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'Unstoppable Momentum' Sees Baha Mar Locate Mondrian Replacement

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar yesterday said its rapid replacement of the Mondrian brand with SLS Hotels provided evidence of “the unstoppable momentum” behind the $2.6 billion project.

Robert Sands, Baha Mar’s senior vice-president of external and government affairs, told Tribune Business that the 20-year management agreement signed with SLS Hotels, a division of hospitality company sbe, “highlights Baha Mar’s appeal as a world class resort and gaming destination”.

He confirmed that SLS Hotels was effectively a ‘like-for-like’ replacement for Mondrian as Baha Mar’s lifestyle hotel brand, adding that it was an equivalent “five-star luxury operator”.

An opening appeared in Baha Mar’s hotel portfolio after a dispute erupted with Mondrian’s operator, Morgans Hotel Management Group, that resulted in the latter terminating their 20-year hotel management agreement.

The speed with which Baha Mar found a replacement indicates that, anticipating problems, the Cable Beach developer had already made moves to line up SLS Hotels or another operator prior to Morgans’ May 25, 2014, agreement termination.

Mr Sands told Tribune Business yesterday that the management agreement termination meant that the dispute between Baha Mar and Morgans was “largely resolved”, with both sides working together on the remaining issues.

He added that the contracts signed by purchasers of condo residences in the former Mondrian remained “valid”, with the property also set to benefit from SLS’s expertise in real estate.

“SLS’s participation at Baha Mar highlights Baha Mar’s appeal as a world-class resort and gaming destination, and highlights Baha Mar’s unstoppable momentum above all,” Mr Sands told Tribune Business.

This newspaper had previously revealed how Morgans/Mondrian had urged Baha Mar to push the opening date for the property back by five months to April 1, 2015, describing the planned December 2014 launch as “not accurate”.

Mr Sands again refuted such claims, suggesting that SLS Hotels was not of the same mind as Morgans.

“SLS will open in December along with the rest of Baha Mar, and Baha Mar is on schedule to open in December 2014,” he said.

“The agreement [with Morgans] has been terminated, and we have entered into an agreement with SLS to operate a 300-room luxury hotel, and that speaks volumes. We’re sufficiently advanced on construction to be open for December 2014.”

Referring to its founder, Mr Sands added: “SLS Hotels and Sam Nazarian bring great experience in hotels, restaurants and nightclubs from Beverley Hills to Miami, and soon Las Vegas and New York, to Baha Mar. They have great brands.”

The hotel SLS Hotels will brand and manage also features 107 residences, and Mr Sands said the switch of operators will not impact those who have already purchased.

“Let me put it to you this way,” he said in response to Tribune Business’s questions. “A number of persons have already bought condos in the Mondrian, and we anticipate all the owners will be excited for the new SLS brand, and all those contracts will be valid.

“I can also tell you that SLS is a leader in hospitality and real estate, and the company currently has developments underway in Miami, Philadelphia, Mexico and Los Angeles.

“The Brickell Residences in Miami are already sold out with the opening not planned until 2015,” Mr Sands added.

“Here at ‘SLS at Baha Mar’, we will be aligned with a world-class lifestyle brand with top amenities.”

‘SLS at Baha Mar’ will be the brand’s first international venture, complementing its soon-to-open hotels and resorts in Las Vegas, New York, Philadelphia, Seattle, Brickell, Miami and China, as well as its signature properties in Beverly Hills and Miami Beach.

Mr Sands also revealed that the developer planned “to go live:” with its website and booking engine for leisure tourists on July 1, having been “very encouraged by the group bookings received to date”.

And, with Baha Mar seeking to rapidly move on from Morgans and Mondrian, Mr Sands confirmed: “The management agreement between Morgans and Baha Mar has been terminated.

“Given that the management agreement has been terminated, the issues between Baha Mar and Morgans have largely been resolved, and both Baha Mar and Morgans are working to resolve the outstanding issues between us in the near future.”

The court case between the two, though, remained ‘live’ in the New York State Supreme Court as of last night.

The dispute relates to Baha Mar’s failure to fulfill certain conditions contained in a July 31, 2011, hotel management agreement with Morgans.

In particular, the 20-year agreement for Morgans to provide “direction, management and supervision” of the Mondrian property required that Baha Mar obtain a “non-disturbance agreement” from its financiers within six months of the deal’s signing.

Such an agreement, which Baha Mar had to obtain from the China Export-Import Bank, its multi-billion dollar lender, would have allowed Morgans to continue uninterrupted management of the Mondrian even if the developer defaulted and the Chinese institution had to foreclose.

“Baha Mar failed to obtain a non-disturbance agreement or to inform Morgans Management of its failure to do so within six months of the date of the Hotel Management Agreement,” Morgans alleged.

“Instead, Baha Mar repeatedly assured Morgans Management that it would obtain such an agreement and requested additional time to do so.”

Morgans then alleged that Baha Mar “improperly retaliated” for the agreement termination by seeking to then draw down a $10 million ‘Letter of Credit’ that the Mondrian operator had posted with Deutsche Bank Trust Company Americas.

The $10 million represented the key money owed by Morgans to Baha Mar, and which was to be paid to the latter in stages in the run-up to the Mondarin’s opening.

Some $3 million was to be paid 180 days prior to the December 1 opening (June 4, 2014); with a further $3 million paid 90 days out (September 2, 2014); and the final $4 million balance due on the opening date.

Deutsche Bank, in its May 30 reply to Morgan’s allegations, confirmed that it would have paid the $10 million to Baha Mar had it not been stopped from doing so by the New York Supreme Court.

The institution is also counter-claiming for a declaration that Morgans reimburse it for any draw Baha Mar makes, plus reimburse its legal expenses and other costs.

Away from the legal action, Baha Mar is looking to the future.

“SLS will bring a spark of creativity and fun that fits in brilliantly with Baha Mar’s distinctive array of brands and partners,” said Sarkis Izmirlian, Baha Mar’s chairman and chief executive.

“Sam Nazarian’s ability to be ahead of market trends has differentiated his eclectic hotels, nightlife, restaurants and cutting-edge design, and will bring a truly unique experience to Baha Mar guests.

“Also, the company’s experience in creating, selling and managing luxury real estate properties will bring additional value to the SLS Residences at Baha Mar.”

Sam Nazarian said, “SLS at Baha Mar represents a collaboration of best-in-class hospitality partners led by Sarkis’ unbelievable vision, and is a perfect fit with our core strategy of developing and managing luxury lifestyle hotels and residences aimed at higher-end leisure and business travellers.”

Tom Dunlap, Baha Mar’s president, noted that SLS’ award-winning hotels, restaurant and entertainment brands, including Cleo, with Danny Elmaleh’s execution of Mediterranean cuisine, Japanese-fusion restaurant Katsuya by Starck, and the Hyde Lounge nightclub, have built an upscale profile for the company.

“SLS guests are exactly the kind of guests that will be attracted to Baha Mar: affluent, sophisticated, fun,” Mr Dunlap said. “They live and play in the markets we most want to attract: Miami, Las Vegas, Latin America. We are thrilled to welcome SLS to Baha Mar.”

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