Tallahassee Circuit Judge John C. Cooper on Sept. 24 granted summary judgment of $32.6 million for Wells Fargo, trustee for the mortgage holder and ruled that IB Tallahassee defaulted on the mortgage. IB Tallahassee lists Burnette as manager and is identified as the borrower in court documents.
Shutts & Bowen lawyers who represent the bank said they could not comment. A request for comment from Burnette’s attorney was pending Thursday morning.
If the money isn’t paid with 4.25% interest, the court said, the Clerk of Court shall sell the hotel to the highest bidder at public auction at 11 a.m. Oct. 28.
That was the original sentencing date for Burnette, convicted Aug. 13 on federal corruption charges involving a pay-to-play extortion scheme that also ensnared former city commissioner Scott Maddox and his partner, Paige Carter-Smith.
Acting U.S. Attorney Jason Coody said in a news release after the trial that the verdict “affirms a multi-year investigation of public corruption in the city of Tallahassee.”
Maddox was sentenced to five years and Carter-Smith got two years. Burnette faces a maximum sentence of 20 years in prison on extortion, fraud and other charges. His sentencing date was moved to Nov. 9.
The hotel itself was at the center of the trial. Prosecutors asserted that Burnette cut a $100,000 payment to Maddox for his abstention on a vote that would have allowed a rival to move forward with a competing hotel. Jurors ended up acquitting Burnette on a racketeering charge that involved the hotel allegations.
More back story:
Burnette said hotel was ‘front door of Tallahassee’
Burnette and his former business partner Kim Rivers, now his spouse, had big plans for the 16-story hotel built in 1972 when IB Tallahassee bought it in 2015 for $21 million.
In a 2015 article, Burnette told the Democrat the hotel “was the front door to Tallahassee” – a place where those visiting would get their first experience of the capital.
At the time, the principals in the group included Rivers, Darren Phillips and Frank Whitley.
They wanted to build on the DoubleTree experience for guests, adding an enhanced facility to the high-grade service already provided, Rivers said at the time.
“Our job, as we see it, is to really increase the customer experience,” Rivers said. She went on to be CEO of Trulieve, the nation’s biggest medical marijuana company.
From 2016 to 2019, Burnette poured $8 million into a renovation and added a futuristic-looking 17th floor restaurant and lounge with views of downtown.
Potential buyers seem interested
Some potential buyers say they’d be interested in acquiring the property.
Brian Ballard, one of the state’s most powerful lobbyists, told the Tallahassee Democrat he would “certainly take a look at it.”
In a June article in the Democrat, Ballard said he initially considered building a hotel instead of a modern six-story office building at 201 E. Park Avenue, where his Ballard Partners firm is headquartered.
He decided against that since the parcel size would require an even taller building than what’s currently standing. At that time of the article, when asked if he has any other plans to do anything else downtown, Ballard said, “Well, I’ll never say never.”
The DoubleTree could be Ballard’s entry into the hotel industry, despite several new hotel properties opening in Tallahassee’s market. The most recent downtown competitor is the new AC Hotel by Marriott Tallahassee Universities at the Capitol at Cascades Park.
“It’s a beautiful property. It’s an iconic piece of downtown Tallahassee,” Ballard said Thursday of the DoubleTree. “It’s something I would be interested in, but I think the debt structure seems to be so complicated. It might just be too tough.”
Ballard said that he’s had numerous clients that have stayed at the DoubleTree over the years. He said the service for the last seven or so years hasn’t lived up to its potential but could in the “right hands.”
“It’s really never got a passing grade on service. I think they haven’t put enough money into it,” he said. “Maybe the bankruptcy court will sort it all out. And once they do, I certainly am very interested in it, if all the financial stuff gets resolved.”
Even though the DoubleTree is saddled in debt, commercial real estate experts say the site is still an attractive asset in downtown Tallahassee.
“The DoubleTree has always had a superior location practically over every other hotel in downtown,” said Ed Murray, commercial broker and president of NAI TALCOR. “You can walk to the Capitol. You can walk to the courthouse. It’s on the park. It’s just a tremendous location.”
To be successful, Murray said the property has to be kept current and relevant.
“Hopefully that one is. I don’t know,” he said. “But your location trumps everything normally. It always has been and always will be a good location.”
Pandemic blamed for financial woes
Despite its location, the DoubleTree has not generated enough revenue to pay off its financial obligations, according to court records.
According to the complaint filed in December, IB Tallahassee borrowed $25.5 million from Goldman Sachs. IB Tallahassee defaulted on the loan in April 2020 after the company stopped making payments.
In its answer to the complaint, IB Tallahassee blamed the COVID-19 pandemic for its failure to keep up with mortgage payments.
“Due to the unprecedented and unforeseen economic conditions now encompassing the nation, and more particularly in Florida, IB Tallahassee is unable to perform on their obligations to the Plaintiff, which is itself experiencing these harsh economic realities,” the company said.
The company also said that the property’s value was equal to the amount owed.
Wells Fargo asked the court in January to appoint a receiver to take charge of the property, and amended that request in June, saying the borrower had refused to comply with its obligations under the loan agreement, including putting money from the hotel into a lockbox account.
“The Borrower remains in control of all of the revenues generated by the DoubleTree Hotel Tallahassee despite the Borrower’s complete and total failure to pay the due amounts on account of the loan,” the supplemental motion from June 2 said.
“The refusal of the borrower to comply with the most basic cash control provisions of the loan documents is further evidence that the appointment of a receiver is not only supported by the remedies provision of the Mortgage, but also called for by controlling law,” the motion said.
The court granted receivership two weeks later. Hotel staff were notified of the receivership appointment and the general manager, John Kelly, was let go.
Other defendants listed in the complaint are RB Tallahassee, whose officers are out of Columbus, Ohio; Burnette Roofing, an inactive corporation that listed Burnette as its president; CEMEX Construction Materials Florida, out of Palm Beach County; and 1 Hour Signs, a company owned by Scott and Jennifer Thornton of Tallahassee.
But the complaint said those defendants may also have claims to the property. For example, the complaint said RB Tallahassee may claim an interest in the property by virtue of a final judgment of $150,000 plus pre-judgment interest of $8,400 plus lawyer fees, awarded by the court against IB Tallahassee.
Jeffrey Schweers is a capital bureau reporter for USA TODAY NETWORK-Florida. Contact Schweers at firstname.lastname@example.org and follow him on Twitter @jeffschweers.
Subscribe today using the link at the top of the page and never miss a story.