Posted on Friday, 10.23.2009
Lenders fighting over fate of troubled South Beach hotel
A court has taken over the Royal Palm a South Beach hotel
, believed to be worth far less than its debt, an owner said Friday.
Minority owner and developer R. Donahue Peebles walked away from the 417 room South Beach hotel
, which he built on city owned land in the late 1990s. Caught up in the crumple of the condominium market and the exploits of fallen condo-hotel king Robert Falor, the Royal Palm spent the decade as South Beach's longest-running hotel drama.
Now with Peebles gone the hotel's two lenders, Wachovia and BlackRock are fighting over the Royal Palm's fate.
Peebles said, the partnership that owns the hotel owes about $50 million to BlackRock and Wachovia has a $130 million mortgage on the property. Wachovia had been fighting BlackRock and the partnership, controlled by Peebles until a judge turned it over to BlackRock in July, to foreclose on the Miami Beach oceanfront property
In exchange for Peebles' agreeing to invest in refurbishments and maintenance needed at the hotel he had hoped the lenders would put him in charge of the property permanently.
But the plan would depend on the lenders' forgiving a large sum of the hotel's $180 million debt. Peebles said the hotel couldn't be viable, with the large amount of debt remaining.
Peebles said Friday, ``There was no way out, no solution.”
The latest trouble adds to the hotel's colorful history.
Peebles, who is a Coral Gables developer, sold the hotel to Falor and partner Guy Mitchell in 2005 for $128 million as the pair prepared a string of condo-hotel conversions that ended in litigation and bankruptcies.
When the two came up short of cash at closing, they gave Peebles back a 12% stake in the Royal Palm and the right to take over management if the business went bitter.
In February, Peebles persuaded a judge to get rid of Mitchell and Falor after the condo-hotel conversion failed and the hotel faced litigation from lenders.
A federal judge in July judge ruled BlackRock owned the hotel partnership outright because of the unpaid debt. Last week, New York judge named a receiver to run the hotel while Wachovia and BlackRock consider their options and Peebles formally withdrew as manager of the South Beach hotel
A hotel broker with EWM, Luigi Mercurio, estimated the hotel is probably worth about $100 million which is roughly 55% of the Royal Palm's debt.
Investors wanting to make the Royal Palm a Hyatt were prepared to pay $210 million for the hotel a year ago but the deal fell through, Mercurio said.
Peebles said he would likely pursue the Royal Palm again as a buyer if it is sold in a foreclosure auction. But given the difference between the hotel's value and debt, selling it would likely require Wachovia to reduce its mortgage. This a complex and complicated matter, since the loan was sold to various investors on Wall Street.