2009-12-11 / Business

The biggest loser – the City of Columbia

By John Temple Ligon temple@thecolumbiastar.com

Columbia Hilton Photo by Mike Maddock Columbia Hilton Photo by Mike Maddock Greenville–based Windsor/ Aughtry, developers of the downtown Columbia Hilton hotel, responded to the City of Columbia’s request for proposals (RFP) in April 2004. The RFP called for a privately–owned convention center headquarters hotel as opposed to the recently rejected proposal for a city–financed, city–developed, and city–managed hotel, mostly because of the total development cost. Once the development cost went above $72 million for the city’s 300–room Hilton, each room on average would cost more than $240,000.

To carry costs and actually break even, the city hotel deal needed to charge around $240 per room per night at an occupancy rate of about 70 percent. Market studies at the time suggested maybe half that, $120 per night, was a reasonable expectation for a room charge. The city council decision was made to privatize the effort.

Windsor/Aughtry agreed to develop a 222–room full–service Hilton with minimal city participation, the least of the respondents to the RFP.

Members of the failed development team behind the city’s hotel deal filed suit against Windsor/Aughtry for “tortious interference with contract and intentional interference with prospective contractual relations.” The main exception among the team members in the suit was John Lumpkin, project director for Edens & Avant, lead developer for the city’s team. Lumpkin and Edens & Avant apparently saw little purpose in such a suit.

On their minds might have been the Memorandum of Understanding (MOU) dated April 17, 2003. Their signatures on the MOU implied they understood and agreed to GENERAL CONDITIONS: “Notwithstanding anything herein to the contrary, if the City determines that it is not feasible to proceed with the Hotel project, it shall have no liability under this MOU.”

Circuit Judge George C. James Jr. in his summary judgment (Nov. 15, 2009) said, “The Court finds that the MOU was not a binding and enforceable contract but rather nothing more than an agreement to agree on future contract documents. Therefore, summary judgment must be granted as to Plaintiff’s First Cause of Action for tortious interference with contract because it requires the existence of a binding contract.”

Judge James further said, “In their Second Cause of Action, Plaintiffs allege the Aughtry Defendants intentionally interfered with prospective contractual relations between Plaintiffs and the City... However, to recover on this cause of action, the Plaintiffs must also prove that the Aughtry Defendants intentionally interfered ‘for an improper purpose or by improper methods.’ “

Who won? Windsor/ Aughtry and their attorney Toby Ward appear out front, but the appeals process could take another two years before final success is declared. And even then, what did Windsor/Aughtry have to pay for legal defense?

Who lost? The plaintiffs included Columbia Realtor Charles Gary, Dallas–based hotel developers Garfield Traub, and the downtown architectural/engineering firm, Stevens & Wilkinson of S.C.

The big loser, though, is the City of Columbia. Legal fees to handle this unbuilt hotel mess, so far, appear to rise above $3 million. S&W could prevail in its separate suit to collect its fees. After a vote on city council and after what must have been additional agreements beyond the MOU, S&W was paid almost $700,000 at the end of 2003. S&W’s fees cited in an attachment to the MOU came to about $2,300,000, which means the city might have to fork over another $1,600,000 to S&W.

Windsor/Aughtry got its Hilton designed, built, and running for less than $400,000 in architectural/ engineering fees.

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