Local hit radio personality Charlie Brennan interviewed me on his morning news show today.
Topic was the Ritz-Carlton Hotel Co.'s lawsuit against the owners of the local Ritz-Carlton. The St. Louis Countian (part of Missouri Lawyers Media) broke the story.
Ritz isn’t rich enough
Clayton hotel owners sued by chain manager
Published: October 5, 2010
How rich should a Ritz-Carlton be?
A lawsuit filed last week in St. Louis County Circuit Court answers the question for at least one of the high-end hotels: The Ritz-Carlton, St. Louis should make at least $4 million in profits a year.
That figure pops up in the lawsuit filed by the hotel operators, Ritz-Carlton Hotel Co. The company, which manages Ritz-Carlton hotels, alleges the owner of the location in Carondelet Plaza is trying to cancel the hotel’s 65-year operating agreement 43 years early because of underperformance.
The hotel has failed to meet its contract’s minimum profit levels from fiscal year 2008 on, according to the lawsuit.
Under the contract, the hotel property’s owner, HEF 1-STL No. 1, can cancel the Ritz’s operating agreement if profits fall below $4 million each fiscal year for two consecutive years — unless Ritz pays the difference for the second year.
HEF 1-STL No. 1 is an affiliate of Maritz, Wolff & Co. of Clayton.
After coming up short in 2008 and 2009, the Ritz paid more than $2 million to cover 2009, avoid cancellation of the contract and “reset” the clock on future cancellation actions, the lawsuit says.
Now, the Ritz claims the Maritz, Wolff affiliate is again threatening to boot it from the operating agreement. HEF has told the Ritz that it expects the hotel to underperform again in fiscal year 2010, the Ritz claims, and that HEF plans to seek “another, multi-million dollar deficiency payment” for the 2009 and 2010 fiscal years. The Ritz claims that such a payment would be “duplicative,” however, and is asking the court to concur.
The Ritz is also asking the court to put a hold on HEF’s alleged efforts to cancel the operating agreement.
“Such a termination would eliminate the Ritz-Carlton luxury hospitality brand in the St. Louis market and would cause Ritz-Carlton to suffer the significant loss of goodwill it has established and built in this market over the past two decades,” the lawsuit says.
Lew Wolff, co-founder of Maritz, Wolff, wasn’t aware that a lawsuit had been filed, but said St. Louisans shouldn’t worry that the Ritz could be leaving town.
“I have a feeling it will be worked out between the parties,” he said.
Wolff said he was aware of the underlying dispute.
“They have one interpretation and we have another,” Wolff said of the operating agreement.
The Ritz is represented by J. Thomas Archer, of Gallop, Johnson & Neuman in St. Louis. Archer referred a reporter to the company’s public relations department. A spokeswoman for the Ritz declined to comment on pending litigation.
The Ritz claims it has already tried to arbitrate with HEF and that it has suggested escrowing the amount of the disputed deficiency payment until the companies work things out. HEF has refused, the suit claims, so the Ritz is also asking for a court order allowing it to escrow the funds.
Maritz, Wolff & Co. boasts $1.5 billion in asset value, according to its website. The Ritz-Carlton, St. Louis, was the first hotel bought by the company, and the hotel’s revenues and operating profits increased 14 percent and 127 percent, respectively, after the 1994 acquisition, according to the website.
The case is The Ritz-Carlton Hotel Company, LLC v. HEF 1-STL No. 1, LLC, 10SL-CC03976.
