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A False Start; Citing Sales Shortfalls, the Deauville Beach
 Resort in Miami Beach Wants to Cancel Contracts
 for Condo-hotel Units Sold
By Douglas Hanks III, The Miami Herald
Knight Ridder/Tribune Business News

Jun. 25, 2005 - Citing sales shortfalls, the Deauville Beach Resort wants to cancel contracts for condo-hotel units at the oceanfront complex in Miami Beach, according to people representing the buyers and letters from the hotel.

The 485-room North Beach hotel that played host to the Beatles on their second Ed Sullivan Show appearance had launched plans to convert into a condo-hotel project and sell off rooms individually.

But more than a year after sales started, letters were sent to buyers saying that the Deauville wanted to cancel their contracts. Two letters provided to The Herald by a lawyer representing buyers said the project had missed a contractual July 25, 2004, sales target of 250 units, or $15 million.

Tony Castro, a top aide to Deauville developer Homero Meruelo, said this week he doubted contracts were being canceled. But he spoke to The Herald before it had obtained the letters to buyers and didn't return later phone calls. Meruelo could not be reached this week.

The head of the MerCo Group development company, Meruelo built the Akoya condominium tower in Miami Beach and recently purchased the Wyndham Grand Bay Hotel in Coconut Grove. He had announced plans for a separate condominium tower on the Deauville site as well.

Canceling contracts would add the Deauville to a short list of false starts among real estate ventures in the Miami area.

Ice, a condominium tower planned for Miami's Edgewater neighborhood, told buyers last month that soaring construction costs had forced builders to stop work on the project. And the Everglades, a 49-story high-rise under construction downtown, canceled reservations last year for its condominiums and began reselling them at higher prices, saying it had underestimated construction costs, too.

But the Deauville, a 1953 resort at 6701 Collins Ave., planned just $7 million worth of renovations in converting to a condo-hotel, according to promotional material on one broker's website.

Michael Schlesinger, a Miami lawyer representing Deauville buyers, questioned whether the Deauville simply wants to resell the units at higher prices.

"We believe they're misrepresenting the actual facts [and that] the contract quotas were actually met," Schlesinger said. He sent a letter to the Deauville on May 25 demanding proof that sales fell short.

The Deauville priced its units between $100,000 and $300,000, said Joel Greene, a condo-hotel broker. He said the unit prices seemed low when sales began, but increases inched the kitchenless units in a 52-year-old building toward the high end of the market.

Kevin Tomlinson, a broker selling condos and condo-hotel units on Miami Beach, said the Deauville was known for low prices. "There was a frenzy when they opened sales over there," he said. "How could you not meet their sales goals for an oceanfront condo on Miami Beach at that price level?" Though there are some condominiums at the Deauville from an earlier, partial conversion, canceling the condo-hotel contracts would leave the property a standard hotel, without the complications of individual ownership.

As a large oceanfront resort not allied with a hotel chain, the Deauville could be attractive for Sheraton and Hilton. The two chains are searching for new homes on the ocean after Fontainebleau parted ways with Hilton this spring, and Sheraton's Bal Harbour resort is set to be demolished for condominiums and a smaller hotel next year.

Castro, chief financial officer for MerCo, said he knew of no changes in store at the Deauville and that it would continue operating as a resort.

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To see more of The Miami Herald -- including its homes, jobs, cars and other classified listings -- or to subscribe to the newspaper, go to http://www.herald.com.

Copyright (c) 2005, The Miami Herald

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com. HOT, HLT,

 
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