A settlement between the Hilton Fort Lauderdale Airport and Broward County bridged a huge gap between what the county wanted to pay for the 388-room hotel initially and what the owner wanted for it.
The County Commission on Tuesday approved a $62 million deal that was far from the $46.3 million the county initially offered to the Blackstone Group LP affiliate for the Dania Beach property in 2011.
The settlement price also was far from the $78 million the owner, Ft Lauderdale Owners LLC, estimated the hotel was worth based on its income and investors’ voracious appetite for South Florida hotels, said Miami attorney Mark Tobin, lead counsel for the owner.
The county needs the land beneath the 27-year-old hotel as part of the runway expansion at Fort Lauderdale-Hollywood International Airport. In February 2012, the commission passed a resolution approving the acquisition of the hotel northeast of I-95 and Griffin Road near the southwest corner of the airport.
But negotiations with the hotel owner, an affiliate of New York-based real estate holding company, stretched out.
"My client had no interest in selling the property," Tobin said. "Really, they preferred not to sell the property."
The county boosted its offer to $49.8 million, but the owner rejected it again, said Tobin, a shareholder with Akerman Senterfitt in Miami.
County documents showed the county commissioned an appraisal in 2012 that placed the value of the hotel at $43.6 million to $52.1 million. Blackstone bought it for $25.93 million in 2004.
In December 2012, the county filed an eminent domain petition in Broward Circuit Court, trying to force the turnover at $49.8 million.
"The overall goal was to get what is fair and reasonable value for the property, and we felt the original offer didn’t represent fair and reasonable value," said Miami attorney Mark Emanuele, co-counsel for the hotel owner.
Tobin said the job of the legal team was to maximize the price paid for the hotel to the benefit of the public employee pension funds that co-own the property with Blackstone.
Emanuele, a partner with Lydecker Diaz in Miami, said other issues needed to be resolved, notably the number of acres the county should take out of the 11-acre property. The owner claimed the county needed only nine acres for airport expansion, so it should only take that much, Emanuele said.
"Ultimately the case was resolved with them acquiring the whole parcel," he said.
The price discrepancy was resolved May 2 during a court-mandated mediation session that lasted 15 hours, wrapping up at 11 p.m., Tobin added. The mediator was St. Petersburg attorney James A Helinger Jr., a member of The Florida Bar’s eminent domain committee.
The hotel’s attorneys gave the county new information about the property and its value before mediation.
"That was what allowed us to bridge the gap that was pretty wide initially," Emanuele said.
The parties agreed to trade the property for $62 million including legal and professional fees. The fees could be in the millions of dollars.
"Statutorily, we would be entitled to seek in excess of $2 million, but no final resolution has been agreed to," Emanuele said.
Assistant County Attorney Tony Rodriguez, who led the county’s negotiations, declined to comment.
"Since this case remains pending, we are unable to discuss this matter at this point," he said. "We anticipate the court entering an order in this case within 45 days."
Hospitality consultant Frank Nardozza said it is hard to determine whether the county overpaid for the hotel. There have been few comparable transactions to accurately estimate the fair value, said Nardozza, chairman and CEO of REH Capital Partners LLC, a national real estate and hospitality investment and advisory services firm in Fort Lauderdale. He was not involved in the negotiations. He described the property as a "suburban airport, kind of upper upscale full-service hotel."
Similar hotels have traded for "$85,000 a key to as much as $185,000 a key," he added.
The Hilton traded at about $60 million excluding fees. That means the county paid about $155,000 a room.
The settlement also includes nonmonetary terms. For example, the hotel will be allowed to remain on the property until March 2014, giving hotel employees time to find new jobs, Emanuele added.
The county plans to demolish the hotel’s parking garage in November and allow hotel staff and guests to park on county-owned land next to the property. The hotel would be vacated in March.
The next step is for both sides to ask the court to enter an agreed order of taking and stipulated final judgment including the settlement terms.
"Upon approval by the court and deposit of the agreed full compensation into a court registry, title to the property will immediately transfer to Broward County," according to county documents.