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The Fontainebleau Miami Beach Has Nearly $65 million in Unpaid
 Contractor Bills a Year after the Resorts Grand Opening

By Douglas Hanks, The Miami HeraldMcClatchy-Tribune Regional News

August  27, 2009 - As the Fontainebleau Las Vegas battles creditors in a bankruptcy fight, its namesake, the Fontainebleau Miami Beach, faces claims of unpaid bills, too.

More than 30 construction companies, designers, installers and others hired for the $500 million renovation of South Florida's largest resort have filed court claims totaling nearly $65 million -- the result, they say, of bills still unpaid nine months after the 1,504-room oceanfront property reopened amid a global financial crisis.

The litigation adds to the pressure facing Jeffrey Soffer, the Aventura developer who launched both Fontainebleau projects at the height of the real estate boom. His lawyers are suing to force major banks to resume funding construction on the stalled Vegas Fontainebleau, while lenders say the 3,800-room tower on the Strip isn't worth enough to justify more construction dollars.

And while that fight unfolds in a Miami bankruptcy court, a parallel legal battle is underway mostly in Miami-Dade civil court.

Lawyers for Fontainebleau Miami Beach claim they are auditing contractors' bills, which has delayed paying off one of the biggest construction jobs ever seen on Miami Beach. Contractors accuse the Fontainebleau of stalling in the face of legitimate debts.

"I was working 12 hours a day. They wanted me to work 24 hours a day," said Walter Jordan Jr., whose Fort Lauderdale metalworks firm built the 7,000-bottle wine rack in the Fontainebleau's Gotham Steak restaurant. "If I could, I'd go there and unbolt it. It belongs to me. They didn't pay for it."

Fontainebleau executives declined to be interviewed about the contractors' court claims. But in the past, executives have said they've discovered contractors overcharging for work completed and negotiated bills down to much smaller sums.

REVENUE WINDFALL

The last two years brought a revenue windfall for the Miami Beach Fontainebleau, as buyers closed on condo-hotel units in its second condominium tower. An analysis by condovultures.com, a Bal Harbour brokerage specializing in distressed condos, shows 80 percent of the 286 units have been sold, though prices have dropped from $960 a foot to $405 a foot in a recent transaction.

Howard Karawan, Fontainebleau Resorts' chief restructuring officer, said the Miami Beach hotel has stayed busy despite the economic decline.

"In July, not traditionally one of the strongest months of the year, our occupancy was in excess of 70 percent and our rate over $200," Karawan said in an e-mail.

The Miami Beach Fontainebleau fights adds to a roster of big-budget South Florida resorts that began as a plum job for contractors, then finished amid internal squabbles.

"Normally I'd say that's unusual, but not in South Florida for some reason," Francis Nardozza, a Fort Lauderdale hotel developer and consultant, said of the Fontainebleau's contractor claims. He cited South Beach's Royal Palm and Hollywood's Westin Diplomat, both the subject of lengthy court fights between the hotels' developers and their contractors.

PLUMBER'S SUIT

Fred McGilvray Inc., a plumbing and HVAC installer in Doral, two weeks ago filed a federal suit against Fontainebleau Miami Beach and Bank of America, which funded the 1954 hotel's renovation.

The suit cites a $9 million unpaid bill for McGilvray's work at the hotel between April 2007 and May 2009. The suit asks a judge to order the Fontainebleau sold in order to pay off McGilvray's bill.

The Fontainebleau says it has been paying its bills. Jordan's Fort Lauderdale metal-working company, Lor Design, has received $1 million, but he says that's $300,000 short of the original fee he negotiated for the two-story wine rack, designer columns and other work on the hotel.

His firm is part of a suit involving 25 Fontainebleau contractors, who were joined into a single case at the hotel's request. Six other court cases involving contractor claims are not part of the suit.

But Jordan says the $300,000 he's suing for does not account for the substantial costs he fronted under orders by the Fontainebleau to finish the job in time for November's grand opening, which featured a televised Victoria's Secret fashion show.

At the time, Fontainebleau executives were frantic to get a city occupancy permit in time for the show. The hotel was supposed to open in the spring, but construction delays pushed the schedule to the brink, with the city permit coming two days before the lavish opening party.

Jordan said he took out a home-equity loan to pay overtime for his workers, which the Fontainebleau promised to reimburse in a frantic push to get the project ready. "In my contract, I needed three months to get the wine rack done," he said. "And I had six weeks to do it."

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Copyright (c) 2009, The Miami Herald

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