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The Royal Palm is part of one of the current real estate crash's many pileups: hotel to condo-hotel conversion. This concept is a variation on the straight hotel-to-condo play. While rooms are sold to retail investors, the property still operates as a hotel. Room owners can stay as long as they want. When not around, their rooms can be rented out. Florida led the U.S. in these instruments, which means the Sunshine State is sitting on a lot of disasters. Why fashion these conversions? A traditional hotel can be carved up and sold to individual owners. The developer gets money up front and the project becomes a real estate play as opposed to a long-term investment. The problem is equally straightforward, says Gregory Rumpel, executive vice president of Jones Lang LaSalle Hotels: greed. A hotel room may be valued at, say, $100,000. You could argue that an investor might pay $200,000 for the room, a diminished return offset by the ability to use it as a destination. "You don't buy a condo-hotel for only an investment," Rumpel says, adding that some condo-hotels, well managed and marketed, have prospered even in Miami's market dive. But in the crazy years of the boom, some developers tried to inflate prices far beyond reasonable values. They marketed to "uneducated and unsuspecting buyers who anticipated a return," Rumpel says. After the crash, investors discovered they were sitting on assets that are not only worth a lot less, but return little relative to the outstanding mortgages. A Chicago developer, Robert Falor, personifies this mess. He has left busted hotel to condo-hotel deals that include the Royal Palm and four other Florida properties, plus three in Chicago. Multiple bankruptcies, lawsuits and forced sales mark his trail. Attempts to reach Falor weren't successful. His Robert Falor Investments LLC isn't listed in Chicago. Typical of Falor's approach was a much-ballyhooed -- and stillborn -- plan to convert hotels into condo-hotels and brand them "Nicky O," after Paris Hilton's lesser-known sister, Nicky. A lawsuit marked the end of that partnership, although why Ms. Hilton would be an inducement to investors is beyond us. It was beyond potential acquirers too. The three properties initially tagged for Nicky's imprint failed to sell any condos. Two -- Miami's Breakwater and Edison hotels -- went bankrupt (a sale is pending). The third is Chicago's boutique Hotel Blake. Despite many lawsuits, Falor has held onto the property, which remains for sale. He wasn't as fortunate with the bigger Hotel 71. This 437-room Chicago property filed for Chapter 11 twice last year. Falor defaulted on more than $100 million in loans and took the hotel into bankruptcy court before creditors could auction off the property. Mezzanine lender Oaktree Capital Management LLC assumed the equity. The bankruptcy was dismissed, but Oaktree took the hotel back into Chapter 11 to cut losses. Another distressed real estate fund bought the $100 million senior debt. No one else wanted to acquire the property, so the fund and its partner will own the hotel. In Miami, Falor found backing from financier Guy Mitchell to buy the 414-room Royal Palm in 2005 for $128 million. Last year, R. Donahue Peebles, the previous owner who retained a minority stake, sued Mitchell for breach of contract. In turn, Mitchell ousted Falor. In the time he was involved, Falor couldn't sell a single room as a condo conversion -- a stunning failure in a Miami condo market that was so hot in 2005 and 2006 that a closet might get multiple bids. That incompetence may be a blessing for current owners, now peddling the hotel for an unrealistic $220 million. Condo owners seem to only diminish the value of a hotel property these days. However, exactly who owns the Royal Palm is in dispute. An affiliate of BlackRock Inc., which holds a loan for the property it says is in default, wants control. Mitchell has resisted. Lawsuits have flown. It's no day at the beach. -- Matt Miller CategoriesComments
From: r,
now they are trying to run and own the tides in melborn fl.
Posted on:
June 4, 2008 1:07 AM
From: billy bob,
You've got to hand it to the guys - there was no lack of greedy people and companies willing to loan money on these projects. Falor(s) talked a good game - it was just hard to listen that fast. Without commenting on on the competency of the players, an oppourtunity was played at great risk to personal and borrowed assets. It all turned to crap - but had it worked no one would be printing this hindsight commentary. I have the right to comment since I lost out as well. I look at it as any other venture with possible risk. Sometimes you lose.
Posted on:
June 4, 2008 1:45 PM
From: don,
it had nothing to do with greed in a well run realstate there is no risk . you may not go against what was agreed with investors and banks such as they are famous for show yourself and talk your good game out of this one. it is finaly over with there tricks. read all blogs and postings on the web.
Posted on:
August 4, 2008 2:51 AM
From: anonymous,
Posted on:
February 4, 2009 1:07 PM
From: Don,
I heard they lost everything. All gone, homes in foreclosure. no money, lost the biz deals etc. The recession took them down also. Heard Chris went to jail again
Posted on:
March 29, 2009 5:16 PM
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The Royal Palm Resort, we are reliably informed by unbiased marketers, is perched majestically on Miami's South Beach, basking in sunshine and kissed by ocean breezes. Here's what the promotions don't mention: The Royal Palm has a history of unpaid bills, overdue loans, lawsuits. One partner has been forced out. The property is on the block, although it isn't clear who owns it.
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check out robert chris and david falor histery with mismanagement of hotels rennisance boca raton- marriott cypress creek fl. holiday inn colonsvill il. holiday inn shamberg il. holiday inn ohare il. sheriton chattanooga. soverign miami beach. ect they are only good talkers to get your money now they are in hiding.