Royal Palm Owners Squabble
The fight over ownership of Miami Beach's Royal Palm hotel escalated last week when original developer and now minority owner R. Donahue Peebles filed a Chapter 11 petition to put the entire ownership structure into bankruptcy. The filing was meant to stave off a foreclosure sale by Carbon Capital, which holds a $30-million loan on the 417-room property.
In an interview Friday at his Coral Gables mansion, Peebles said he made the bankruptcy move to protect his interest in the Royal Palm--and to protect the hotel itself. In a sense, he considers the Royal Palm his baby.
When he sold it for $128 million (the Miami Herald said it was $124 million, which Peebles corrected) to Guy Mitchell and Robert Falor in 2005, they were short $11 million and he got 12 percent of the hotel. "They made such a mess of the hotel, they ended up in various defaults with lenders and on Monday (Jan. 5), Mitchell tendered his ownership interest in the hotel to the lender without consulting us," Peebles says.
"In order to protect our interest in the property, we exercised some of our remedies and put the hotel ownership entity (Royal Palm Senior Investors) into bankruptcy," Peebles said. The Royal Palm is overleveraged on debt and the "managers of the partnership have not run the property or the business well; we are looking for the bankruptcy process to allow us to turn things around and hopefully take some control and pay some of the unsecured creditors back.
"We worked real hard to build that hotel. We made a lot of money selling it (it cost $80 million to build and it sold for $128 million)," he concedes, "but that hotel stood for something." Not only did it represent a breakthrough for African-American developers like Peebles, it contributed to the revitalization of South Beach."
"We're not going to sit back and see it run into the ground and become just a feeding frenzy," Peebles says. "It's about my concern for what the hotel stands for. And also I want to protect the jobs for the employees there." In this economic climate, who knows? Peebles, a consummate opportunist, might be interested in buying it back. As he noted, Kirk Kerkorian sold the MGM Grand three times.
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