Feb. 3, 2007 - The developer behind Nicky Hilton's planned South Beach hotel said Friday he is considering scuttling the project because she allegedly filmed a private videotape with older sister Paris making racist remarks.

"I'm very concerned about it. I'm shocked actually that she would participate in something like that," developer Robert Falor said. The video is making the rounds on the Internet and is the subject of a lawsuit by Paris Hilton.

Falor's comments offer the first signs of strain in a partnership between a developer known for sparring with associates and the 23-year-old celebrity heiress, who has become one of South Beach's most high-profile hoteliers. Though still under construction, the 95-room "Nicky-O" condo-hotel has won favorable mentions by Vanity Fair, People and even David Letterman.

Nicky Hilton's representatives did not return phone calls on Friday. A failed partnership with Hilton could prove a highly public setback for Falor, who briefly enacted bankruptcy proceedings for the Ocean Drive site before signing a deal to make it Hilton's first hotel venture.

Falor announced a second Nicky-O in Chicago and touted the fashion designer's style and celebrity cachet as a developer's dream.

In her lawsuit filed in federal court in Los Angeles, Paris Hilton claims the tape in question was obtained from her storage unit in California. The video on YouTube seems to show Paris mocking Jewish and African-American people, with Nicky behind the camera.

Falor said he has not talked to Hilton or her business partners and hasn't made a decision on the project's future.

"I'm trying to get all the facts together," he said. "I'm going to take the weekend."

HOTEL DISPUTES

If his venture with Nicky Hilton does end, it would mark the latest Falor partnership to turn contentious for the Chicago developer.

The Falor family's hotel management company faced litigation over management contracts for three South Florida hotels between 1999 and 2002. Falor also wound up in court over disputes with two real estate brokers he hired as well as his partner in the Nicky-O site.

The venture, converting the adjoining Breakwater and Edison hotels on the 900 block of Ocean Drive, already has faced stumbles.

Falor, a Chicago developer, missed the hotel's original opening date of New Year's Eve and seems to have pushed a second debut back from March to May.

The project's local sales director, Miami Beach broker Mark Zilbert, said he left the Nicky-O sometime last year. And Falor said sales halted completely five to seven months ago after he decided would-be buyers wanted to see more of a finished product. The project's website has been down for at least two weeks.

But Falor said Friday that the project was going well, and that he enjoyed a healthy relationship with Hilton and her team.

'NO TENSION'

"There's been no tension," he said. "Everything has been working fine."

Still, he seemed eager to distance himself from a celebrity he once touted as both the creative force behind the project and a marketing star.

"There's been some negative press on Nicky about the clothing line and the handbag line recently," he said. Women's Wear Daily has reported that Hilton's merchandise is not doing well, and Macy's dropped her Chick junior sportswear line. "Now there's this issue. We're evaluating -- and want to make the decision quickly -- whether this is something we want to be a part of."

Zilbert said demand was strong for the units, priced at $500,000 and up.

Miami Herald writer Bridget Carey contributed to this report.

-----

Copyright (c) 2007, The Miami Herald

Distributed by McClatchy-Tribune Business News. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. NYSE:FD,