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More than two years later, the drama at The Setai in Miami Beach has ended. And in favor of the hotel operator, GHM, who was kicked out, literally, in the middle of the night, by the hotel's owners, Lehman Brothers.
Last week, the ICC International Court of Arbitration ruled "that all previous allegations of mismanagement were baseless and have awarded damages to GHM for improper termination of GHM’s hotel management agreement." It seemed that the hotel's impressive RevPAR rate of 76 percent was a key factor in the decision against Lehman. Lehman Brothers now have 30 days to make the compensation to GHM. The Miami Herald reports the damages exceed $10 million. There are also more tort claims against Lehman that are still pending in state and federal court.
However, GHM will not return to the property as manager. Trevi Luxury Hospitality Group., which has managed the hotel since the shakedown, still remains in place. Room rates for this weekend for a studio suite (the starting room category) start at $530 a night but there's a AAA discounted rate and a Florida resident rate available for $488.
[Photo: The Setai]
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The Paramount Hotel has come a long way in the past decade. Back in 2007, the Philippe Starke-designed hotel was shuffling along like a lost soul after the departure of Ian Schrager. But last March, the hotel reopened after a $40-million renovation which saw an upgrade of the guest rooms, a redesigned two-story lobby, a new restaurant and bar, an Italian cafe, and the introduction of a hip retail concept, Free & The Brave.
“After the completion of a multi-million dollar renovation, we felt it was important to align the property with a management company that could successfully reposition the hotel,” says Aby Rosen, Co-Founder and Principal of RFR Holding LLC.
Setai Shakedown / GHM / Miami Hotel Mambo / Hotel Management Companies / Hotel Industry News / Hotel News / → All Tags
Singapore-based General Hotel Management, aka the people who were running The Setai in South Beach until they were forcibly removed from the property by the Setai's owners, Lehman Brothers, have just put out a statement with their side of the story.
Hans R. Jenni, President and Director of GHM, said:
"Representatives from Lehman Brothers arrived at the hotel with armed guards and off duty sheriff officers in uniform in the early morning hours on March 31st. They informed us that they were taking over the property and that General Hotel Management (GHM) was no longer welcome on the property. These actions took us by surprise, as we had no prior indication they were intending to do this, nor were we under the impression that they were unhappy with our performance. We had just achieved the second best financial performance year since the inception of the hotel, not an easy accomplishment in the current economic environment."
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UPDATE: GHM speaks out on the shakedown!
It was a wild Saturday in Miami last weekend which really isn't nothing new for the party town but things got crazy--like police involved crazy at The Setai for a different reason--a hostile middle-of-the-night takeover.
USA Today reports the owners of The Setai, Setai Owners LLC, kicked out their current management company, General Hotel Management and GHM (South Beach) LLC, and replaced them with Dallas-based Trevi Luxury Hospitality Group.
The ousting happened because the Setai owners (which is actually a unit of Lehman Brothers) claims the hotel should be more profitable. Here's a little bit on what the hotel was spending their money on (this comes from Lehman's request for arbitration to essentially end GHM's management contract):