Miami-based developer R. Donahue Peebles has overcome an impasse in negotiations with the Broward County Commission. He verbally agreed to terms that propose the development of an $81-million, four-star hotel on a county-owned site in Downtown Fort Lauderdale, 26 miles north of Miami.

Agreeing to invest $2.35 million in personal funds, Peebles has received a tentative commitment from Anaheim, CA-based Fremont Investment & Loan Co. to provide $52.65 million in financing. A ground-breaking date hasn't been set.

Offering Peebles a concession on an early position, the commission voted 6-2 on Mar. 27 to appropriate $11 million in public subsidies to back the proposed 200-room to 300-room convention hotel project. Peebles must repay the entire amount, however, if he decides to sell his estimated 60% controlling interest any time within five years of the day the hotel opens for business.

The county's contribution complements a management agreement Peebles recently negotiated with Dallas-based Wyndham International Inc. to manage the proposed hotel. In exchange for a 40% interest, Wyndham tentatively agreed to invest $15 million in the project and possibly another $10 million in contingency funding for any cost over-runs.

Nearly three years in the making, the proposed hotel deal nearly collapsed when Peebles and the county reached a standstill in January over their differences, including the county's refusal then to grant any subsidies. County commissioners then retained Strategic Advisory Group to explore possible alternatives.

The Pittsburgh-based consulting firm advised the county it could withdraw its support for the Peebles project, subsidize the project at an estimated cost of $8 million to $11 million or take advantage of Internal Revenue Services rules that would allow the county to develop the hotel.

In the meantime, the project general contractor, Miami-based Miller & Solomon General Contractors Inc., raised the estimated hotel construction budget to $81 million from a figure estimated at $75 million. The contractor attributed the $6 million increase to contingency costs.

The hard construction cost estimate would be $405,000 per room on 200 rooms and $270,000 per room on 300 rooms.

Hospitality industry estimators tell GlobeSt.com that luxury hotels being built at $250,000 per room or more today must ask average daily room rates of $200-plus and keep the hotel at almost 100% occupancy seven days a week just to break even on the construction cost.

In a concession to the county, Peebles verbally agreed to hold the county harmless and relinquish his control over the convention center lease if he fails to meet certain performance guidelines. That performance will be written into a contract he is expected to sign when it is completed sometime over the next couple of months.

The county also agreed to the new terms, despite concerns the consulting group issued in a Mar. 26 memorandum.

"Neither Fremont nor Wyndham has completed enough due diligence to make a realistic commitment to the project," according to the consultant's memo. "Accordingly, there is significant risk that upon completion of due diligence one or both will not make the capital contributions under the proposal."

Instant Insights /

Developer, County Break Stalemate on $81-Mil Convention Hotel

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