|By Tania Valdemoro Longest, The Miami
HeraldMcClatchy-Tribune Regional News
Oct. 26, 2011--Coral Gables officials and the operator of the city-owned Biltmore Hotel decided Tuesday to continue negotiating toward a deal for the hotel to repay $5.5 million in back rent and golf fees owed to taxpayers. But the talks may not go on much longer.
The City Commission gave Seaway Corp. two more weeks to resolve its differences with the city before commissioners declare the company in default of its lease and start taking steps toward putting a new management firm in place at the 1926 historic landmark.
At least three commission members -- Mayor Jim Cason and Commissioners Maria Anderson and Frank Quesada -- were poised to declare Seaway in default.
But instead, City Attorney Craig Leen and Biltmore attorneys Daniel Ponce and Howard Berlin will continue talks until Nov. 8. The main sticking point remains: how much, if anything, taxpayers should spend for the rehabilitation and restoration of the iconic hotel.
At issue: how much rent Seaway should pay in light of the economic downturn and high maintenance costs at the Biltmore. Seaway has argued that Coral Gables needs to reinvest the $17.5 million in rent it has received since 1992 into the federal landmark. Over that time, the company says it has spent more than $60 million in capital improvements and another $40 million to repair and maintain it.
If no final deal is reached, Leen may issue a notice of default. Seaway would have 10 days to repay $5.5 million. If it does not, Great American Life, which owns the mortgage on the property, would have another 10 days to make the city whole. Otherwise, Coral Gables can terminate the hotel lease and evict Seaway. The hotel could close, but Leen said the city would do everything in its power to keep it open.
Gene Prescott, the president of Seaway, said he believes the situation will not reach that point. He pointed out the commission did not declare default Tuesday but instead called for more talks.
"I'm confident we will get a satisfactory conclusion that will fulfill the goal of the city and Seaway. They are using default as a motivation for us to move quickly," Prescott said.
Mayor Cason agreed.
"It seems to me the closer we get to issuing a default, the more progress we are making," he said.
Vice Mayor William "Bill" Kerdyk Jr. supported more time. "When you declare default, all hell breaks loose. It changes the whole perspective and affects the business coming in and the business that might come in," he said.
But Commissioner Quesada was fed up with the new extension. He said mediation had not worked and both sides began settlement talks again Monday night.
"I don't want this to go past today," he said. "I don't like the way this has played out. Why do we want to move forward with Seaway if this may happen again in the future?" he asked.
There is a lot at stake for both sides. Coral Gables receives 3.5 percent of the hotel's gross revenues -- which works out to between $1.2 and $1.6 million a year. That amount includes $600,000 in base rent. This year, the city is counting on $1.91 million from the Biltmore to balance its budget.
Seaway says the economic impact of the Biltmore exceeds $110 million a year. The hotel generates more than $16 million in federal, state and local tax revenues. It employs more than 600 people directly and 370 others indirectly.
The company has agreed to pay the outstanding hotel rent -- $100,000 each quarter starting in July 2012 -- as well as $650,000 in delinquent golf fees. It would repay the hotel's base rent of $800,000 a year starting on Jan. 1, 2012. It would also pay $160,000 a year for golf fees.
The major issue is figuring out how much of the hotel rent should be spent on rehabilitation and restoration costs. The city says Seaway is solely responsible for the expense, while Seaway maintains that Coral Gables is obligated to reinvest the rent into the property.
In its latest proposal, Seaway wants the city to earmark all rent above a base amount to cover costs associated with preserving the building. The Biltmore would pledge an equal amount.
The matching would last for up to 65 more years -- the time remaining on the hotel lease.
Commissioners balked at such a large rent cut. Instead, they supported Leen's suggestion: that commissioners decide each year how much of the rent money should be spent on those costs.
"Under their proposal, 10, 20 or 50 years from now, the city would be bound and still have to use taxpayer dollars to match," he said. "That's the concern."
(c)2011 The Miami Herald
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