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Trio Purchase & Sale Deadline Expiring: Developer Could Seek $6.25 Million In Court

Come Feb. 26, developer McLaughlin could seek $6.25 million in court


January 18, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

The deadline for signing the purchase and sale agreement between the Hotel Development Corporation (HDC) and developer Brian McLaughlin for the Condado Beach Resort, formerly known as the Condado Trio, expires Feb. 26.

If McLaughlin decides to pursue legal action against the Commonwealth government, which an inside source says he most definitely will, he must prove that the government failed to perform its obligations under the contract signed on Aug. 26, 1998.

If he does, McLaughlin could be walking away with at least $6.25 million in expenses and damages, according to a copy of the contract obtained by CARIBBEAN BUSINESS. This amount does not include other provisions stipulated in the contract that could increase that amount.

If McLaughlin fails to prove his case, then the government would have the right to keep the $250,000 deposit and all interest accrued on the deposit, which McLaughlin paid to the Government Development Bank.

"The Condado Trio case is a very complex issue," said Jaime Gonzalez, who at the time ran HDC, under the leadership of former Puerto Rico Tourism Co. executive director Jorge L. Davila. "The government promised to deliver McLaughlin all his permits and I don’t believe they accomplished it."

According to the contract, McLaughlin’s obligation to perform were subject to his receiving "final, unappealable and unappealed" permit approvals required of all community, municipal and Commonwealth authorities and organizations for the construction and development of the project (excluding the construction permits to be issued by the Permits and Regulation Administration, also known as Arpe in Spanish). If those were not obtained the deal was off and McLaughlin could be entitled to a refund for his expenses and a monetary award for damages for lost business opportunities.

San Juan City Hall, headed by then-Mayor Sila Calderon. City Hall questioned the project’s permit process, claiming McLaughlin did not comply with public policy and all issued permits were challenged in court.

There was industry-wide speculation that Calderon’s strategy was to tie up McLaughlin and his project in court until the Nov. 7, 2000 gubernatorial elections.

"The bidding and selection process of a developer for the Condado Trio was not politicized until after McLaughlin’s proposal was selected," said Gonzalez, who was also the former deputy executive director of planning and development at the Tourism Co. "The municipality of San Juan’s proposal was not the best nor was it the second best."

The end of all hope for McLaughlin’s proposal came Dec. 14, 2000 when the Puerto Rico Supreme Court revoked permit approvals for the Condado Beach Resort project after concluding that Arpe and the Environmental Quality Board disregarded 12 public policy violations.

"Personally, I believe that McLaughlin did everything in his power to fulfill his obligations under the contract," said Gonzalez. "If McLaughlin is not compensated for his investment because of a politicized decision against him, the effect will be disastrous for future private sector investment in Puerto Rico."

As for Calderon’s argument that McLaughlin did not have the financing in place for the entire project, Gonzalez claims that the developer did not need to according to his contract.

"McLaughlin put down a deposit and he needed to have the down payment for the project, under the condition that all his permits were approved on hand," Gonzalez said.

The Condado Trio consists of the Condado Beach Resort, former San Juan Convention Center, and La Concha Hotel. McLaughlin had to pay a purchase price upon closing of $20 million, payable as follows: $6 million, less the $250,000 deposit, by wire transfer, certified or bank manager’s check to an account designated by the government. Also, McLaughlin had to provide the sum of $14 million evidenced by promissory notes.


This Caribbean Business article appears courtesy of Casiano Communications.
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