The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Nassau resort owner yesterday pledged to defend its $25 million investment to “the nth degree”, as a three-way battle with its operator and former lender heated up.

Valentine Grimes, attorney for Sunset Equities, owner of West Bay Street’s Courtyard by Marriott hotel, sought to turn the tables on its operator by disclosing that its management agreement had been terminated in February 2017.

Responding to Donald J Urgo and Associates’ allegations of contractual breaches by his client, Mr Grimes claimed that the management company had failed to obtain a hotel operator’s license - and other essential permits and approvals - to enable it to operate in the Bahamas.

“They did not have a license to operate in the Bahamas,” Mr Grimes told Tribune Business of Urgo’s Bahamian subsidiary, UH Nassau Ltd. “They didn’t have a Business License, and were unable to show us any approvals that they were obligated to have.”

He added that this prompted Sunset Equities to terminate UH Nassau’s management contract on February 24, but Urgo yesterday hit back at the claims via its own attorney, Michael Scott.

Mr Scott alleged to Tribune Business that Sunset Equities’ “interference” had delayed UH Nassau’s efforts to obtain the necessary licenses and permits from the former Christie administration.

And, pointing out that Urgo’s management agreement obligations only kicked-in once it possessed the necessary licenses, Mr Scott questioned why Sunset Equities had allowed the operator to continue providing accounting and other services at the Courtyard by Marriott after it had supposedly been ‘terminated’.

“Why was Sunset accepting performance by my clients of accounting obligations and the rest of it?” Mr Scott asked. “The hotel could not function without my clients doing the accounting and running the place.

“How could you terminate the agreement and be accepting accounting services? It makes no sense. It’s bizarre. It’s unreal.”

The legal battle between owner and operator of the resort, which is located opposite Junkanoo Beach, intensified yesterday after Tribune Business revealed that Urgo launched legal action on August 21, 2017, demanding $556,000 in unpaid management fees it claims to be owed.

Urgo made a series of damaging allegations, citing 10 purported management agreement breaches by Sunset Equities, and claiming that it had failed to make due payments to Marriott and its mortgage financier.

Mr Grimes, though, argued that Urgo’s action “portrays an inaccurate picture” of its fractured relationship with Sunset. He said the Courtyard by Marriott owner was the first to initiate legal action, having filed a writ against Donald J.Urgo & Associates on March 15, 2017.

This document, obtained by Tribune Business, seeks damages against the resort operator for “breach of contracts” and “fraudulent misrepresentation” over the December 17, 2015, management agreement.

It also alleges that Urgo interfered with Sunset Equities’ negotiations to secure a new management company for the Courtyard by Marriott, and demanded an injunction to prevent this. The hotel owner also wanted a declaration that its manager “did not legally perform its duties” under their agreement.

Mr Scott, on Urgo’s behalf, retorted that Sunset Equities only served that writ on himself and Urgo on August 22 - just after being served with the operator’s action. Questioning why service had taken more than five months, he suggested Sunset Equities’ action had only been prompted by his client’s legal moves.

Urgo’s termination as the Courtyard by Marriott’s manager, which supposedly took effect on March 27, 2017, was issued on February 24. The notice, seen by Tribune Business, states: “Please be advised that Sunset views your failure to obtain the requisite hotel operator’s license pursuant to Bahamian law as a fundamental breach of the agreement.

“As you are fully aware, Clause 4.01C of the agreement mandates you to obtain and maintain the required permits and licenses necessary to operate the hotel in the Bahamas. In September 2016, you were requested to produce the relevant licenses and, as of the date of this letter, you have refused and failed to produce the same for our inspection and satisfaction.”

Ron Hershco, the New York, Brooklyn-based real estate developer who is Sunset Equities’ principal, told Tribune Business yesterday that Urgo’s involvement was not required for the West Bay Street resort to be flagged by Marriott.

He added that Courtyard by Marriott was performing “very well”, and said the legal dispute with Urgo would not impact its operations and profitability, nor the 174-room property’s 100-plus staff.

Praising his client’s development efforts, Mr Grimes urged Bahamians to remember how he had upgraded the property from its past life as the Nassau Palm Resort.

“He completely gutted the entire hotel,” the attorney told Tribune Business. “Every inch, every wire, every cable was replaced, and every room refurbished. He’s put an enormous amount of time and money into the project, and wants to ensure it’s success.

“Anyone who knows this property prior to him taking over knows a lot of work needed to be done to it. He’s made it a first class property in Nassau, and filled a lovely niche in demand.”

Mr Grimes revealed that Sunset Equities had also initiated separate legal action against David Kosoy’s Sterling Financial Group, which provided the initial mortgage financing for the resort’s 2013 purchase.

Documents obtained by Tribune Business show a ‘claim and counterclaim’ back-and-forth occurred between the two sides late last year, after Sunset Equities gave Sterling a 90-day notice on February 22, 2016, that it would pay-off its mortgage in full.

The Courtyard by Marriott owner alleged that it had secured $20 million from a new lender, Bixby Bridge Capital, to pay-off Sterling’s original mortgage only for the latter to suggest it could offer more favourable terms.

Sunset alleged in legal papers that when the two sides failed to agree satisfactory terms, Sterling claimed that the resort owner had defaulted on the original loan. The latter then offered a new lending facility on July 5,2016, with $6.03 million in credit divided into two tranches - one for $4.2 million, and the other for $1.83 million.

A September 23, 2016, letter from Sterling’s attorneys, Lennox Paton, gave Sunset Equities seven days to accept the terms, otherwise their client’s existing mortgage security “will become immediately enforceable”.

Confirming that Sterling is a minority equity shareholder in Sunset Equities, the letter added: “Our client is concerned that Sunset is being negligent in not expediting construction financing when prompt completion of the hotel is critical to shareholder return, and to honouring brand and operator obligations.”

Mr Kosoy, Sterling’s principal, complained to Tribune Business on Thursday of being “frozen out” by Sunset and Mr Hershco in relation to his equity stake. 

The legal documents obtained by Tribune Business show Sterling initiated legal action against the Courtyard by Marriott owner over the alleged default, forcing the latter to obtain an emergency Supreme Court injunction on October 11, 2016, to prevent it appointing a receiver.

The two sides eventually agreed to settle Sunset Equities’ action by paying off the $13.684 million mortgage owed to Sterling, together with Stamp Duty and interest.

“We’re not looking to fight with Urgo, not looking to fight with Sterling; they’re looking to fight with us,” Mr Hershco told Tribune Business. “I came here to make a tremendous investment and run it quietly, and these things started coming up. I don’t know why. We’re not looking for problems.”

He and Mr Grimes vehemently denied the allegations by both Urgo and Sterling, and pledged that the ongoing legal actions will be fully defended.