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At least $165,000 Later, Coral Gables Commissioners and Biltmore Hotel Owners
Rent Dispute Remains Unresolved

By Tania Valdemoro Longest, The Miami HeraldMcClatchy-Tribune Regional News

July 29, 2011--Six months after Coral Gables commissioners received an oral report from consultants and attorneys on the business plan and operations of the Biltmore Hotel, they have not resolved the rent dispute between the city and Seaway Corp., the company that operates the historic, city-owned property.

So far this year, Coral Gables has paid $45,238 in fees to lawyers at Akerman Senterfitt and $24,979 in fees to consultants at PriceWaterhouseCoopers, records show. That's on top of the $97,025 the city paid last year to the consulting firm for its work.

There has been no written report produced from the consultants -- and they may not ever publish one.

And commissioners say they don't know the status of negotiations between the city and Seaway.

Both sides are discussing whether to revise the terms of the hotel's 99-year lease with the city and what to do about the $5.5 million that the city says the Biltmore owes for rent and golf management fees. Seaway stopped paying its rent -- 3.5 percent of the hotel's gross revenues -- in April 2009.

The Biltmore contends that money it has paid since its 1992 lease with the city should be credited for restoration and maintenance of the historic 1926 landmark. City officials disagree.

"Things have not gotten better," said Commissioner Ralph Cabrera, who has publicly asked the city manager for updates twice in recent months. "We have not been paid and we are spending a great deal of money."

City Manager Patrick Salerno has only replied that negotiations are ongoing.

Cabrera said the nature of the negotiations has left him and his colleagues in an awkward position.

"While there may be potential litigation or not, it's uncomfortable as a government not to talk about this relationship with Seaway," Cabrera said.

Mayor Jim Cason, who criticized the city administration for not releasing the PWC report when he was running for mayor this spring, backtracked on his earlier position.

"After I got elected, I found out there was no written report. I was wrong," Cason said.

As for residents' criticism that the negotiation process lacked transparency and is getting expensive, the mayor said, "I think the important thing is the result. We have competent people negotiating with The Biltmore. We have to wait and see. Afterwards, people can say whether or not the money was well spent."

Commissioner Frank Quesada agreed with the mayor on the value of hiring experts.

"Of course I wish this was money we didn't have to spend," he said. "But we are not experts in hotels or experts in these types of contracts. We can't renegotiate a contract without the help of experts."

Commissioner Maria Anderson said she thinks it was wise not to publish a report by the consultants.

"It could be challenged under the escrow agreement we have with the Biltmore. I'd leave it as a verbal summary so the city can negotiate and strategize," she said.

The agreement says when PWC or the city is ready to issue a report, The Biltmore can review all the records and the report to see whether or not any of the hotel's trade secrets have been revealed. If there is proprietary information in the report, Seaway can mark that up and prevent its disclosure.

Vice Mayor William "Bill" Kerdyk Jr. could not be reached for comment. In the past, he has called for the city to publish the analysis done by PWC. Like the rest of the commission, Kerdyk has said Seaway must repay the rent and golf management fees.

Salerno, who has been leading the Biltmore negotiations for the city, declined to answer written questions and referred all the queries to City Attorney Craig Leen.

"My understanding is we have not hired PWC to produce an audit," Leen said.

The city attorney said the fees paid to outside lawyers such Akerman and Reeder Glass, an attorney with Holland & Knight who has spent years dealing with the Biltmore lease, "is reasonable in light of what is at stake." Invoices for Glass' work were not immediately available last week.

Leen added that it is customary that settlement discussions between Coral Gables and Seaway remain confidential.

But until the commission formally votes on an outcome -- several are possible, such as approving a new lease and repayment plan with Seaway, declaring Seaway in default of the lease and looking for a new hotel operator, or turning to the courts to resolve the impasse -- the $5.5 million in unpaid rent and golf management fees will continue to be a drag on the city's budget.

Cabrera pointed to the fact that Seaway will owe $1.91 million in rent and golf management fees for the new budget year that starts Oct. 1.

In a small footnote, the city budget stated, "If this is not resolved, the city will have to find additional sources of revenue or have further reductions in personnel/operating costs."

Earlier this month, Salerno said that Coral Gables may have to dip into its reserves, which stand at $6.5 million, to make up that shortfall.


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