The labor problems and financial difficulties at the resort are real, but to assign blame to the Tenants' Association of the Pelican Resort Club (TAPRC) Board for failing to control the labor and budget situation misrepresents the facts. Since 1997, Royal Resorts (the "professional" management company hired by the TAPRC Board and an affiliate of the new owner) has had primary responsibility for formulating realistic annual budgets, up to and including, complete control and responsibility for the labor management and collective labor agreement (CLA). If the new owner believes the resort can now run with almost 100 fewer employees than when the TAPRC owned the resort, then shouldn't Royal Resorts be held responsible for the overstaffing at the Resort for the last 13 years and the deficits thereby created? Of course they should, but it was much more advantageous for them to raise the annual maintenance fees on which Royal Resorts was being paid a 10% commission than to manage the Resort efficiently and in a manner that financially benefited the TAPRC.
The new owner's statement that the maintenance fees at the Pelican are unreasonably low, allegedly 30% lower that the neighboring resorts, again misrepresents the facts. For the last 13 years the fees at the Pelican are, and have always been, comparable with the other resorts on the island. Even in the case of its two neighboring resorts (The Flamingo and The Royal Palm) the 30% increase in maintenance fees occurred during the last two years as a result of particular circumstances unique to those two resorts. It is obvious where the new owner intends to go with this argument.
The inference that the loans provided by the Quantum Investment Trust ( a company also owned by the new owner) to fund operational losses were somehow altruistic flies in the face of reality. Unlike the TAPRC owners that were lured into investing in a capital improvement program initiated by Royal Resorts , the new owner received complete repayment of all his operational loans together with 12% interest. The same loans also served to secure the continuation of the management fees being paid to his affiliated management company, Royal Resorts.
The situation concerning the building of the Pelican Marina Residence (PMR) and the resulting foreclosure on the Resort is particularly disturbing and the new owner has no intention of providing full public disclosure. It is true that early TAPRC Boards wanted to build the PMR to establish reserves for the resort, because they had been assured it would be a joint venture with Royal Resorts, who consistently represented themselves as a financially strong and trustworthy partner. The TAPRC Board even received a signed letter of intent stating that the building of the PMR would be a joint venture. What the new owner fails to tell you is critical: When it appeared that the TAPRC Board would not approve the project the new owner acquired enough votes to personally vote himself and a number of his friends on to the TAPRC Board. With this new power contracts were signed that among other things:
- Gave exclusive sales rights on the new building to Alpha Marketing (another company affiliated with the new owner). Alpha was to receive 46% of any sales proceeds;
- Made Royal Resorts the construction manager whereby they awarded a sole source contract to a contractor without so much as a single competing bid and failed to phase the project as planned despite an obviously slowing economy;
- Eliminated the joint venture and made the Pelican Resort solely responsible for the debt.
- Agreed to construction financing that did not even provide enough funds to pay for the building construction while pledging the entire resort as collateral for the loan. (A minimum of $68 million in collateral for a $25 million loan) The loans went so far as to contain clauses requiring Royal Resorts to remain the Resort manager during the complete term of the financing;
- Gave Royal Resorts 50% of any profits, calculated on an annual basis, with no responsibility for any losses, for completely unspecified services;
- Backdated a number of contracts, including one to give the new owner more favorable loan terms, on the accounts receivable portion of the financing;
- Extended the management contract for Royal Resorts by 10 years with absolutely no performance measurements and added the PMR to their management contract.
In short, the new owner and its affiliated companies controlled the construction, the sales, the financing, the management, the receivable collections, and even the loan re-payments on the project.
It is perfectly clear why no commercial bank would provide financing for this project. A timeshare association, with absolutely no financial wherewithal or reserves, was being thrust into a position in which it was responsible for massive debt. All the significant benefits of the project had been transferred to companies affiliated with the new owner. Under the best case scenario, as indicated in projections provided by Royal Resorts, the Pelican only stood to make $8 million. After deducting the $4 million land value contributed by the TAPRC, the net profit on which the TAPRC would risk the entire Resort and bankruptcy, was only $4 million while the new owner and his affiliated companies stood to make millions of dollars risk free. If the project encountered any difficulties or delays, such as the current economic downturn, foreclosure was a foregone conclusion. The conflicts of interest enumerated above are even more egregious given the fiduciary responsibilities of the Board members involved and Royal Resorts, which served as co-managing director for the Pelican Resort.
The new owner's characterization that the efforts of the TAPRC Board to gain control of its assets as "aggressive, unreasonable, and an indignant borrower" fails to disclose the facts as indicated above. Also notably absent from the facts presented by the new owner is that Royal Resorts had gone so far as to open numerous bank accounts (in direct violation of its Management Agreement) in other countries such as Belize. Opening these bank accounts was analogous to identity theft; numerous accounts opened in the name of the Resort, with no one on the TAPRC Board with signature authority over any of the accounts. Engaging attorneys and consultants was the only responsible action the TAPRC Board could take when the intent of the new owner to assume ownership of the Pelican Resort became obvious. Becoming "indignant" when access to funds was blocked and contract terms were grossly skewed in favor of Royal Resorts was a situation manufactured by the new owner, not the TAPRC..
The current claim by the new owner that he cannot afford to keep the resort open and will close the Resort effective February 20th,after collecting an undisclosed amount of 2011 maintenance fees from the timeshare owners, must be viewed in the full context of the circumstances surrounding his carefully premeditated acquisition of the Resort. The St. Maarten government must respond and respond forcefully. As an island dependent on tourism, St. Maarten's ongoing economic well-being is heavily dependent on the steps the government takes to protect the timeshare owners who have made substantial investments on the island. Timeshare owners, the citizens of St. Maarten who rely upon income from timeshare owners and tourists, the businesses in St. Maarten and the displaced employees of the Pelican Resort are all relying upon the government of St. Maarten to right these wrongs.
Gene Albrecht, Former TAPRC Chairman 2009
Christine Schlunz, Former TAPRC Chairman 2010