Black-Owned Miami Beach Hotel Goes Belly Up

The Royal Palm Hotel will be sold in a public auction in May.

​The Royal Palm Hotel on 16th Street and Collins Avenue was supposed to be a beacon of atonement for Miami-Dade County's racist past.

In 1989, county officials snubbed South African leader Nelson Mandela when he visited Miami. African Americans across the country boycotted Miami-Dade, costing the area tens of millions in lost tourism dollars. So Miami Beach came up with a plan in 1993 to loan $10 million to a black developer to build the city's first black-owned convention center hotel and provide management opportunities for blacks in the hospitality industry. In 1995, Miami Beach selected R. Donahue Peebles, a charismatic Washington D.C. developer who got his start doing deals with former D.C. Mayor Marion Barry.

Fifteen years later, the Royal Palm is an albatross and its mission destroyed by hubris, lawsuits, and poor management. During the project's construction phase, Peebles bickered with the city over alleged defects in the building's structure. After the hotel opened in 2002, the developer refused to pay his rent until the city commission in 2004 renegotiated his deal to allow him to convert some of the Royal Palm rooms into condo-hotel units.

That allowed Peebles to sell the hotel's majority interest to investors Guy Mitchell and Robert Falor for $127 million in 2005. Peebles reportedly made a $48 million profit.

But the condo-hotel concept never took and the Royal Palm began missing loan payments. In 2007, Peebles -- who remained a minority owner -- sued Mitchell and Falor citing mismanagement. He won, and a circuit court judge gave Peebles management control over the Royal Palm. But it was too late.

South Florida Business Journal reported on April 1 that the hotel is set to be auctioned off on May 27 after its owner, Royal Palm Senior Investors LLC, lost a $142.7 million foreclosure judgment to Wachovia Bank and Credit Suisse First Boston. Peebles did not return Riptide's call requesting comment.

However, Marilyn Holifield, an attorney with Miami law firm Holland & Knight, which helped organize the black boycott, says the Royal Palm will always serve as "a monument to the boycott and the goodwill of our community."