The Biltmore–Asset or Liability

I very much appreciated the detailed comments of Danielle Frineburg of the Biltmore on my three Biltmore posts.

  1. The main Finnegan point is that the Federal Government has confirmed that monies for proper maintenance and protection (“property’s repair, rehabilitation, restoration and recurring maintenance requirements”) of this historical facility should be paid before excess revenues are paid out.  This suggests that Coral Gables should subtract all recognized and agreed upon maintenance and restoration expenditures (with capital expenditure restated in annual payments of the financed capital expenditures) before taking out its payment.  What is unusual is that this has not been a issue between the management and the city until the declining economy actually led the hotel to have falling revenues,  and (perhaps coincidentally) after the departure of a city manager who is widely thought to have been extremely friendly and accommodating to the hotel’s management.
  2. Another Finnegan point is that the taxpayers have not had to subsidize the hotel.  This may have been true in the past but the taxpayers are now subsidizing the hotel.  The failure to pay rent has meant a reduction in city revenues which have led to reduced services to taxpayers, higher property taxes and fees–these directly related to the Biltmore not paying at least $2.0 million in rent owed and past due (the Commission recently postponed repayments starting next year).  If the new lease is not strongly negotiated the hotel will pay less than it should and the taxpayers will pay more than they should.
  3. Another Finnegan point is that the hotel has brought many benefits to the city.  I am sure that this has been true, but I tried to say that the hotel may be more of a burden than a benefit to the community in the coming years.  The US economy is not coming back.  The number of people who are willing and able to pay the cost of the luxury that the Hotel Biltmore represents has declined substantially.  Conventions are moving to lower cost venues.  Fewer people are able to attend expensive hotels.  This means that the hotel wants to pay less, the city will receive less and the taxpayers will have to shoulder the costs of the future of the hotel.

No doubt the Biltmore Hotel has been a great asset for this city–indeed it has been at the center of the city’s brand–but just as the Coral Gables Country Club became an anomaly for this city (too exclusive, too expensive, too costly for the city) and and then not viable in the future.  Let us hope that the taxpayers of Coral Gables do not have too pay too much to keep the hotel and that the hotel finds a viable long-term business niche.  That is our hope.

About Stephen E. McGaughey
International consultant in financing development programs and projects

One Response to The Biltmore–Asset or Liability

  1. Regarding the first point, we brought into question the sustainability of the current business model several years ago. The original lease (assumed by Seaway) contemplated a restoration of $36 million. To date, $110 million has been spent on restoration an renovations. The extremely severe economic decline of 2008-2009 only exasperated the issue.

    On point number 2, . While we understand that this is a painful and difficult time for the City and its Citizens, however if the federal regulations are to be adhered to, then rent is not owed.

    And finally, the Biltmore will not be a “burden” on the City of Coral Gables. Memories of the hotel padlocked and in disrepair seem to have faded for some, but having a National Historic Landmark in our midst is a source of pride for many of its residents. It is a world class establishment that enriches this community in countless ways.

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