Tracy Colman  |  January 4, 2020

Category: Disaster Help

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Hurricane claims finally resolved.DiamondRock Hospitality (DRHC) has finally achieved a settlement resolving hurricane claims it filed with its insurer, according to prnewswire.com

As indicated by its website, DRHC is a real estate investment trust which owns a group of 31 destination resort properties throughout North America and the U.S. Virgin Islands. The hotels that are part of this immense portfolio have a combined 10,000 rooms.

The settlement reached concerns the Havana Cabana in Key West, Fla. and Frenchman’s Reef Resort in St. Thomas, Virgin Islands. Both sustained heavy damage during Hurricane Irma and Maria in September 2017.

What Damages Resulted from Hurricane Irma?

Hurricane Irma had a significant path of destruction that affected the northeastern Caribbean, Florida Keys, and parts of the continental U.S. In terms of the latter location, Irma was thought to be the strongest storm endured since Hurricane Katrina in 2005. Both Irma and Maria hit these areas in September 2017 and were considered Category 5 storms.

As indicated by prnewswire.com, DRHC is very pleased with the successful negotiation and settlement of their hurricane claims. They remain hopeful that at least Frenchman’s Reef Marriott Resort and Spa and the new Noni Beach Resort will be open to receive guests in St. Thomas by the latter part of 2020. To date, the insurance company had paid out $140.12 million of the hurricane claims. The settlement requires that an additional $106.63 million be paid within the next 30-day period.

The combined total of what has been received and what is expected within the next month total $246.75 million. The settlement nullifies any attempts to seek business interruption monies related to the hurricane claims. In addition to this settlement, DRHC settled a claim with respect to damage caused by Hurricane Maria for $1.44 million.

The costs associated with reconstructing Frenchman’s Reef and the corresponding beach bungalows that are part of its companion Noni Beach Resort is estimated to be $300 million. DRHC is expected to fund from its own resources $48 million dollars toward this complex. Additionally, they have applied for $30 million grant from local government resources with the caveat that one wing of the hotel will be constructed as a hurricane shelter.

Other funds the company will rely upon includes $202 million in insurance monies, at least $37.7 million of which are the proceeds from business interruption claims. DRHC hopes to tap into recovery funds available under the Hotel Development Act—a law adopted by the U.S. Virgin Islands after this notable Hurricane season in 2017 that was meant to encourage rebuilding and new development. The funds available under the act are meant to fill in the gap between insurance payouts and actual costs of reestablishing functional and successful resorts. Whether or not the application for this money will be successful or not remains to be seen.

DRHC plans on reaching a state of stability with the new and rebuilt St. Thomas resort after about three years. The expected income before interest, taxes, depreciation, and amortization is around $25 million for this property alone.

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