This page contains a single entry from the blog posted on May 26, 2009 6:54 AM. The previous post in this blog was You *can* have it all. The next post in this blog is Cosi fan tutti. Many more can be found on the main index page or by looking through the archives.

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Tuesday, May 26, 2009

Portland Lawsuits of the Future

Here's a distressing scenario that you can see coming a mile away if Portland is ever stupid enough to spend public money to build a Convention Center hotel. The outfit that's brought in to run the hotel looks out for its own interests, to the detriment of the people who own the place. In Portland's case, that latter group would likely be you and I:

The contracts are supposed to give owners the benefits of a hotel operator’s reputation and its marketing and management prowess. But provisions in those operating agreements also usually require owners to cover the costs of operating the hotels, in addition to paying the hotel manager a fee, often a percentage of gross revenue.

"It gives the operators all the benefits of ownership with none of the burdens," said James R. Butler Jr., a lawyer at Jeffer Mangels Butler & Marmaro in Los Angeles. "It pushes to the owner all of the costs — the capital costs of buying, maintaining and operating the property — and lets the managing companies take most of their money off the top."

Meanwhile, a reader writes:

A friend who knows hotel deals and who must remain nameless comments on our proposed Convention Center hotel project that Starwood's apparent indifference to the prudence or lack thereof in the revenue forecasts for the project are probably based on the presence of something called a "non-disturbance agreement" in their deal with Metro. Such an agreement protects the hotel operator from loss of management income in the event the hotel underperforms. My friend observes that elsewhere, Starwood is demanding not just its full management income payments, but additional capital investments in upgrading the property to keep it in top shape, where the property hotel in question is having big losses.
Hmmmm. Maybe it's time to take a look at that contract between Starwood Hotels and whichever public entity around here -- Metro? The PDC? -- is paying Starwood to take us to the cleaners. Go by streetcar!

Comments (5)

I'm sure Metro and PDC have everything under control. Nobody negotiates good deals for taxpayers like their legal departments.

Starwood knows that some rubes still believe in the existence of a free lunch.

"Nobody negotiates good deals for taxpayers like their legal departments."

The Port of Portland is in their league.

Giving away the shipyards and drydocks.

Does anyone know what happened to the original proposal for the CC Hotel? It was on the METRO WEBsite, but is gone now. It had details (like on page 57 out of 120 pages) on actual operations and the tax breaks they needed.

This is also why the subcontractors won't get paid, as I warned on this earlier post:


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