May 5, 2007--Robert Falor, whose acquisition of the Royal Palm hotel three years ago cemented his status as the leader in South Florida's condo-hotel conversion trend, has surrendered management of the property.

Falor said his departure from the South Beach hotel signals the beginning of the end of his stormy tenure in South Florida real estate. His other South Beach project, the Breakwater and Edison hotels, are in bankruptcy. Falor said both hotels, along with a South Florida property where he owns a small stake, Islamorada's Cheeca Lodge, are for sale.

"For me, it made sense to move on," the Chicago developer said.

Falor's departure from the Royal Palm was first announced in a court hearing Friday for a lawsuit developer R. Donahue Peebles filed against Royal Palm owners claiming gross mismanagement by Falor. Majority owner Guy Mitchell said Falor was removed as manager in March.

Peebles, who retained a 12 percent stake in the Royal Palm after selling the property to Falor and Mitchell in 2004, claims the hotel has defaulted on about $137 million in loans and lost $10 million last year. He wants the Miami-Dade Circuit Court to transfer management of the hotel to his company and order Mitchell and Falor to turn over financial documents Peebles claims he's entitled to see.

Judge Gill Freeman on Friday ordered the two sides to try and mediate the dispute before returning to court Thursday for another hearing.

The suit revealed a rift among the owners of one of Miami Beach's largest hotels. At one point, Freeman ordered Mitchell to sit in the corner of the courtroom for muttering commentary during Peebles' testimony.

Mitchell's lawyer Judson Cohen disputed Peebles' description of the Royal Palm as a troubled hotel, noting Peebles also had loan difficulties while he owned it.

With revenues up and operations doing "extremely well," Cohen warned that Peebles' litigation threatened to ruin the hotel. If Peebles succeeded in having the court take over the Royal Palm -- which Peebles requested if he couldn't run the hotel himself -- it would trigger a "calamity" with lenders, Cohen said.

On Friday, Falor said he made money with his South Florida deals -- including conversions at the Tides in South Beach and the Mayfair in Coconut Grove, which both resulted in litigation before being sold.

"There's no market for condo-hotels right now," he said. "We took advantage of what drove the highest values at the time."

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Copyright (c) 2007, The Miami Herald

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