Park, the operators of the Caneel Bay Resort had a handsome operation. Nightly rates quickly surged past $600 for a room in paradise, they were surrounded by a national park, and they owed the National Park Service nothing for that privilege.
But time has been running out for Gary Engle's CBIA, LLC, which manages the posh resort. Under the terms of the "Retained Use Estate" that Laurance S. Rockefeller had crafted in 1983, the resort is to be transferred to the Park Service in October 2023. On top of that, Congress told the Park Service in 2010 to decide whether a concessions lease operation made sense, and if so, to work towards that end.
The Park Service's preference was to do just that, and so Jo Pendry, at the time the agency's concessions chief, began traveling to the island of St. John to meet with Engle and his management team. But while talks seemed to be progressing -- Pendry's team in 2013 had put together a draft operating plan and draft lease -- Engle was trying to find a way to succeed where his corporate predecessors at Caneel Bay Resort had failed in their attempts to stretch out the RUE, which doesn't require its holder to pay a franchise fee to the Park Service.
Things turned dire in the fall of 2017 ... or perhaps gave Engle leverage.
That summer, Engle wrote top Interior Department officials asking that the RUE be extended beyond September 2023. In mid-August Engle again was rebuffed, by Todd D. Willens, Interior's acting assistant secretary for Fish and Wildlife and Parks at the time. Willens wrote to tell Engle the "NPS has no power to extend or amend the RUE."
Three weeks later, Hurricane Irma, and a week later Hurricane Maria, trampled St. John and substantially knocked down the resort.
Today the resort remains shuttered with no rebuilding ongoing, while Engle has been trying to use the hurricane-inflicted damage to convince Congress to legislatively extend the RUE by as much as 60 years.
The ruins of the Catherineberg sugar plantation are just some of the rich history told in the national park/Kurt Repanshek file
Developers Treasure Caneel Bay Resort
The resort's setting within Virgin Islands National Park long has been treasured by developers. When Rockefeller bought up most of the island in 1956 and gave more than 5,500 acres to the Interior Department for the national park, he retained about 150 acres for the Caneel Bay Resort. In September 1983, Rockefeller crafted the language for the Retained Use Estate. Held initially by Rockefeller's Jackson Hole Preserve, Inc., the document clearly stated that the entire property would be turned over to the National Park Service on September 30, 2023.
Under the RUE's terms, the right to operate the resort could be passed down to subsequent parties, and in 1988 CSX Corp., which had acquired the RUE two years earlier, put the resort up for sale. That caught Rockefeller's attention, and on November 30, 1988, he wrote National Park Service Director William Penn Mott to remind him that he intended for the property to become part of the national park in 2023.
"I am concerned that the Park Service may be asked to extend the term of the Retained Use Estate, which would have the effect of enriching the seller and defeating the foundation's intent to add the Caneel property to the park as scheduled," wrote Rockefeller. "Caneel Bay is a very special site of outstanding scenic beauty which we believe should be protected and made available to the public as part of Virgin Islands National Park. We have been working together with the Park Service for over thirty years to achieve this end, but ultimately, your successors will determine whether and when the public will have the opportunity to enjoy the site as we intended."
In reply, Mott told Rockefeller that while he issued a directive that RUE extensions in the park system "may not be granted and, in fact, are not legally possible," he also noted that Congress could grant an extension legislatively.
In 1989, CSX sold the RUE to VMS Realty Partners, which quickly ran into troubles, and the operation was turned over later that year to Bankers Trust. The bank ran the resort for 15 years, and early on sought an extension to the RUE. In March 1995, National Park Service Director Roger Kennedy wrote Roy Schneider, governor of the U.S. Virgin Islands, to say an extension could not be granted.
"We can sympathize with the situation in which Bankers Trust has found themselves in due to the default of one of Caneel's subsequent owners," wrote Kennedy. "However, any extension of the reserved use and occupancy would be a breach of the original contract. ... Extension of the reserved estate held by Bankers Trust would be precedent setting... We regret that we cannot accommodate the request of Bankers Trust regarding the extension of the reserved use and occupancy."
Bankers Trust was not so easily put off. That September the bank reached out directly to Kennedy with a request to extend the RUE by 20 years, through Sepember 2043. The company determined that a 20-year extention was worth $1.5 million, and offered to either pay the government that much in one lump sum, or pay $2 million over a five-year period, with interest.
If those terms were not of interest to the Park Service, the company's vice president wrote, it would swap 266 acres of land it controlled in a California ranch near the then-proposed Otay-Sweetwater National Wildlife Refuge east of San Diego for the 20-year extension. None of those offers gained traction.
By 2004, the RUE had come to Engle, who created CBI Acquisitions, LLC, as a subsidiary of Stoneleigh Capital, a private equity firm.
Convert The RUE To A Concession Lease
Six years later, in 2010, Congress passed a law directing the Interior Department to weigh whether it was better to keep the facilities under the RUE or create a concessions agreement for the resort. Three years later, in July 2013, the Park Service, after conducting an environmental assessment, recommended that the operating agreement be redefined as a long-term lease more in line with typical concessions agreements. Part of that assessment pointed to valuable archaeological and natural resource aspects of Caneel Bay's location.
Among the archaeological resources is a site "noted for being one of the largest villages on the island," and there are historic remains associated with the Caneel Bay Plantation complex that date to the early 1700s and which, during the Slave Rebellion in 1733, "served as a refuge for the plantation owners during four to six months" of the revolt, according to the Park Service. Part of the plantation was used to grow cotton and indigo, and there later was cattle ranching on the land.
The EA said if the RUE remained in place, there could be impacts to land use, archaeology, cultural and historic resources, and species such as sea turtles and corals. Indeed, a letter the national park's superintendent wrote in 2010 seeking a solicitor's opinion regarding the Park Service's authority to manage resources at Caneel Bay mentioned that RUE operators "over the years and without park notification destroyed half of a historic plantation’s slave village to install diesel tanks, trenched throughout the property cutting though prehistoric ceremonial sites, installed tennis courts, swimming pools, and sidewalks. In the past few years they have installed a modern floor in the plantation’s factory, and cleared with machinery along the shoreline resulting in the disturbance and erosion of materials from both the prehistoric record and the first European settlements on the island."
Hawksnest Bay is just one of the idyllic spots to enjoy the park's sugar sand beaches and warm tropical waters/Kurt Repanshek file
According to documents National Parks Traveler obtained through a Freedom of Information Act request, Park Service efforts to negotiate a concessions lease with Engle seemed to bog down almost from the start.
A September 27, 2013, email from Pendry to Engle seemed to indicate progress was being made on a concessions operation.
Hi Gary,
Hope you are doing well. We had a great trip to the VI park/Caneel earlier this week, went through the draft lease and operating plan with the park leadership, had a chance to see Nikolay, and he was kind enough to show us a couple of the renovated rooms and the renovation work for the new restaurant. The improvements were very impressive.
In terms of next steps, our review appraiser has received the draft appraisal and plans to start his review Monday. We are hopeful he can get his review done quickly and turn around any questions to Cheryl.
Lars and I made considerable progress with the park on their input to the draft lease documents; we we are still on track to provide you with a draft lease before the end of October (presuming no lapse in government appropriations).
This should allow us, pending approval of the appraisal, to begin negotiations with you in the November time frame. We need to discuss preferences for where we negotiate and start exploring possible dates.
Whether that November meeting ever occurred wasn't reflected in the documents provided Traveler, though others cited negotiations held in 2014. And some of the documents made it clear that Engle was essentially playing two hands of poker; while negotiating with the Park Service on a lease, he was continuing to press Interior for an extension to the RUE.
On July 14, 2017, in response to an Engle letter from June 5, Virginia H. Johnson, the acting assistant secretary for Fish and Wildlife and Parks, echoed Mott and Kennedy, telling Engle that the "NPS does not have any legal authority to amend or extend the Retained Use Estate as requested in your proposal."
However, she pointed out, the Park Service had the authority and was "willing to negotiate a forty-year lease with you." Evidently unsatisfied with that response, Engle then wrote Willens on July 31 with the same request.
Willens, who had succeeded Johnson, reiterated what Johnson had told him.
"The NPS would like to work on a lease with your company that contains terms that are satisfactory to both parties, and that allows your company the sort of autonomy to operate Caneel Bay Resort that lessees typically enjoy," wrote Willens. "The NPS looks forward to working with you to address concerns that you raised while negotiating the lease with the NPS in 2014, such as concerns relating to reporting and planning requirements that would be applicable to your company under the lease."
Environmental Testing Raised Questions Of Site Pollution
In his letter, Willens also revisited a topic that Johnson had raised: the need to conduct more extensive environmental testing of the resort's property.
A 2014 environmental assessment of the property raised questions of contamination from SVOCs -- semivolatile organic compounds -- often related to pesticides, and arsenic, according to some of the documents Traveler obtained through its FOIA.
"In addition, there are concerns for leachability of SVOCs, arsenic and mercury to groundwater," the consultant's report noted. The surveys also found concentrations of total petroleum hydrocarbons and diesel range organics above acceptable levels set by the Virgin Islands Department of Planning and Natural Resources.
While the assessment called for more extensive testing to determine the extent of these contaminants -- both across the ground surface and to determine depth of contamination -- records Traveler obtained indicate Engle repeatedly has refused to allow a contractor for the Park Service to access the grounds to perform further testing.
One of those records from 2017 pointed out that negotiations towards a lease agreement "stalled in 2014 due to CBIA's concerns about NPS requirements associated with historic preservation and environmental contamination."
The Park Service was within its rights to gain access to the resort grounds to conduct further environmental testing. An Interior Department document, dating to October 1984, said the agency could inspect the resort's grounds to ensure the holder of the RUE was complying with its requirements.
"This right (to examine development at the resort) should not be confused with control or oversight, which are forbidden to the Park Service by the (RUE)," wrote Roger S. Babb, Interior's Southeast regional solicitor, in response to concerns voiced by the park's superintendent at the time. "Rather, examination and review of plans is strictly limited to the Park Service function of determining whether the grantor is in compliance with the (RUE)."
Part of that compliance, specifically contained in Rockefeller's RUE, was that the resort's operator "maintain the Premises in such a manner that will (a) be consistent with the preservation of such outstanding scenic and other features of national significance and (b) preserve the Premises to the extent feasible in their natural condition for the public benefit, enjoyment, and inspiration..."
Whether the environmental contamination known to exist on the resort grounds, or the decaying shambles of the hurricane-ravaged facilities, constitute CBI's failure to hold up that specific requirement under the RUE isn't known.
Rob Wallace, who in June 2019 was confirmed as Interior's assistant secretary for Fish and Wildlife and Parks, last week did not respond to a Traveler inquiry concerning Engle's refusal to allow contractors on the grounds to conduct further environmental testing or whether he was still pressing for an extension to the RUE.
Hurricanes Irma and Maria dealt a one-two punch to the island of St. John and Virgin Islands National Park, as well as the Caneel Bay Resort. Even today, more than two years after the hurricanes, the park is still recovering, and the Caneel Bay Resort lies in ruins/NPS file
Hurricanes Irma And Maria Devastate Caneel Bay Resort
The hurricanes of September 2017 did substantial damage both to the national park and Caneel Bay Resort. Late that year U.S. Rep. Stacy Plaskett, D-VI, introduced legislation to extend the RUE, held by CBI Acquisitions, for 60 years.
During a March 2018 hearing by House Federal Lands Subcommittee on the legislation, Engle testified that such a long-term lease was necessary because there was not enough time before the RUE expired in 2023 to raise the $100 million he wanted to rebuild the resort. While CBI would later receive $32 million in insurance proceeds for damage incurred by Hurricane Irma to the resort, a similar claim for damage caused by Hurricane Maria was denied by the insurer, which viewed the claim as duplicative of the first. The resort's insurance coverage was not brought up during the hearing, nor was the rationale behind Engle's $100 million figure.
As for Park Service negotiations to turn the RUE into a lease agreement, Engle said those talks never got substantive. His correspondence with Park Service and Interior officials was not brought up during the hearing.
U.S. Rep. Raúl Grijalva, D-Arizona, objected to the legislation at the time, saying that "the RUE allows a single private owner to enjoy a monopoly on revenue from the resort and to avoid any competition with other possible management entities that might be better positioned to provide the best services to visitors. HR 4731 simply extends the status quo, using the storm damage as a justification for failing to reexamine the RUE.”
Plaskett's legislation never was considered on the floor of the House of Representatives. While Park Service officials say negotiations with Engle have continued, no one is saying whether they're been substantive.
Pendry, now retired from the Park Service, has declined to discuss the lease negotiations she led other than to say she was engaged with Engle over a concessions lease. Engle's public relations team has not responded to Traveler inquiries regarding his decision to reject the offer of a 40-year lease, or why he testified that negotiations towards a concessions agreement were less than substantive.
Engle has hired a new lobbyist, one with close ties to President Trump. Ballard Partners, whose principal chaired Trump's organization in Florida for the 2016 election and was vice chairman of the president's inaugural committee, has been tasked with getting an extension to the RUE.
Whether Ballard Partners succeeds where others retained by Engle have failed remains to be seen, and with the presidential election this November, timing to get the deal done before then could be crucial for CBI. Regardless, it will be years before there's a functioning resort at Caneel Bay.
What is known is that Gordy Kito, the Park Service's leasing program manager, said in May 2017 that if a long-term lease with Engle was not successfully negotiated, work towards finding a leasee for the resort "will need to be initated at the beginning of 2020." Work on looking for a concessionaire for the resort has not begun, according to the Park Service.
With three-and-a-half years left until Rockefeller's RUE expires and the Caneel Bay property becomes National Park Service property, answers to some key, unanswered questions should surface:
* Will Engle agree to a concessions operation for the resort?
* How extensive is environmental contamination on the property, and who is responsible for its cleanup?
* With the resort facilities currently a shambles, who will clean it up and will lodging be rebuilt?
Additional coverage from Traveler's archives:
Questions And Answers On The Future Of Caneel Bay Resort At Virgin Islands National Park
Operators Of Caneel Bay Resort Pressuring Interior Department For Deal
Friends Of Virgin Islands National Park Want Caneel Bay Resort To Revert To Park
Paradise Lost At Virgin Islands National Park
Virgin Islands Daily News: Plaskett’s Bill Delays Reopening Of Caneel Bay Resort
Laurance Rockefeller Wanted Caneel Bay Resort To Go To Virgin Islands National Park
Questions Remain Unanswered Over Caneel Bay Resort At Virgin Islands National Park
Comments
Well, Mr. Katz, I'm not sure anyone with significant involvement in this issue is really thinking seriously about "camping and lower-cost options" at Caneel Bay. Admittedly, the cost of rebuilding that site is ultimately going to drive "a high-end resort" whether we like it or not. The issue is really not egalitarianism on St. John and we do want to see Caneel Bay be a "strong economic engine" for the island once more. The issue is getting a greedy, nonperforming, defiantly threatening, squatter, CBI, out of the picture and the National Park Service properly in charge as Rockefeller intended. Whether you feel Saint John National Park is already big enough or not, Rockefeller essentially left Caneel Bay to the American people and, although he left the RUE temporarily in place as a courtesy to the "operators" at the time, he very clearly and specifically called for Caneel Bay to eventually be turned over to the National Park Service. Those were his intentions.
As for your insinuation that the National Park Service is limited to "rustic park experience" levels of management, apparently places like Jenny Lake and the Ahwahnee are too pedestrian for your tastes; but, those seem to be sufficiently "high-end" resorts to me.
As for your contemptuously dismissive taunt that the National Park Service "should realize" Caneel Bay will never be rebuilt by anyone without a long-term lease, that would depend on what you mean by long-term. Given the rich revenues that some of the lodging at Yellowstone, Yosemite, and other "rustic parks" have been generating and the construction that has been undertaken to reap those revenues over the duration of contracts that are a third as long as what CBI wants, you can rest assured, Mr. Katz, that, once CBI and the scandal surrrounding it are cleared from the table, a number of organizations will step up and be more than "willing and able to spend significant dollars" on Caneel Bay. They will indeed recover construction costs; they will indeed make more than a reasonable profit; and they'll do it for a concessions contract a fraction of the length of the ludicrous and absurd 60 year lease that CBI has threateningly been demanding. Frankly, the National Park Service would be foolish to even consider doing business the way CBI wants. The problem is not the National Park Service, Mr. Katz; it's Gary Engle.
Mr Ploughjogger, I was going to post a similar response, then read yours and realized that I could not come close to the almost perfect tone and insight in your post. Thank you.
I will only add that Mr Katz probably doesn't realize the irony in his post.
Thanks, Brian. I try to stay on topic and moderate my feelings about these issues; it doesn't always work; but, I try.
I am 88 years old now have bin sou chef at canel bay giving my thoughts to give it back to nature thaks