A privately financed tourism project with public safeguards, infrastructure investment and required government oversight
The Government of the Virgin Islands is reviewing a proposed reinstatement and amendment to a lease with Water Island Development Company, LLC for the development of a hotel, marina, residential units and related resort facilities on portions of government-owned land on Water Island.
The proposal is not final. It requires approval by the Governor and the Legislature of the Virgin Islands. The project must also go through all required permitting, environmental review and regulatory approvals before construction can move forward.
The purpose of the amended agreement is to determine whether a long-discussed Water Island development can proceed under stronger terms, clearer obligations and greater public benefit than the original lease.
What is being proposed?
The proposed project would allow for the development of a hotel and marina on Water Island, along with branded residential units, restaurants, retail, spa facilities and other resort-related uses.
The project also includes supporting infrastructure such as roads, utilities, water, wastewater, drainage and marine-related improvements.
The intent is to create a new tourism asset for the Virgin Islands while requiring the private developer, not the Government, to carry the primary cost and responsibility for building the project and the infrastructure needed to support it.
Why is the lease being revisited?
The original lease was approved in 2014. The project did not move forward as expected, and in 2025 the Government issued a notice of termination for non-performance.
After further discussions, that notice was rescinded, and the Government negotiated revised terms with a restructured Water Island Development Company, LLC.
The amended agreement is intended to reset the project under updated requirements, including a higher private investment commitment, revised timelines, Government revenue participation, performance protections and continued oversight.
In plain terms, the Government is not simply reviving the old deal. It is seeking to move the project forward under a more demanding framework that better reflects the public interest.
What land is involved?
The proposed lease covers portions of government-owned land on Water Island that were part of a larger federal conveyance to the Government of the Virgin Islands.
Importantly, the amended agreement removes certain areas from the leased premises and returns them to Government control.
Those areas include:
- The Catchment Area
- Tract C, commonly known as Honeymoon Beach
This is an important public-interest point. Under the amended agreement, Honeymoon Beach is removed from the leased development premises and returns to Government control.
What would the public receive from the proposal?
The public benefits identified in the proposed agreement include private investment, infrastructure improvements, public access protections, Government revenue and continued regulatory oversight.
Major private investment
The amended agreement requires a minimum private capital investment of $300 million. That is more than double the $140 million investment contemplated under the original lease.
Infrastructure improvements
Approximately $40 million of the required investment is expected to support critical infrastructure, including:
- Roads
- Drainage systems
- Potable water systems
- Wastewater systems
- Solid waste systems
- Utilities
- Marine-related improvements
These improvements are intended to support the development while also strengthening Water Island’s long-term infrastructure capacity, environmental management and resilience.
Public access improvements
The proposal requires continued support for public ferry operations and public access at the Landing Parcel, including public parking and public restrooms.
This matters because any major development on Water Island must account for the people who already live there, work there and rely on the island’s public access points.
Government revenue
The Government would receive lease payments, hotel occupancy tax revenue if the hotel becomes operational, transfer tax revenue from residential sales and a 6 percent Government participation fee from residential unit sales.
Those revenue figures should be understood as projected benefits, not guaranteed money already in hand. They depend on the project being financed, permitted, built and successfully operated.
How much would the developer pay the Government?
After the construction rent period, the base rent would be $120,000 per year, paid in monthly installments.
In year 20, the annual rent would increase to $240,000.
Beginning in year 25, the rent would increase by 5 percent every five years.
During the construction period, rent would be reduced to $1,000 per month while the developer works through construction after receiving the necessary permits and approvals.
The Government would also receive 6 percent of the gross purchase price from each residential unit sold as part of the project.
What protections are included for the Government?
The proposed agreement includes several safeguards intended to protect the public interest.
Performance bond
The developer must provide a $3 million performance bond from a financial institution preapproved by the Government. The bond is intended to secure the developer’s early-stage obligations, including the effort to obtain required permits and approvals.
Required permits and approvals
The project remains subject to all applicable laws, permits and regulatory approvals.
That includes approvals related to coastal zone management, submerged lands, marine facilities, earth change activity, environmental requirements and other applicable reviews.
Approval of the lease would not mean approval of every construction permit.
Government oversight
The proposal preserves Government review over key actions, including land conveyances, certain transfers, financing arrangements, subleases and other major project steps.
The agreement also requires compliance with applicable law and includes procedures intended to protect the Government’s ownership interest.
What about environmental review?
The project must still go through the required environmental and permitting process.
Any work involving submerged lands, marina facilities, shoreline activity, earth change or coastal development must receive the necessary approvals from the appropriate agencies.
That means the public review process does not end with lease approval. Lease approval would establish the legal framework for the project, but permitting and environmental review would still have to occur before construction can proceed.
What still has to happen?
Before the project can move forward, several steps remain.
The amended lease must be approved by the Governor and the Legislature.
The developer must secure financing, obtain required permits and approvals, satisfy legal requirements, meet project milestones and comply with the terms of the agreement.
The Government must continue reviewing the project to ensure that public access, environmental protection, infrastructure commitments and financial safeguards are honored.
How the Proposal Should Be Judged
This proposal concerns a long-discussed hotel and marina development on Water Island that was first approved under a prior lease in 2014 but did not move forward as expected.
The amended agreement now before the Government is intended to reset the project under clearer and stronger terms. It would require the developer to make a significantly larger private investment, build needed infrastructure, preserve key public access protections, return certain land areas to Government control and provide the Government with lease revenue and participation in residential sales connected to the development.
It is important to understand what this proposal is and what it is not. It is not final approval to begin construction. It is a proposed legal framework that would allow the project to move into the next stage, subject to approval by the Governor and Legislature, required permits, environmental review, financing and continued compliance with Virgin Islands law.
For the public, the question is not whether development should happen at any cost. The question is whether this amended proposal protects the public interest better than the prior arrangement while giving the Virgin Islands a realistic opportunity to turn underused government land into infrastructure investment, tourism growth, jobs and long-term revenue.
That is the standard by which the proposal should be judged.
View Governor’s Transmittal Letter to the 36th Legislature of the Virgin Islands
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