W South Beach Owners Sue Each Other Over Failed Buyout

Longtime partners RFR and Tristar trade lawsuits in New York and Miami-Dade

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RFR Holding and Tristar Capital, the co-owners of the W South Beach hotel, are feuding over a failed buyout of the luxe property, ahead of a maturing loan.

Aby Rosen’s RFR sued Tristar (now called Tricap) in New York Supreme Court, one week after David Edelstein’s Tristar sued RFR in Miami-Dade County, each claiming that the other had breached an agreement where Tristar would buy out RFR’s interest in South Florida Mezzanine Investors, a jointly owned entity that indirectly owns the hotel. 

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In RFR’s telling, Tristar walked away from a $200 million agreement they had reached in October, because the agreement was actually a “ruse” to extend the maturity on a $157.4 million Citibank loan on the property, per the complaint. In Tristar’s version, RFR is trying to blow up an earlier buyout deal  using the buy-sell process, per its complaint in the 11th Circuit Court.

The initial hiccup between the partners arose as the Citibank mortgage, first issued in 2018, was coming due last August. RFR and Tristar, which developed the hotel together in 2009, couldn’t agree on whether to sell the W South Beach or refinance the debt. “Despite years of relative harmony, a disagreement arose between [South Florida Mezzanine]’s two member groups about whether, and how, to sell the hotel,” RFR’s complaint states. 

The two began negotiating a buyout, first through the buy-sell process stipulated in the terms of their partnership, then they began to consider other structures. In October, Tristar agreed to buy RFR’s interest for $200 million, adding to its own $122.6 million stake and giving it controlling interest in the entity, valued at $508 million, RFR contends in its complaint. With the agreement in place, the partners could forgo the plan to sell the hotel, and RFR agreed to several extensions of the Citibank loan while negotiations proceeded. 

In December, the loan was extended until Jan. 25, 2023, but within a day Tristar backed out of the deal, preferring to pursue the buy-sell deal, per RFR’s complaint. Tristar, on the other hand, claims that the buy-sell deal is the real enforceable agreement, and that RFR is refusing to extend the loan further in an effort to force the non-existent October agreement. 

With the latest maturity date quickly approaching, both are asking their respective courts to enforce their preferred agreement. 

“In response to [Tristar]’s complaint, [RFR] belatedly filed a lawsuit on Martin Luther King Day in New York Supreme Court, apparently seeking to avoid litigating the matter in Florida,” a spokesperson for Tristar said. RFR did not immediately respond to request for comment.

The oceanfront W South Beach at 2201 Collins Avenue includes 395 rooms, which can go for upward of $1,000 a night. It was one of the earlier high-end hotels that contributed to the luxury boom in South beach.

Chava Gourarie can be reached at cgourarie@commercialobserver.com

 

Update: This story has been updated with information from Tristar’s suit, which was missing from an earlier version of the story.