from:
http://www.mysanantonio.com/news/loc...rand_mess.html
GRAND HYATT IS A GRAND MESS
FaulknerUSA, the company the city hired to build the Grand Hyatt hotel and condominiums at the convention center, has busted its deadline to finish the job by almost seven months and is being ordered to “substantially complete” the project by mid-October.
Subcontractors and workers have filed at least 68 liens claiming the Austin company owes them almost $13 million. FaulknerUSA and its partners also face 17 lawsuits.
Frustrated by repeated delays, the city Aug. 21 told the company to finish the last floor of the 34-story hotel by the new deadline. About 60 of the 1,003 rooms still are under construction, said Tom Netting, the Grand Hyatt's managing director.
The top eight floors of condos must at least be partly built by February.
If FaulknerUSA and its partners miss the latest deadlines, the city could find itself in the condo business.
“They made it pretty clear that they've had cost overruns on this job and that obviously it made it very difficult for them to get finished,” said Michael Sawaya, the city's director of convention, sports and entertainment facilities. “I don't profess to know the details of the health of their company. Believe me, I've tried to find out a little of that, and they're pretty protective of that.”
FaulknerUSA officials didn't return calls seeking comment.
The company's growing financial troubles are the latest setbacks for the Grand Hyatt and Alteza condominiums, a project that was envisioned as a swanky mixed-use hotel that would draw affluent residents and tourists alike.
The City Council under then-Mayor Ed Garza chose FaulknerUSA in December 2004 to build the hotel after years of failed plans with other suitors, largely because it committed $77 million of its own finances to the project. The remaining $208 million was funded through bonds backed by the city.
The Grand Hyatt partly opened more than a month past its Feb. 6 deadline. Hotel officials were worried it wouldn't be ready in time for guests scheduled to stay there during the NCAA's Final Four basketball tournament April 5-7.
The city began fining FaulknerUSA $70,000 a day after it broke the deadline. Since then, the company has paid $1.6 million in fines.
The latest agreement with the city releases FaulknerUSA from penalties if it meets the new deadlines, which require the company to finish the hotel rooms, the entire exterior and some interior finishes on the condo portion.
The company doesn't have to complete all of the condos.
The delays leave potential condo residents wondering what they've gotten themselves into.
“A couple months ago, I sold my house for a nice chunk of money — less than I would have — because I thought I was going to move in this fall,” said Patti Stewart, who has signed a contract for a condo. “So I don't know what's really going to happen. I'm just kind of waiting. I haven't heard from them in a month.”
Stewart is renovating a warehouse in Alamo Heights so she has a place to live.
Buyers put 10 percent down on condos ranging in value from $300,000 to $3.3 million. So far, the hotel has pre-sold about half of the 147 planned condos.
Stewart paid a $74,000 deposit — money that's in escrow and would be returned if the condo deal collapses.
“I was probably one of the very first ones to buy,” she said. “First it was spring, then it was summer, then it was going to be September, now December. I know in my contract they have to be finished by April 2009.”
Sales representatives for Faulkner are telling potential buyers the condos will be completed by January or February.
But the unsettled liens on the property may keep FaulknerUSA from conveying clear titles for the condos. Without a title, buyers could drop out of the deals and get their money back when their contracts expire.
“The lien is filed against the property, so in order for the developer to sell one of those condos, which is part of the property, the buyer and that buyer's lender are going to require that those liens be released,” said Scott Farrimond, an attorney with Stumpf Farrimond in San Antonio.
One company with a lien is Burditt Tile & Stone of Cibolo, which claims FaulknerUSA owes it for $185,970 for tile work on hotel bathrooms.
“For a small company like us, it's a large amount,” owner Polly Burditt said. “We've been checking back down there and we haven't even been able to get hold of anyone.”
Burditt says there hasn't been much discussion about settling the liens.
“What concerns us more than anything is the nonpayment to subs and suppliers that are local and family-run companies,” said Doug McMurry, executive vice president of the San Antonio chapter of the Associated General Contractors. “The fact that they aren't getting paid is causing a significant hardship. It's just awful.”
Under the agreement with the city, if FaulknerUSA defaults, another entity would step in to finish the project. If that entity — Hotel Investments LP, composed of New York-based Marathon Real Estate and FaulknerUSA — is unable to fulfill the agreement, the city would take over.
If that were to happen, Sawaya said, the city would find another company to spearhead completion.
“I think the parties involved have been working toward a successful resolution and we're really optimistic that they get this finished — both the hotel portion and the condominium — by the end of the calendar year,” City Manager Sheryl Sculley said.
The most important element, she said, is that the hotel is operating and making its required debt-service payments on bond revenue used to help fund the hotel portion of the project. If the hotel were unable to make the debt-service payments, the city would be forced to dip into its hotel occupancy tax revenues.
In the second quarter of 2008, the Grand Hyatt had $9.5 million in revenue, for an average of just over $104 a night per room, said Bruce Walker, president of Source Strategies Inc., a local hotel consulting firm. That ranks the hotel 176th in the state of Texas.
In comparison, revenue per room during the same quarter at other downtown hotels was $203 at the Watermark Hotel and Spa; $162 at the Hotel Valencia; $150 at the Hilton Palacio del Rio; and $136 at the Marriott Rivercenter.
Netting said the Grand Hyatt's occupancy has been about 70 percent.
“We're in pretty good shape,” he said. “We're happy with the results. Most of our challenges are within the first few couple months, and it's running as a normal hotel now.”
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