1621-5 Royale Group •It was the closing of another chapter in a saga that has become one of
the most controversial on the resurging South Beach historic district. The
area has been targeted for a combination of urban renewal and historic
preservation. But preservationists have long derided Royale for allegedly
allowing the hotels to deteriorate, and were outraged when Royale tore down
the Senator.
For N.W. Residential Mortgage, the name under which FCA Mortgage
operates, the dealings with Pelullo and Royale were long and contentious.
Their efforts to foreclose were stymied by Royale's Chapter 11 bankruptcy
filing. In October, U.S. District Judge Sidney Weaver threw out the case after
Royale missed a third deadline for posting $1.1 million to demonstrate it had
the wherewithal to reorganize.
It appears N.W. Residential has lost dearly on the deal. Its $9.95
million bid on Monday gave it title to the properties, but the company's
mortgage is roughly four times that amount -- suggesting a startling drop in
value in the properties.
TAG: 9003170505
21 of 283, 6 Terms
mh ROYALE DEALT 10/06/1990
THE MIAMI HERALD
Copyright (c) 1990, The Miami Herald
DATE: Saturday, October 6, 1990 EDITION: FINAL
SECTION: BUSINESS PAGE: 1C LENGTH: 81 lines
ILLUSTRATION: photo: The CARLYLE HOTEL
SOURCE/CREDIT LINE: MICHAEL HUBER Herald Business Writer
ROYALE DEALT
A BLOW ON
DECO HOTELS
The Royale Group vows to hang on to its South Beach hotels despite the
dismissal this week of the bankruptcy cases that have been shielding the Art
Deco landmarks from foreclosure.
"It's not over till it's over, " Royale Group Chairman Leonard A. Pelullo
said Friday •
U.S. Bankruptcy Judge Sidney Weaver on Wednesday dismissed the Chapter 11
cases that had prevented Royale's lenders from fo rbcing the hotels to auction.
Weaver acted after Royale missed three deadlines for depositing $1.1 million
with the court to show that the company had the wherewithal to successfully
reorganize.
Attorneys for Royale's primary lender, FCA Mortgage Corp. , claimed
Weaver's decision as a victory Friday.
"We now will ask the special master to schedule the foreclosure auction,
probably for November," said Jim Silver, bankruptcy partner at the Miami law
firm Valdes-Fauli, Cobb, Petrey & Bischoff. "FCA definitely will be at the
auction to protect its interests."
Royale, too, could bid for the properties. It also could go back to
Weaver with the $1.1 million and ask for a rehearing. It already has an appeal
pending from an earlier ruling in one of the cases.
"Every time you think they're down for the third time, they float back up
to the surface," said Jose Fernandez, whose Jose Fernandez Investments Inc.
specializes in South Beach hotel deals.
Royale's attorneys repeatedly have succeeded at forestalling foreclosure
"
F---- !__, .
sales of the hotels.
The latest 11th-hour rescue came in February, when Royale huddled the
hotel subsidiaries under the protective cloak of the bankruptcy court three
days before a scheduled foreclosure auction. The parent company had entered
Chapter 11 in 1989.
South Beach preservationists were rejoicing Friday at the prospect that
oyale would lose the hotels.
"We are delighted that after so many years some of the key Deco
properties on Ocean Drive are finally to be released from Royale's control,"
said Richard Hoberman, chairman of the Miami Design Preservation League. "All
the properties, taken as a whole, could be a self-contained Deco village under
the proper management."
Preservationists are eager to be rid of Royale, which they say has
allowed the hotels to deteriorate. Royale first alienated the preservationists
in 1988, when it bulldozed the Senator Hotel to make way for a parking lot.
The Royale properties financed by FCA include five Ocean Drive hotels:
the Cardozo, Carlyle, Cavalier, Leslie and Victor. The other piece of the
package is a plot at the northeast corner of Collins Avenue and 12th Street.
That tract includes two boarded-up apartment buildings and the parking lot
that was the Senator site.
Weaver's decision also affects Royale's two other South Beach properties,
the Tides and the Oceanfront, whose mortgages are held by their previous
owners.
Starting in 1983, Royale Group borrowed $28.3 million to buy and renovate
i the hotels. With accumulated interest, the debt now totals $38 million.
The lender, FCA Mortgage Corp. , now does business as N.W. Residential
Management Corp. FCA was a subsidiary of a California thrift that federal
regulators seized in 1988.
Royale attorneys have said the hotels are worth as little as $7 million.
Brokers value the properties at $10 million to $18 million.
In either case, FCA is likely to lose big, said South Beach broker
Fernandez.
"Are they going to foreclose? The question is whether the lender is ready
to take a $20 million hit," Fernan said.
In an interview this summer, Pelullo had said that he would be focusing
his energies on reorganizing Roya saving the hotels. Pelullo said he had
been distracted for more than a year by his defense of wire fraud and
conspiracy charges.
A fedetral jury in August acquitted Pelullo, who had been accused of using •
part of a $1 million loan to pay a kickback to the president of an Ohio
thrift. The loan was intended to help finance the .renovation of the South
Beach hotels.
Pelullo entered a new legal battle this week when he filed a libel suit
against the New Jersey Commission of Investigation. A 1985 report by the
commission, "Organized Crime in Boxing, " described Pelullo as a "key organized
crime associate." Pelullo has repeatedly denied any links to the mob.
TAG: 9003070140
26 of 283, 6 Terms
mh ,DECO HOTELS NEAR FORECLOSURE 09/13/1989
THE MIAMI HERALD
Copyright (c) 1989, The Miami Herald
DATE: Wednesday, September 13, 1989 EDITION: FINAL
SECTION: BUSINESS PAGE: 4B LENGTH: 45 lines
ILLUSTRATION: photo: hotel Buildings on the auction block are (left
i
•
to right) Leslie and Carlyle and Cardozoand Cavalier (ART DECO
MIAMI BEACH)
SOURCE/CREDIT LINE: CHRISTOPHER BOYD Herald Real Estate Writer
DECO HOTELS NEAR FORECLOSURE
A California lender this week plans to ask a judge to order a foreclosure
auction of some of the best-known hotels in Miami Beach's Art Deco district.
FCA Mortgage Corp. is asking U.S. District Court in Miami to order the
auction of 10 hotels and apartment buildings controlled by the Royale Group.
The hotels include the Art Deco hotels the Carlyle, Cardozo, Victor, Cavalier,
Leslie, Tides and Molar. The other three properties are apartment buildings.
• A federal judge ruled last week that the lender, a subsidiary of New West
Federal Savings and Loan Association, could proceed with plans to foreclose on
the hotels. A Royale- controlled trust owns the hotels, which are between
Ocean Drive and Collins Avenue north of 10th Street.
"We are submitting a proposed foreclosure judgment this week and we guess
a foreclosure sale will be set for late October or early November, " said
William Crenshaw, FCA's attorney.
Royale's hotel subsidiaries borrowed $28.3 million to
purchase and renovate the hotels in the early 1980s. Crenshaw said unpaid
interest has increased the debt to $35 million.
FCA first filed foreclosure proceedings against Royale in 1985. That led
to an agreement that the hotels would be converted into a single resort
complex.
In May 1988, the lender reopened the case, claiming Royale failed to pay
taxes and liens filed on the properties. Last month, Royale filed to
reorganize under Chapter 11 of the U.S. Bankruptcy Code.
Barry Richard, attorney for Royale, said he hasn't decided on a response
to the court ruling, which essentially removes all obstacles to a foreclosure
sale.
Leonard Pelullo, Royale's president, was unavailable for comment
Tuesday.
Pelullo is facing personal legal problems. In June, federal
prosecutors in Ohio indicted him on conspiracy and wire fraud charges for
allegedly misappropriating funds from an Ohio savings and loan association.
The charges claim that Pelullo used part of a $1 million loan as a
kickback tq the S&L's president. The loan was made for renovation of the Miami •
Beach hotels.
TAG: 8903050252
39 of 283, 2 Terms
mh ROYALE GROUP SAYS 01/10/1988
THE MIAMI HERALD
Copyright (c) 1988, The Miami Herald
DATE: Sunday, January 10, 1988 EDITION: FINAL
SECTION: NEIGHBORS MB , PAGE: 7 LENGTH: 51 lines
SOURCE/CREDIT LINE: STEPHEN SMITH Herald Staff Writer
ROYALE GROUP SAYS
IT'LL PAY TAX IT OWES,
TELLS CITY TO BE PATIENT
The Royale Group, an attorney for the hotel developer said, will make good
on its hefty resort tax tab to Miami Beach.
Probably later than sooner.
"The city can lean on them and kill the goose that laid the golden egg, "
said Dennis Richard, attorney for the various companies known collectively as
Royale Group. "They have to pay sooner or later, there's no question about
that.
"But the city is tending to be realistic about it."
Actually, the city is tending to become impatient about it. Royale, owner
of seven South Beach hotels, owes more in back resort taxes than any other
Beach business.
It has passed on to the city just $5, 000 of the $33, 500 it collected in
resort taxes during the first 11 months of 1987.
City Manager Rob Parkins said he plans to meet this week with Royale
executives.
"Tt's not their money, " Parkins said. "It is a resort tax that belongs
really to the citizens of Miami Beach. Our basic position right now is, there
is $28,500-plus-plus that belongs to the citizens of Miami Beach, Metro-Dade
County."
Royale executives understand all of that, attorney Richard said. In
Royale's first public statement about its tax tab, Richard said Royale ran
into problems finishing the renovation of the Cardozo Hotel, which opened late
last year.
Give Royale time, Richard said. Be patient. Have faith.
"Fortunately for the city and for the people who live in the city, these
people are survivors, " Richard said. "The Art Deco Hotels group is doing its
best toP
et these hotels open and functioning so that enough of them are
9
generating enough income to take care of these things."
"These things" being resort taxes and mortgages. Last week was a bad week
for South Beach developers, with word of a triple whammy.
A mortgage holder sued to foreclose on Royale for not making loan
payments on the Tides Hotel. Richard said Royale might have been late with
payments, but made the payments.
A hotel owned by Tony Goldman was sold in a court-ordered auction. A
partnership headed by Gerry Sanchez that owns Espanola Way buildings filed for
protection from creditors in U.S. Bankruptcy Court.
Nobody appears to be panicking. Royale's renovated hotels are open,
serving food and drink. And plans go on to renovate the shuttered inns.
The city, for its part, wants the tax money.
Said Robert Nachlinger, city finance director: "I just wish they'd pay."
TAG: 8801030343
Press [RETURN] to continue or type q to return to Menu:
mh A LOT AT STAKE 12/06/1987
THE MIAMI HERALD
Copyright (c) 1987, The Miami Herald
DATE: Sunday, December 6, 1987 EDITION: FINAL
SECTION: NEIGHBORS MB PAGE: 28 LENGTH: 52 lines
SOURCE/CREDIT LINE: RICK HIRSCH Herald Staff Writer
MEMO: OPINION
A LOT AT STAKE
AS THE TOURISTS
START ARRIVING
The tourists are coming, the tourists are coming. Is the Beaches area
0
ready?
Let us pray. As the season dawns in Miami Beach, there is cause for
optimism and concern -- and a lot at stake.
Renovations continue in the Art Deco District, from hotels merely getting
new paint to places undergoing complete make- overs.
In the small Deco properties near the Miami Beach Convention Center and
the Bass Museum, there is fresh paint, new furniture, new restaurants.
In Middle Beach, a group of once majestic properties is getting major
cash infusions, probably the most significant positive sign in the Beaches
area.
Even Sunny Isles, dormant in recent years, is enjoying rejuvenation. The
Newport Hotel, once the pride of Motel Row, is being redone under the banner
of Holiday Inn. Smaller hotels are renovating.
To top it off, tourism experts are forecasting a bustling season. Ocean
Drive developer Gerry Sanchez says with typical overstatement that he expects
so much business he'll be throwing people out of rooms.
The dark side? There is growing evidence that some Deco pioneers have
spread themselves too thin. Complaints of bounced paychecks from employees of
Royale Group properties are unsettling; the fact the Deco chain is $28,000
behind in city resort tax payments is more disturbing.
A failure at the biggest network of restored rooms and restaurants won't
play well to the loan committees reviewing other proposed Art Deco projects.
There could be a slight silver lining: The Senator Hotel might survive
for a good while after its city-imposed stay of execution expires in February.
But the Senator would only gain company in the world of shuttered historic
properties.
Delays in the opening of Ocean Drive properties -- Tony Goldman's Park
Central and Imperial and the restaurants and
clubs planned within -- also test the nerves of Ocean Drive optimists.
Goldman is wise not to open until he is ready, but opening dates that
keep dropping back don't build community confidence.
Forgetting all that, you have to wonder if the area, Ocean Drive in
particular, is prepared to handle big crowds when they arrive in the next
month. Sanchez is talking about major tour groups from Europe. If they get a
major dose of sorry Ocean Drive service -- I think every permanent resident
has experienced it even when establishments are empty -- will those groups
ever come back?
Cross .your fingers. Say a prayer. Smile at tourists -- and be patient in
restaurants.
TAG: 8704010651
120 of 283, 2 Terms
mh LAWSUITS, FINANCIAL WOES PLAGUE ROYALE 10/06/1987
THE MIAMI HERALD
Copyright (c) 1987, The Miami Herald
DATE: Tuesday, October 6, 1987 EDITION: FINAL
SECTION: BUSINESS PAGE: 5B LENGTH: 52 lines
SOURCE/CREDIT LINE: GREGG FIELDS Herald Business Writer
LAWSUITS, FINANCIAL WOES PLAGUE ROYALE
Royale Group Ltd., one of the leading landlords in Miami Beach's Art Deco
district, has lost $26.73 million in the last three years and its future is
seriously jeopardized by its
financial problems, according to a filing with the Securities and Exchange
Commission. .
In the filing, Royale also said it faces numerous lawsuits over its
business dealings in Florida and elsewhere, the Internal Revenue Service is
demanding hundreds of thousands of
dollars in back taxes, and the company's net worth is now a negative $511,000.
Company officials refused to comment.
It wasn't clear from the report how Royale's problems might affect its
efforts to revitalize numerous properties in the South Beach area.
However, the company said litigation with a construction lender -- one of
many lawsuits Royale faces -- "significantly delayed" its renovation schedule
last year. Construction has since resumed.
Serious questions remain about the company's future, according to
Bergman and Kane, the company's outside auditors. Bergman and Kane became
Royale's auditor after two other large firms -- Coopers & Lybrand and Touche
Ross -- quit in disputes.
• Royale's "ability to continue as a going concern is dependent on its
ability to achieve profitable operations . . . and to obtain additional
financing or refinancing for its future operating needs," Bergman and Kane
says in the report. In addition, the ultimate liability of the mountain of
litigation facing Royale "cannot be reasonably estimated, " the auditor's
statement said.
Royale has been heavily involved in South Beach real estate since .1983.
That year, subsidiaries of the company purchased six hotels and an apartment
building in the Art Deco district. The company's subsidiaries have purchased
several properties since.
Three of the company's hotels -- the Carlyle, the Leslie and the Cavalier
-- are operating. The Cardozo is scheduled to reopen soon and the Victor is
scheduled to open in 1988. Royale has said it wants to tear down the Senator
hotel to increase area parking.
Royale's isn't the only South Beach developer to face
financial problems. South Pointe Towers, a luxury high-rise condominium being
developed on the southern tip of Miami Beach,
went into foreclosure earlier this year and was later rescued by a consortium
of lenders. Stuart Rogel, economic and community development director for
Miami Beach, said he believes the redevelopment efforts of South Beach will
continue despite Royale's problems.
"Development activity on South Point is gaining momentum, " he said. "When .
one group has fallen by the wayside new people have come in to take their
place."
TAG: 8703160415
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