Nikki Beach Hotel and Resort Playa Blanca Deal Falls Apart

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The owner-operator of a new $40 million luxury condominium hotel in Playa Blanca, Panama has accused the Miami-based Nikki Beach company of improper termination of contract and of spreading false, defamatory statements which seek to undermine the success of the real estate development.

The five-star property, which features 240 condo hotel units (80 percent sold), was built and is operated by RG Hotels Group and its subsidiaries, owned by the Galvez family of Panama. Under a contract signed in December 2006, the local partners were granted the full exclusive right to use the “Nikki Beach” brand name in Panama for a term of five years. Later on, in May 2007, the parties entered into an operating agreement for Nikki Beach Hotels to take over management of the property.

“Despite the problems experienced with Nikki Beach as operator, we have upheld our commitments to condo owners, guests, and investors of the Nikki Beach Hotel and Resort Playa Blanca,” says Maru Galvez of Santa Fe Holdings S.A. and RG Hotels Group. “We remain dedicated to the successful operation of this beautiful property, and are currently exploring other alternative brands under which we can operate this popular resort.”

According to company lawyers, the Panamanian developer had reasonable basis to doubt Nikki Beach’s ability to fulfill its contractual obligations with regard to operations. In 2008, Nikki Beach ran a major hotel in Turks and Caicos into bankruptcy. Ten other Nikki Beach projects in the region, including a hotel in Roatan, failed to materialize.

Despite their promises of a new crew of top-level managers to be sent to Playa Blanca, a mass exodus of executive staff from the company required the local partner to take over operations. Instead of assuming responsibility, lawyers say, Nikki Beach published false and damaging information on its website disregarding the legally granted use of its brand name on the Playa Blanca property, and stated it was a matter of litigation when in fact currently no litigation has yet been initiated.

At every stage throughout the construction process, representatives of Nikki Beach were present on the ground in Panama to supervise the work quality and progress, and even shipped in specially made furniture and issued custom design requests in the final stages. In October 2010, when the hotel was 95% complete, Nikki Beach gave notice to suspend the operating agreement, later arguing that the hotel did not meet design specifications.

“Our client has a clear contractual right to operate the hotel under the brand name, while their partner Nikki Beach is seeking improper termination of contract without any legitimate grounds,” says Juan J. Rodriguez, partner at Carey Rodriguez Greenberg & Paul LLP and counsel to the Galvez family group of companies. “They have simply walked away from their commitments in Panama, which is a grave disappointment for a company that holds itself out as a luxury hotel operator.”

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