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Rise and Fall of South Florida's Last Five-star Hotel;
Recession, Foreclosure Shutter Grand Bay

By Douglas Hanks, The Miami HeraldMcClatchy-Tribune Regional News

April 3, 2010 --Pigeons live in the barren penthouse nightclub of the former Grand Bay, South Florida's last five-star hotel.

A vagrant recently went to the bathroom in the vacant lobby, where black graffiti colors the walls. The dining room hints of smoke, the remnant of a campfire built on the polished cherry floors.

No local hotel has suffered as steep a fall as Coconut Grove's Grand Bay, which closed two years ago for a $20 million renovation and never reopened.

Now the subject of a protracted foreclosure fight, the boarded-up hotel offers no hint -- inside or out -- that it once epitomized the lavish and libertine Miami of the 1980s.

"It was hot. It was the place," said David Feder, general manager of the Turnberry Isle resort in Aventura and a long-time hotelier in South Florida.

"If you were thinking luxury in Miami, you thought the Grand Bay Hotel."

Michael Jackson and his entourage occupied two floors during their stay in 1984 before the late singer's Orange Bowl concert. Liberace requested a Baby Grand piano for his suite.

On the ground floor sat the Grand Cafe, where the French chef served Everglades frog legs with sheep's cheese polenta. Waiters offered guests white gloves with newspapers to prevent soiled fingers.

Thirteen stories up, the elite partied in Regine's, a nightclub said to sell more champagne than any other establishment in the United States.

"We had our Eden Roc and we had our Fontainebleau," Stuart Blumberg, the former president of the Greater Miami and the Beaches Hotel Association, said of the region's leading resorts from the 1950s. "But we hadn't seen a hotel like the Grand Bay before."

In 1987 the Grand Bay was the only hotel south of Palm Beach to win a coveted fifth star from Mobil travel inspectors -- a feat that hasn't been repeated since.

Now the hotel faces official condemnation. In December, the city of Miami ordered the pyramid-shaped building demolished if the owners won't fix it.

It's the latest wrinkle in a legal saga that could last months, if not years.

A court-ordered receiver now oversees the hotel as the owner and lender fight over responsibility for the property's demise.

"It's a shame," said Sherwood Weiser, the hotel developer who opened the Grand Bay in 1983 with partner, Donald Lefton.

His office sits a short walk from the hotel, but Weiser keeps his distance from the property he and Lefton sold in 1997 to a hotel conglomerate that would soon become Wyndham International.

"I have no interest in going there," Weiser said. "I really don't want to go through it."

How did things go so wrong?

Like many suffering buildings throughout South Florida, the Grand Bay fell victim to an ill-timed real estate venture.

Mobil downgraded the hotel to four stars in 1999 after it become the Wyndham Grand Bay, then to three stars in 2001.

As the Grand Bay lost its luster, a wave of new luxury hotels were pursuing South Florida's wealthiest travelers. A Ritz-Carlton opened a block away in 2002, joined by a Four Seasons nearby on Miami's Brickell Avenue.

In 2005 the Merco Group, part of the sprawling real estate empire built by the Meruelo family, paid $25 million for the Grand Bay at 2669 S. Bayshore Drive.

Backed by prominent Cuban-American developer Homero Meruelo and his eldest son, Homero Jr., Merco had bold ambitions for the Grand Bay.

The Meruelos planned to spend $20 million refurbishing the 1982 property. Though it ceded the "Grand Bay" name to Wyndham, Merco set out to bring in a glitzier hotel brand and transform the hotel into a more stylish version of itself.

On the list of contenders, according to Merco Group financial chief Antonio Castro: W and Waldorf-Astoria -- as well as Playboy, Nikki Beach and Opium, then one of South Beach's top nightclubs (it has since moved to the Seminole Hard Rock casino in Hollywood).

The project was so massive that Merco needed to shut down the hotel. The doors closed in April 2008, with plans to reopen in December.

Merco estimated it needed $20 million for the project.

Caixa Galicia, a Spanish bank, loaned it $10 million for construction with an alleged promise of another $10 million once final permission was granted by headquarters.

Despite not having a signed agreement for more funding, Merco began construction as the summer of 2008 began.

"If we knew we only had $10 million and our budget was $20 million, we never would have shut down the hotel," said Castro, Merco Group's chief financial officer. "That was suicide."

As construction began, there were signs of a global credit crisis that rocked world economies in the fall.

By September, according to a Merco suit against the Spanish bank, Caixa cut off construction funds.

In its own suit against Merco, Caixa accuses the developer of defaulting on the mortgage once monthly loan payments halted in March 2009.

Gary Carman, a Miami lawyer representing Caixa, did not respond to interview requests. The dueling lawsuits in Miami-Dade Circuit Court are moving ahead without signs of a compromise. "This has turned into an emotional battle," Castro said.

Castro said investors have approached Merco about buying the hotel for a deep discount, but the court fight makes a deal nearly impossible to close. Blumberg, the former hotel-group president, notes the Eden Roc was closed during hard times in the 1970s. He thinks the Grand Bay could enjoy a similar comeback.

"It's not unheard of for a hotel of that magnitude to shut down and reopen again," he said. "There's light at the end of the tunnel."

Each side blames the other for the Grand Bay's deteriorating condition.

Construction got far enough along that workers ripped out the air conditioning system, and the leaky windows and musty interior blackened the walls with mold.

The ground floors became favorite havens for the homeless during Miami's frigid winter, who routinely burned spare lumber inside to keep warm.

Birds continue to fly in and out of holes cut into exterior walls, openings used to ventilate the building after a mold outbreak.

"Every time I walk in the lobby, it just kills me. It breaks my heart," said Mark Alvarez, the last general manager of the Grand Bay who still works for Merco.

"Some homeless person, again, has broken into the building within the last 24 hours," he continued, pausing during a recent tour of the hotel's darkened kitchen.

"There are a couple of beer bottles that weren't there before," he said. "A couple of water bottles. Somebody defecated in the building, by the lobby."

Alvarez had hoped to preside over the Grand Bay's second rise to the top of Miami's lodging industry. His voice catches as he describes the hotel's current circumstances.

"You're destroying an icon of Miami," he said.

"This is not a dilapidated building. This is the Grand Bay."

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To see more of The Miami Herald or to subscribe to the newspaper, go to http://www.herald.com.

Copyright (c) 2010, The Miami Herald

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