PHILIPSBURG--Gene Albrecht and Christine Schlunz, two former chairpersons of the Tenants Association Pelican Resort Club (TAPRC), over the weekend said the new owner of Simpson Bay Resort and Marina (formerly Pelican) and its affiliated group of companies are responsible for a series of actions that many affected parties consider criminal.
"Their recent attempt to assign blame to the very parties that are the victims of their alleged crimes is unconscionable. The press release issued by the new owner of Simpson Bay Resort and Marina (SBRM) is not only an unmitigated example of 'spin,' but is breathtaking in its complete disregard of full and honest disclosure concerning the history leading up to the recent events at Pelican Resort," they said.
They said while the labour problems and financial difficulties at the resort are real, assigning blame to the TAPRC board for failing to control the labour and budget situation misrepresents the facts.
"Since 1997, Royal Resorts has had primary responsibility for formulating realistic annual budgets, up to and including, complete control and responsibility for the labour management and collective labour 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?" they asked.
"But it was much more advantageous for them to raise the annual maintenance fees on which Royal Resorts was being paid a 10 per cent commission than to manage the resort efficiently and in a manner that financially benefited the TAPRC," they added.
Albrecht and Schlunz said unlike the TAPRC owners, who were lured into investing in a capital improvement programme initiated by Royal Resorts, the new owner received complete repayment of all his operational loans together with 12 per cent interest. "The same loans also served to secure the continuation of the management fees being paid to his affiliated management company, Royal Resorts," they said.
"It is true that early TAPRC Boards wanted to build Pelican Marina Residences (PMR) to establish reserves for the resort, because they had been assured it would be a joint venture with Royal Resorts, which 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 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 the TAPRC Board," the former chair persons said.
They added that with this new power, contracts were signed that included among other things:
1. Giving exclusive sales rights on the new building to Alpha Marketing (another company affiliated with the new owner). Alpha was to receive 46 per cent of any sales proceeds;
2. Making 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;
3. Eliminating the joint venture and making Pelican Resort solely responsible for the debt.
4. Agreeing 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 US $68 million in collateral for a US $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;
5. Giving Royal Resorts 50 per cent of any profits, calculated on an annual basis, with no responsibility for any losses, for completely unspecified services;
6. Backdating a number of contracts, including one to give the new owner more favourable loan terms, on the accounts receivable portion of the financing;
7. Extending the management contract for Royal Resorts by 10 years with absolutely no performance measurements and adding 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," Albrecht and Schlunz said.
"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," they continued.
"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, Pelican only stood to make US $8 million. After deducting the US$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 Pelican Resort." They said.
Albrecht and Schlunz said 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, they said, 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 Pelican Resort became obvious. Becoming "indignant" when access to funds was blocked and contract terms were grossly skewed in favour of Royal Resorts was a situation manufactured by the new owner, not the TAPRC," they said.
They stressed that the he current claim by the new owner that he cannot afford to keep the resort open and will close the resort effective February 20 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 Pelican Resort are all relying upon the government of St. Maarten to right these wrongs," Albrecht and Schlunz concluded.
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