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Miramar Hotel

Paul Wellman

Miramar Hotel


Would the Miramar Ever Make Money?

Report Suggests Rick Caruso’s Hotel Project on Montecito Coast May Never Work


Wednesday, November 21, 2012
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Even if it were to perform well, the Miramar Hotel may not make financial sense, according to a recently completed third-party analysis of the project.

Keyser Marston Associates, an advisory group agreed to by both Miramar owner Rick Caruso and Santa Barbara County officials, analyzed a few different scenarios — including different occupancy levels and average daily room rates — and concluded the economic gap ranges from zero to $24 million, while the financing gap ranges from $22 million to $37 million. The proposed high-end hotel would include 186 rooms, a spa, beach club, banquet facility, and restaurant.

A new county bed tax rebate program — which would kick some cash that should be going to the county back to luxury hotel developers — would provide Caruso between $19.6 million and $21.6 million to offset that gap. But that still leaves some ground to make up.

Caruso spokesperson Matt Middlebrook said he wasn’t surprised by the report and that it only highlighted the need for the money from the rebate program. “I did not need a third-party analysis to tell us financing was going to be a challenge,” he said. Caruso always anticipated filling the feasibility gap with equity, Middlebrook explained, adding that the boost the tax rebate gives makes the project on South Jameson Lane more attractive to financiers.

The county has yet to approve Caruso’s application to the rebate program. As part of approving the application, the Board of Supervisors would have to find there is a public benefit, and the analysis could provide guidance along those lines. But they might not get there anytime soon. Last month, County CEO Chandra Wallar informed Caruso the county was suspending negotiations because an agreement on how to implement an incentive program for the Miramar Hotel wasn’t currently possible. The two sides disagree on how the funds under a rebate program should be appropriated over a 15-year program, and what happens should the county not give the money on an annual basis.

Meanwhile, as of Monday, county staff had approved non-expiring permits for the project, according to Dennis Bozanich, assistant to the County CEO. Caruso is only required to do two things to be entitled to the permits: demolish the property and pay $1.4 million, which he already has done. He has until March 2013, but can ask for extensions of his current permits until 2015. While originally he promised to demolish the buildings on the property when a bed tax rebate was in place, Caruso will “probably move forward with demolition” regardless, Middlebrook said. He said the citizens of Montecito deserve to get rid of the dilapidated buildings.

The move would be sound business as well, as the non-expiring entitlements make the property much more valuable.

Comments

Independent Discussion Guidelines

Just like Gray Davis paid too much for electricity and public pensions, Caruso paid too much for the Miramar property. Hubris in both cases.

JohnLocke (anonymous profile)
November 21, 2012 at 9:37 a.m. (Suggest removal)

"Caruso always anticipated filling the feasability gap with equity" . Welcome to Santa Barbara! No income property in this town will provide cash flow with NO down payment (equity). A tax rebate would be quite nice for any property investor as well as make any property more valuable.

JHL (anonymous profile)
November 21, 2012 at 10:50 a.m. (Suggest removal)

Caruso is spending too much time at the dispensaries.

bimboteskie (anonymous profile)
November 21, 2012 at 3:10 p.m. (Suggest removal)

Given Caruso's spread of interests and investments, I'd bet that Montecito, having proven itself inhospitable yet again, is not real high on his priority list.

JohnLocke (anonymous profile)
November 22, 2012 at 8:56 a.m. (Suggest removal)

Basically old news as everyone has figured that out for at least a year if not a decade.

Ken_Volok (anonymous profile)
November 22, 2012 at 2:14 p.m. (Suggest removal)

as another has stated previously, You'll never polish that turd.

easternpacific (anonymous profile)
November 23, 2012 at 9:26 a.m. (Suggest removal)

Not sure what JohnLocke thinks "Montecito" means in this case but it's funny he characterizes giving Mr Caruso $20 million in rebated bed tax as "inhospitable."

chubbco (anonymous profile)
November 23, 2012 at 11:18 a.m. (Suggest removal)

@chubbco: "Montecito" is the small-minded self-involved community that has already driven out 2 owners of the Miramar with their obstructionist ways, delayed improvements on the Biltmore and Music Academy for years, has blocked construction of a modern cell site for improved communication for several years (thus putting the roughly 1/3 of Montecito residents who have no land line at risk), has blocked improvement of the gas station at the corner of Olive Mill and CVR, tried to block the traffic circle at the other end of CVR (which is a HUGE improvement over the mess that existed before) and is now delaying the improvements to the 101 (thus ensuring continued pollution into Montecito from the traffic stopped on the 101 in their area - clever, huh?).

Montecito did not give Caruso the tax rebate; the County did - which by the way has been found questionable at best under state law.

I think the objectionista in Montecito are actually a very small fraction of the population (a few people out of the 10% that belong to the Montecito Association) - the rest pay no attention or don't care.

JohnLocke (anonymous profile)
November 23, 2012 at 12:55 p.m. (Suggest removal)

@JohnLocke - I don't think you actually understand what happened with Gray Davis. But, feel free to drag him into this, too.

I think Caruso knew exactly what he was doing at the time.

Frankly, "Montecito" didn't drive anyone out, but if you want to go there, the past proposals for the property would have been worse than the wreck we currently suffer with.

It's all very easy to continually refer to this as the fault of Montecito residents. I'm guessing you don't live in Montecito.

Native1 (anonymous profile)
November 27, 2012 at 7:08 p.m. (Suggest removal)

I think people believe if they slap "Santa Barbara" on something they'll strike it rich.

Ken_Volok (anonymous profile)
November 27, 2012 at 7:55 p.m. (Suggest removal)

@Ken_Volok, well certainly it works in other cities and markets! We're paradise, after all....and everyone seems to know it, ha!

The fact that it won't work in our own backyard is telling, right?

Native1 (anonymous profile)
December 10, 2012 at 3:41 p.m. (Suggest removal)

It doesn't work because our surroundings aren't exotic to us.

Ken_Volok (anonymous profile)
December 10, 2012 at 4:17 p.m. (Suggest removal)