When the Fontainebleau wanted to celebrate the end of a $600 million renovation in the fall of 2008, the Miami Beach resort sent out invitations etched in glass, booked Mariah Carey for the ballroom and commissioned a Victorias Secret lingerie show starring Heidi Klum.
Behind the scenes, lenders were cutting off funds, and the hotel soon flirted with bankruptcy, according to a new lawsuit by the resort against its former architects.
The Fontainebleaus financial woes were hardly a secret in the months after new owner Jeffrey Soffer relaunched South Floridas largest resort after a two-year rehab. Contractors filed suit against the resort, claiming more than $70 million in unpaid bills and eventually settled for less than 50 cents on the dollar.
Soffer sold off half of the resort to investors from Dubai in the spring of 2008, when it was becoming clear the resort would not open in time. Soon, he was fending off creditors in Miami Beach and in Las Vegas, where a $3 billion sister Fontainebleau halted construction and eventually was liquidated in bankruptcy court.
But the lawsuit filed Thursday may be the first time that the Fontainebleau Miami Beach itself has detailed just how dire things got during the downturn.
Fontainebleau avoided bankruptcy by the narrowest of margins, resort lawyers wrote in the suit. Construction delays pushed a June opening into November, meaning the debut fell in the midst of a global financial crisis that began with the Sept. 15 collapse of the Lehman Brothers bank.
On top of the credit freeze, Soffer saw construction costs balloon by 50 percent as workers raced to finish in time for the nationally televised Victorias Secret show, the suit said.
The Fontainebleau should have reopened months before the economic crisis of 2008, the suit said. Because the Fontainebleau was not open and operating, the projects construction lenders began questioning the viability of the project ...
Fontainebleau executives blame the projects architect firm, Texas-based HKS, for submitting faulty drawings and other errors the resort said helped push a June opening date into November. Among the alleged mistakes: mishandling the Miami Beach historical boards approval of the 1954 hotels famous Stairway to Nowhere in the lobby and not accounting for environmental rules regarding oceanside lights and their impact on sea turtles.
An HKS lawyer declined to comment Wednesday afternoon, saying he had not yet seen the suit. The suit, filed in Miami-Dade Circuit Court, seeks unspecified damages against HKS and the consultants HKS brought in for the job. Soffers own Turnberry construction firm managed the project, which the suit said ended up costing 50 percent more than planned.
Alvin Lodish, a partner at Daniels Kashtan in Coral Gables and the Fontainebleaus lawyer, said the delays cost the Fontainebleau as much as $8 million a month in lost bookings and revenue. He also said lenders cutting off funds led to the unpaid bills for contractors, as the Fontainebleaus owners arranged for replacement dollars to finish the project.
We wouldnt have run into any of the issues when the financial crisis hit, he said.
Soffer and his familys development firm, Turnberry Associates, which owns the Aventura Mall, continue to face litigation that targets their ownership stakes in the Fontainebleau. But the Miami Beach resort itself appears to have righted its finances. Soffer reached a deal with his lenders in 2010 that forgave some debt but left the bulk of it intact, and earlier this year the Fontainebleau sold $580 million worth of corporate bonds to retire the original construction loan.

















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