Resort developer sues city over $1.7M

Group disputes city’s claim it got stiffed on Margaritaville’s sale

HOLLYWOOD – The developer of Margaritaville has filed a lawsuit claiming Hollywood is “grasping for straws” in demanding more than $1.7 million in proceeds from the sale of the resort earlier this year.

Lon Tabatchnick and a spokesman for his partner Starwood Capital declined to comment Tuesday.

The lawsuit, filed in Broward

Circuit Court on Nov. 14, claims the city’s argument is “desperately flawed” and represents a “twisted interpretation” of the contract approved by commissioners five years ago.

“It’s within their right to dispute the city’s demand,” Mayor Josh Levy said Tuesday. “And the interpretation of the contract language will be decided by a judge, the American way.”

Margaritaville was sold in April for $190 million, triggering questions over whether Hollywood was owed money from the sale.

Hollywood owns the land on which the 17-story resort was built and has been getting lease payments since it opened in fall 2015.

Under the terms of the contract, the developer agreed to pay the city 5 percent of the profit from any sale.

But when the resort sold, Tabatchnick told Hollywood he and his partner made no profit on the sale.

City officials didn’t take his word for it and spent months doing their own research.

On Oct. 15, City Attorney Doug Gonzales sent a certified letter to Tabatchnick and Starwood saying Hollywood was entitled to $1,719,962.41 in so-called transaction rent. The letter gave them 30 days to pay up.

The lawsuit says Hollywood erred in assuming the parking garage was not part of the developer investment.

Now Tabatchnick and Starwood are hoping a judge will tell Hollywood to bug off.

Their lawsuit claims the contract was “clear and unambiguous.”

Commissioner Peter Hernandez, the lone commissioner to vote against the project, disagrees.

“There is nothing further from the truth,” Hernandez said. He declined further comment, citing the pending litigation.

The deal was so complicated, some commissioners said they didn’t realize they’d approved a $23 million giveway to get the deal done.

Taxpayers kicked in $23 million to help bring the Jimmy Buffett-themed resort to Hollywood beach.

Turns out it was a loan that became a grant between the third draft and final version of the 99-year lease agreement.

Because the developer received another $5 million to make improvements to Johnson and Michigan streets, critics claim the grant was actually $28 million.

The news came to light on April 18, when commissioners approved the sale of the resort after the fact to private equity firm KSL Capital Partners.

TAIMY ALVAREZ/SOUTH FLORIDA SUN SENTINEL Margaritaville, built on land owned by Hollywood, opened in 2015. It was sold to a new owner in April. The developer is now suing Hollywood after the city claimed it was owed $1.7 million on profits from the sale.