May 16– May 16–ST. THOMAS — Details of a looming sale of Carambola Beach Resort and Spa on St. Croix emerged Wednesday at a public hearing of the Economic Development Authority.

The resort — owned by the V.I. Government Employees' Retirement System — is expected to be sold by the end of the month to Davis Bay LLC, a company formed by the New York-based Rubicon Company, according to testimony at the meeting. The company is seeking a transfer of previously awarded economic development benefits from Carambola Northwest LLC to Davis Bay, according to testimony.

The company favors a hands-off approach, Rubicon founder Marc Gordon told the board. For example, Rubicon is likely to retain Aimbridge Hospitality — previously hired by GERS to manage the hotel. Aimbridge was represented at the meeting by Rick Carrington.

"When Rubicon gets involved with assets, sometimes we change brands, sometimes we change management, always do a renovation," Gordon said. "In this case, we're planning no changes to management. We work with Rick's company, Aimbridge, at multiple other hotels. We're very happy with them. It was just kind of a happy accident that they happened to be running this asset for the GERS."

Once ownership has changed, the new company intends to invest at least $10 million in improvements and renovations to the hotel, Gordon told commissioners.

"It's critical to us that we get the benefits of the EDC, sure," he said. "I know we've been talking about a $10 million investment. The reality is it's certain to be more than that. You know, we'd like to commit to you 10, because I'd like to keep it as low as possible, but it's certain to be more than that."

Long term plans for the hotel include regaining the Marriott's Renaissance marque, Gordon said.

Development could improve the territory's overall economic prospects, Gordon said.

"As this hotel comes back to life and prominence, I am hoping that more airplanes are going to come to St. Croix, which will benefit not just our hotel, but other existing hotels, potentially new hotels, which in itself might have a greater benefit to us, as St. Croix becomes something that people talk about in New York and Boston and D.C. and Chicago," he said.

Commissioners, like V.I. Agriculture Commissioner designee Positive Nelson, questioned whether transferring 100 percent of the benefits was necessary for the completion of the deal.

EDC beneficiary corporations, like Carambola, are exempt from most forms of taxation in the Virgin Islands. In exchange, they are required to meet local employment, charitable giving and other requirements.

"If the benefits were slightly reduced, could you see yourself still functioning?" Nelson said. "Let's be more specific. Let's say, like, instead of 100% gross receipts it was 99% gross receipts. Would you give back 1% to the Virgin Islands in a hard time? One percent of the property tax, since everybody else is going up on their property tax."

Local attorney Tom Bolt said it might be too late to make even a minimal change.

"I'm sure that when they did their calculations, they were based on their getting the same benefits that were there," he said. "I think we get our benefits from the employment, and the exponential benefits to the territory that Carambola renders."

Rubicon is also seeking a reduction to an employment requirement, according to testimony at the meeting.

Past owners appear to have been hamstrung by employment levels that ate into the resort's profits, Gordon said. The hotel once had 147 full-time employees, though that number dropped following the 2017 storms to the current level of 61 employees, based on testimony at the meeting. Following renovation, the hotel would eventually increase the number of full-time employees to 100, according to testimony at the hearing.

"The hotel used to lose money," Gordon said. "When we looked at the EDC requirements, we went through all of them, and we haven't come to you asking for any modifications to any of the other ones with this one exception. I've been involved with a lot of hotels, and we could not figure out how anybody had ever agreed to this level of employment in order to have a profitable operation. And I think the reality is it resulted in the hotel losing money. GERS had been the lender and in effect ended up foreclosing on the asset because it just didn't work under the former operating model."

GERS Administrator Austin Nibbs confirmed Wednesday that — in line with testimony at the meeting — the sale could close by the end of the month.

"It has already been approved," he said.

Nibbs declined to give the full value of the sale until after the deal closes.

"I cannot tell you that," he said.

— Contact Brian O'Connor at 340-714-9130 or email [email protected].