McCaysville GA – August 20, 2015 (hospitalitybusinessnews.com) On August 19, 2015, Rosewood Hotels and Resorts International filed documents in the US Bankruptcy Court to terminate its’ agreements with Baha Mar due to the fact that “Baha Mar has incurred numerous defaults under the various Rosewood Hotel Agreements, many of which are incurable”.
Specifically Rosewood mentioned the following items:
- Baha Mar is in violation of its representation and warranty to Rosewood that it owns the real property on which the Hotel and associated Residences are situated (the “Land”);
- Construction of the Hotel has ceased for more than 30 consecutive days;
- Baha Mar has failed to pay both the rank and file employees and the senior executives at the Hotel (whom Rosewood requires to run the Hotel) and has failed to reimburse Rosewood for pre-petition and post-petition fees and expenses due under the Rosewood Hotel Agreements; and
- Baha Mar’s filing its Chapter 11 case is a default under the License Agreement and other Rosewood Hotel Agreements.
According to the Management agreement between Baha Mar and Rosewood these points appear to be valid.
Under section 5.9 of the agreement, Rosewood has the right to terminate if Baha Mar ceases construction for 30 or more days. Additionally under section 17.2 Rosewood would have the right to terminate if Baha Mar files for voluntary bankruptcy protection. (See bottom – Rosewood Court Filing – for all documents including the management agreement)
The agreement between the two companies gave Rosewood a management fee of 2% of revenues, a 1% royalty and a 12% incentive fee. Additionally Rosewood was required to pay $10M in Key Money for the 30 year agreement. The first $2M was supposed to be paid 60 days prior to the hotel opening. It is not known if this was in fact paid, and if it was will Rosewood get it back at some point.
The question now is will the other hotel companies involved, SLS and Hyatt, file their own termination documents?
This comes at an important time as the Government of the Bahamas and Baha Mar are in court now to determine whether the Government can send in a Liquidator. With the brands pulling out this will make opening the hotel more difficult.
Is a sale of the project imminent?
Rosewood Court Filing – rosewood