Este informe no está disponible en español.


Palmas del Mar-Santana’s Airport Shoppes Dispute Continues

Expropriation proposal considered detrimental to island’s business climate


March 4, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

One year after Palmas del Mar Candelero Hotel shut down operations in Humacao, its future remains uncertain. Airports Shoppes & Hotel Corp. (AS), the hotel’s new owner, and Palmas del Mar Properties Inc. (PMP) are awaiting a court decision to settle the controversy over the ownership of the two-acre parking lot near the hotel.

On Jan. 21, AS sued PMP because it was denied access to the parking lot, which constitutes [the hotel’s] right of use, as stated in a public deed, according to AS’ complaint.

Along with the lawsuit, AS asked the Anti-Trust Practices Division of the local Justice Department to investigate PMP actions regarding the operation of the hotel’s casino and has accused PMP of hindering Candelero’s renovation to reduce hotel competition within the complex given PMP’s interest in developing a five-star hotel elsewhere in the resort. Empresas Santana Assistant to the President Dwight Tavales claims AS acquired the two-acre parking lot in March 2003 when the hotel was bought from Banco Santander. Candelero Hotel was foreclosed by Santander because its previous owner—Blue Water Palmas Ltd—reportedly owed the bank $6.1 million.

But according to PMP president Jaime Morgan Stubbe, the two-acre parking lot was never part of the hotel property and therefore wasn’t included in the AS acquisition of the Candelero. "The new owners did a very poor due diligence job when they bought the property from Santander," said Morgan Stubbe.

In 1996, PMP authorized the use of the parking lot—through an easement—to Blue Water Palmas Ltd. Morgan Stubbe explained that according to its own terms, the easement wasn’t part of the property and expired as soon as the hotel was transferred to a new owner, which in this case happened upon foreclosure by Santander.

In fact, according to Morgan Stubbe, the two-acre parking lot is part of a 9-acre lot Morgan Stubbe says the PMP remains very willing to sell to AS as a whole under conditions which apparently AS isn’t willing to accept.

The dispute worsened after Rep. Sylvia Corujo, chairwoman of the Tourism Committee of the House of Representatives, proposed expropriating the plot under dispute to end the controversy.

"It would be detrimental to the island’s business climate, and to Puerto Rico’s image abroad, if the government were to intervene and exercise its eminent domain powers to settle a private legal dispute between two private parties over the right of use of a private property," said Jaime Morgan Stubbe, president of PMP.

Morgan Stubbe, former administrator of the Puerto Rico Industrial Development Co, explained that if the government expropriates the Palmas’ parking lot, it will send a negative message to people willing to invest in Puerto Rico. He pointed out that PMP’s parent company, Maxxam Inc., has invested hundreds of million dollars on the island and has created 4,000 direct jobs in the region. PMP is now considering countersuing AS for damages.

Tavales said the government could exercise its right to expropriate the land because it has been affected by the dispute since jobs and revenues from the hotel occupancy tax rate have been lost.

He also argued that since last September—when the $6.1 million acquisition of Candelero Hotel was completed—his company has lost nearly $360,000, because it was unable to start the renovation project. "PMP wants us out, because its initial $3 million offer to Banco Santander to buy the hotel was not accepted."

AS has made a counter offer for the plot of land, seeking to end the dispute after PMP offered them a nine-acre property including the two-acre parking lot and an additional seven acres where a condo-hotel could be developed. "At the time, we were willing to negotiate but we simply cannot invest $11 million for a parking lot in addition to the $6.1 million hotel acquisition plus the $7 million renovation project," Tavales said.

Parking issue just the tip of the iceberg

Candelero Hotel’s $7 million renovation plan as proposed by AS must comply with construction codes and regulations adopted by the PMP Architectural Review Board (ARB) since the hotel is in the Palmas del Mar complex. According to Morgan Stubbe, AS’ proposal includes adding 5,000 feet to the hotel’s ballroom and increasing the number of rooms, requiring the hotel to provide nearly 400 parking spaces as well as a letter of approval from the owner of the land to use the existing parking. Both dispositions are listed in the ARB code approved in July 2003 and endorsed by the Palmas Homeowners Association.

However, Tavales argues PMP’s actions are intended to remove AS from the hospitality business in Humacao. "I’m willing to discuss the evidence we have, and show [PMP] that we’re right," he said. Morgan Stubbe denies AS’ allegations.

Tavales suggested the PMP has a conflict of interest because four members of the ARB board are PMP employees. PMP controls 405 votes at the 3,000-member Palmas Homeowners Association, and Tavales acknowledged the association has granted Palmas ARB, ascribed to PMP, the power to evaluate development projects.

Morgan Stubbe and PMP say they’re interested in Candelero Hotel’s reopening since it would benefit the community. "Palmas del Mar’s master plan, originally conceived two decades ago, projected three hotels focused on different markets," said Morgan Stubbe.

The PMP is negotiating with Hong-Kong based Mandarin Oriental to open a five-star hotel elsewhere on the sprawling resort. According to Morgan Stubbe, the two properties would not compete with each other because they would appeal to two completely different markets.

This Caribbean Business article appears courtesy of Casiano Communications.
For further information please contact

Self-Determination Legislation | Puerto Rico Herald Home
Newsstand | Puerto Rico | U.S. Government | Archives
Search | Mailing List | Contact Us | Feedback