In Part One we looked at the still unraveling situation leading to the imminent closing of Pelican Resort, now Simpson Bay Resort. In this second part we examiner more closely some of the issues involved.
The resort has been operating at a financial deficit for more than ten years; sometimes, it is claimed, spending $500,000 USD more than it brings in in annual maintenance fees.
The Tenant’s Association of Pelican Resort Club, the consortium formed by the Owners Association to purchase the property when the original developer went bankrupt in 1996, had several options to address this annual deficit. They could have increased the annual maintenance fee paid by each owner; they could have imposed a special assessment; they could have lowered expenses.
Instead, they chose to borrow money to make up the shortfall. Ultimately the deficit grew to more than $4 million.
Another strategy to eliminate the debt and improve financial stability involved the 2005 construction and sale of Pelican Marina Residences, the projected revenues offsetting the annual deficits as well as repaying the debt. The world wide economic crisis certainly derailed the rate of success for that solution.
In any event, ultimately the loans were foreclosed upon, and the lender was the only buyer at the auction in December 2010.
At dispute is how widely this auction was publicized, were other potential buyers aware of the sale.
In any event, it is clear that the former lender, now owner of the property, wanted to begin to get the annual budget under control. More than half the existing budget was dedicated to paying salary and costs associated with the maintaining a staff well in excess of 200 full and part time employees. This is separate and apart from 200 or so people employed by on site vendors and businesses.
The new ownership believes they can operate efficiently with about sixty full time employees, the union has gone to court to protect 182 union jobs. Apparently compromises that would protect somewhere in the vicinity of 145 jobs have not been satisfactory to one side or the other.
Both sides have drawn a line in the sand. The union, to protect all it’s jobs. The new owner not wanting to pour what they consider good money after bad, after forgiving debt, and facing considerable deferred maintenance issues.
So, unless someone blinks, the property closing is imminent, and nobody works, not the couple of hundred union and non union jobs on the resort, not the couple hundred people working for the on-site businesses and vendors, all dependent on the uninterrupted flow of timeshare tourist spending.
In the conclusion, we look at who suffers, and another little discussed issue facing timeshare that this situation brings to light.