|The Miami Herald|
Knight Ridder/Tribune Business News
Nov. 30, 2004 - The owner of the Royal Palm Crowne Plaza Resort, the key concession that ended a three-year black tourist boycott of Miami-Dade County, has signed a contract to sell it to a white-owned hotel development company, according to documents obtained by The Herald.
The deal, which could face significant hurdles, calls for R. Donahue Peebles to sell the oceanfront resort for $128 million and pay back city subsidies requiring black ownership. Industry experts said the price would be the highest ever paid for a Miami Beach hotel.
The tourism boycott began after local leaders snubbed South African President Nelson Mandela during his visit here in 1990 because of his support for Fidel Castro. Eager to end the boycott, Miami Beach in 1993 invited black developers to bid on building a large, convention-headquarters hotel on city-owned oceanfront.
Peebles, then a Washington-based developer, won the contest and spent a reported $84 million building the 417-room Royal Palm, which opened in 2002.
Now Peebles is poised to sell the resort to The Falor Co., a Chicago-based company that has bought a number of South Florida hotels in recent years. The Royal Palm's lease with Miami Beach allows Peebles to pay $10 million for the land and lift most restrictions on the property, including the minority ownership requirements, city officials said.
The hotel's sale would mark the end of a high-profile venture touted as giving blacks more of a stake in the region's $17 billion tourism industry. The city lease required that at least 25 percent of the Royal Palm's executives be black, and the hotel became a magnet for Magic Johnson, Will Smith and other black celebrities. In 2003 the NAACP picked Miami Beach for its national convention.
The Royal Palm project also raised Peebles' profile as a star African-American entrepreneur; Black Enterprise magazine named his Coral Gables firm, Peebles Atlantic Development, its Company of the Year in May.
"Selling an asset is a part of the ordinary course in the development business," Peebles said in a statement Monday night.
"In the spirit of equal economic opportunity I should have the same rights and opportunities and be judged as any other business person; the right to make a profit from my investment, dedication and hard work."
H.T. Smith, a Miami lawyer and chief architect of the tourism boycott, praised Peebles Monday night and endorsed the property deal.
"The Royal Palm was a symbol of what could be achieved with the collective perseverance of the black community," Smith said. "I never expected any business and certainly not any hotel business to remain permanently in the hands of the original owner. I'm very proud of the fact that Don stepped forward and broke a barrier."
Peebles has faced increasing pressure to either find a new lender for the hotel or sell it. The contractor on the project, Clark Construction, won a $12 million judgment against a Peebles company in May, and original lender Union Planters Bank recently sold the hotel's $54 million mortgage to a New York company that is now trying to foreclose on the property.
Peebles dismissed the problems, always citing the hotel's value on the real estate market. He said he has had multiple offers for the hotel -- most at prices high enough to pay off Miami Beach, lenders and Clark.
But at least one major roadblock seems to remain before Peebles could sell the Royal Palm to Falor. He first must close a deal with the city to let him convert a portion of the Royal Palm rooms to condominium units -- an element crucial for Falor, which specializes in such conversions.
Peebles and city commissioners had reached an agreement to convert 160 rooms to condo-hotel units as part of a settlement over $16 million in construction overruns that Peebles partly blamed on structural problems with the city-owned hotel site.
But Peebles' disputes with his lenders and Clark have delayed the final paperwork on that settlement. And City Manager Jorge Gonzalez raised the possibility Monday that Miami Beach might scuttle the agreement if it wanted to oppose the sale to Falor.
'Perhaps we would say, 'Wait a minute -- this arrangement was made exclusively to settle a dispute with [Peebles],' " Gonzalez said. "That situation has now morphed into a different situation."
The wave of condo conversions in Beach hotels has led to worries that major conventions might have difficulty booking large blocks of rooms.
While hotel-condo rooms are generally put back into a hotel's rental pool, owners usually have the right to stay in them themselves.
The issue is particularly sensitive with the Loews Miami Beach and the Royal Palm -- two hotel projects the Beach subsidized in part to serve as convention-headquarter hotels.
In two interviews Monday night, company head Robert Falor seemed to tread on that prickly ground. While he said he only wanted to convert about 150 Royal Palm rooms at first, he did not consider his company bound by that agreement.
Asked if he was planning to convert the entire hotel into a hotel-condo property, Falor replied: "I am."
After speaking with Peebles, Falor retracted that comment, saying that to convert more than 160 rooms "we would need permission from the city."
Falor said he is negotiating with Hard Rock Cafe to operate the hotel and the condo-hotel units' prices would start at about $450,000.
By Douglas Hanks III and Nicole White
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