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EDC Hearing Reveals Ritz, Cabrita Point, Divi Plans

Feb. 27, 2006 – The R.C. Hotels V.I. Inc. expects to sell its Ritz-Carlton St. Thomas hotel to Merrill Lynch, company officials said at an Economic Development Commission hearing held Monday at the Legislature building on St. John.
"The closing is expected in May," said David Holton, Ritz-Carlton senior vice-president for resort development.
The Ritz-Carlton asked for an extension of its EDC benefits package to make the sale more attractive to Merrill Lynch. A portion of the tax benefit package expires in July, with the final section running out on Jan. 2, 2009.
Holton said Merrill Lynch will subsequently submit an application for EDC benefits.
Additionally, Cabrita Partners LLC, a newly formed 50/50 partnership between the Ritz-Carlton company and Lionstone Holdings, asked the EDC to approve an initial benefits package.
Florida developer Alfredo Lowenstein owns Lionstone Holdings. His plans to develop the property have been the subject of numerous protests by the Red Hook Community Alliance. The organization wants the area to remain undeveloped.
Holton said Cabrita Partners plans to invest $180 million in the Cabrita Point project, with the total investment for all committed and future improvements to the hotel and the Cabrita Point project totaling $456.8 million.
Robert Phillips, senior vice president for business development at the Ritz-Carlton, said Cabrita Point plans to build 68 "fractional" units as well as 22 single-family homes to be sold as fractional ownership. Fractional is a term similar to time share.
The number of Ritz-Carlton hotel rooms is expected to grow from 144 to 176.
Phillips said Ritz-Carlton will continue as the hotel's management company.
Ritz-Carlton is owned by Marriott.
Phillips said it was part of the company's management plan to sell the hotel.
He said the St. Thomas hotel is only one of five out of the 2,900 hotels managed by Marriott that the company actually owns.
Phillips said that the company will sink the money from the sale into the Ritz-Carlton hotel and the Cabrita Point development.
The EDC also heard a request from the Divi Carina Bay Hotel on St. Croix to extend its EDC benefits package for another 10 years.
"Quite simply, our resort struggles," said Brad Whitmore, president of Grapetree Shores which operates as the Divi Carina Bay.
Whitmore said that St. Croix can "never seem to get out of the starting gate" and is beset with a continuing series of troubles.
"Marilyn, Lenny, 9/11…," he said, ticking off problems that have hindered the island's economy.
He said the company plans to build a beachfront pizza restaurant and a miniature golf course if it gets the extension.
After Whitmore spoke about the need for a trained workforce, commission member Kent Bernier segued discussion on the proposed EDC benefits package extension into a request that the Divi be involved in building a hospitality training school. Bernier also made the same request of the Ritz-Carlton officials.
"There's no way you're building facilities and you don't find some way to participate here," Bernier told Ritz-Carlton officials.
Whitmore said that he's offered the local government five acres of Divi property for a conference center.
"We would manage it at no profit," he said.
He said it would be very difficult for a private enterprise such as the Divi to fully fund a conference center.
Economic Development Authority Director Frank Schulterbrandt said that the commission will make a decision on these and other applications at a meeting to be held in several weeks.
The Commission also heard a request from Providence Investments on St. Croix for an initial EDC benefits package. Company owner John Boyd, who is currently involved with an EDC beneficiary company, Kapok Management, said the company's principals have left the company.
"It's in a bit of reorganization," he said.
Internal Revenue Service Agents raided Kapok in 2003. That action helped spark a federal tightening of EDC residency requirements.
Boyd said he will sever his limited relationship with Kapok if he gets the EDC benefits package.
Boyd has hired former gubernatorial candidate and St. Thomas businessman Michael Bornn as staff.
V.I. Paving Inc. of St. Croix requested a new EDC benefits package so it could remain competitive with other similar companies that have packages.
Company founder Richard Schierloh said that although the company has been in business since 1981 and has its roots in his earlier endeavors in the region, he didn't ask for an EDC benefits package sooner because his was the only such company around.
"We were the only show in town," he said.
Heavy Materials LLC, with facilities on both St. Thomas and St. Croix, requested an initial benefits package. Doug Gurlea and Shane and Tom Brunt IV bought the company in 2005 from V.I. Cement's Devcon division.
Gurlea said the benefits package would help the company improve distribution.
He outlined the problems the company has in bringing in explosives to use in company operations.
He said that since the Sept. 11, 2001 terrorist attacks, the U.S. Coast Guard clamped down on explosives-carrying vessels entering St. Thomas Harbor for fear the ship could hit a cruise ship.
Gurlea said that instead, the company has been forced to rent private planes to fly in the explosives.
"They close the St. Thomas runway down and don't open until the explosives are unloaded," he said.
He said this operation takes place at night.

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