ST. CROIX — Governor Albert Bryan Jr. has submitted legislation to the Virgin Islands Legislature, authorizing the Public Finance Authority to create a subsidiary to issue tax-exempt bonds for the Frenchman’s Reef resort on St. Thomas that would result in the government owning the property.
In an October 22 letter to Senate President Milton Potter obtained by WTJX, Bryan indicated that the PFA is working with Fortress Investment Group LLC, which owns Frenchman’s Reef, on a financing plan that would not involve the commitment or pledge of any government revenues or assets. He likened the arrangement to an industrial development bond.
Under the proposed structure, tax-exempt bonds would replace Fortress’s existing corporate debt and equity on the property. When the bonds are fully redeemed — expected in about 30 years — ownership of the resort would “revert” to the Virgin Islands government, according to Bryan.
Frenchman’s Reef comprises two interconnected resorts — The Westin Beach Resort St. Thomas and Buoy Haus Beach Resort.
While Bryan indicated that no new legislative approvals are required for the issuance of the bonds, he pointed out legislation is required for the PFA to create a new subsidiary entity for the new bonds to be issued without the 35-investor constraint. The new entity, to be called the Virgin Islands Hotel Development Financing Corporation, would issue the bonds and oversee related hotel financing projects without being subject to the federal 35-investor limit under private offerings.
Bryan’s proposal would amend the Hotel Development Program to allow the PFA to establish wholly owned subsidiaries, or affiliated corporations, with the same powers granted to the Authority under Virgin Islands law. The bill expands the functional capacity of the PFA by authorizing its wholly owned subsidiaries and affiliated corporations to fully implement and administer the Hotel Development Program, Bryan wrote. He noted the legislation expands the PFA’s ability to structure and finance hotel development projects, ensuring the Authority can continue to promote tourism and economic diversification across the territory.
Frenchman’s Reef hotels previously received $84 million in PFA-issued Hotel Occupancy Tax and Economic Recovery Fee Revenue Bonds in 2024 to reimburse Fortress for construction following Hurricanes Irma and Maria in 2017, Fortress announced last November. Fortress, which acquired the storm-damaged property in April 2021, has invested $311 million in renovations, with total redevelopment costs reaching $468 million. The resort, which opened in two phases starting in May 2023, was up-branded to a dual-branded Westin and Autograph Collection from a Marriott.
Before Fortress’s acquisition, DiamondRock Hospitality Company owned the 478-room property and had secured up to $136.3 million in tax incentives through the Virgin Islands Economic Development Authority in November 2020. The incentive agreement allowed 50% of Hotel Room Occupancy Tax revenues to reimburse a portion of reconstruction costs over 30 years.
Founded in 1998, Fortress manages approximately $53 billion in assets globally across credit, real estate, private equity, and permanent capital investment strategies.
