|By Douglas Hanks, The Miami
HeraldMcClatchy-Tribune Regional News
Oct. 29, 2007 - The saga of Nicky Hilton's would-be South Beach hotel continues, with its bankrupt owners set to auction off the Ocean Drive property under court order.
After a failed condo conversion, the combined Breakwater and Edison property will be sold to the highest bidder under the supervision of a federal bankruptcy judge. Construction has stopped midway through completion of a rooftop penthouse, and a lawyer close to the case expects debts to far exceed what the hotel can command on the real estate market.
"It's such an awesome piece of property," said Michael Ehrenstein, a lawyer for co-owner Jonas Mimoun. "But it's been so thoroughly mismanaged."
The bankruptcy-court auction marks a dramatic turn of events for a property that only a year ago won favorable mentions by David Letterman and from writers in People and Vanity Fair magazines.
Hilton -- a 24-year-old socialite with a fashion accessories line and a famous older sister, Paris -- signed a licensing deal with developer Robert Falor to brand the two properties the Nicky O. She was promoted as the guiding force in designing the condo-hotel, and her tabloid cachet brought waves of publicity to the project.
But the partnership dissolved into litigation, just one in a string of disputes involving Falor's once formidable portfolio of condo-hotel projects. He ceded control at South Beach's Royal Palm hotel earlier this year amid a dispute with a partner there, and also faced litigation linked to conversions at Coconut Grove's Mayfair Hotel.
Construction stopped at the Breakwater and Edison this summer; Miami Beach declared the tarp-draped hotel at 940 Ocean Dr. abandoned on Sept. 17 and issued a stop-work order at the construction site.
Mimoun sued Falor in 2005, alleging violations of their partnership agreement, which gave Falor authority to run the hotel and supervise its conversion to a condo-hotel. The suit is still making its way through Miami-Dade Circuit Court.
Falor did not immediately return a phone message left on his cellphone Monday morning. Entities controlled by Falor and Mimoun filed for bankruptcy protection earlier this year.
Ehrenstein, a lawyer for Mimoun, said the $60 million in mortgage and penalty interest sought by lenders is more than the parties expect to get for the 95-room hotel complex.
Though an auction is set for Nov. 19, Jones Lang LaSalle Hotels has been hired to find a "stalking horse" buyer ahead of time to buy the property. Bidders then would have to beat that buyer's price.
Jones Lang LaSalle has not set a price for the hotel, but broker Christian Charre said interest has been high. Though construction crews have already done about $5 million in work converting the rooms into condominium units, Charre expects a buyer would probably opt just to operate the property as a traditional hotel.
"It's an A-location in South Beach," Charre said. "You can't replace that."
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