Friday, February 11, 2011

The New Flagship Should Attract Folks!

Repairs, amusement rides planned for Flagship

Published September 25, 2009
GALVESTON — Landry’s Restaurants Inc. said it plans to repair the storied Flagship Hotel, where today curtains billow out through shattered windows and tourists stop to photograph gaping holes torn in outer walls by Hurricane Ike a year ago.

The plan is a departure from the Houston-based company’s intention in June to sell the iconic 225-room hotel at 25th Street and Seawall Boulevard.

Landry’s said in June it was in talks with a serious buyer for the hotel on pilings over the Gulf of Mexico.

Landry’s had said it would consider demolishing the hotel and developing a “pleasure pier” with amusement rides if a sale of the 44-year-old property fell through.

But island native and Landry’s CEO Tilman Fertitta will move ahead with plans he made years ago to improve the troubled hotel, officials said this week.

“Mr. Fertitta has personally toured the property and is very excited about making the Flagship a true icon that it should be,” Steve Greenberg, vice president of governmental affairs for Landry’s Restaurants, said Tuesday.

The Flagship Hotel, closed since Hurricane Ike struck Sept. 13, 2008, was a problem property long before Landry’s bought it in 2004.

Before crews can begin repairs, Landry’s, which has invested more than $100 million in hotels, restaurants and entertainment complexes on the island and in Kemah, must get permits from the city.

But it also must work out legal issues that have stymied past attempts to return the Flagship to a major tourist draw, Greenberg said.

Looming Reminder

The Flagship has become the most visible symbol of Ike’s destruction.

Storm recovery, including rebuilding of the famous souvenir shop Murdoch’s Pier at 2215 Seawall Blvd., is apparent everywhere on the island, but the Flagship has been untouched by construction crews for a year.

Its battered state has frustrated some residents, tourists and city officials.

Some tourists just visit the site to pay homage to a hotel about which they have fond memories.

And some photograph it to show folks back home the magnitude of Ike’s destruction. But that’s not how officials want tourists to remember a resort city where hundreds of shops, restaurants and hotels have returned, in many cases improved.

‘What’s Going To Happen?’

Tourists and island residents want something to be done, city officials said.

“The most commonly asked question is: ‘What’s going to happen with the Flagship?’” RoShelle Gaskins, spokeswoman for the Galveston Island Convention and Visitors Bureau, said.

The recession has slowed efforts to make repairs to the hotel, Gaskins said.

“The Flagship has been the eyesore left from Ike, but we understand the economy has played a major factor in its recovery,” Gaskins said.

A renewed Flagship Hotel would help in the city’s efforts to revitalize the seawall, a major tourism driver, Gaskins said.

Legal Tangles

Although the Flagship sits on prime real estate, it has languished for years as various owners, including the city of Galveston, tried to evict its operator, The Flagship Hotel Ltd., accusing the company of letting the property fall into disrepair.

Landry’s paid the city $500,000 for the hotel in 2004, saying it planned to spend $15 million to transform it into an entertainment plaza with amusement rides, including a roller coaster.

Landry’s attempted to move ahead but was stopped by agreements that gave Daniel Yeh, head of The Flagship Hotel Ltd., control of the hotel until 2031.

Then Hurricane Ike put a strange twist in the saga: Yeh wanted out of the lease, and Landry’s wanted Yeh’s management company to stay put.

Landry’s Restaurants and affiliated companies filed a lawsuit Dec. 31 in Galveston’s 405th District Court to keep Yeh from terminating the lease.

Landry’s asserted the hotel operator breached its lease by failing to keep enough insurance on the property.

The Flagship Hotel Ltd., which took over the property in 1990, had only $3 million in windstorm insurance and no coverage beyond that amount for water damage or storm casualty, according to the lawsuit.

The lease required $10 million in insurance coverage.

Landry’s officials at the time estimated the storm caused $7 million in damage.

The litigation was near resolution, attorneys for Yeh and Landry’s officials had said in June. Yeh’s lease, renegotiated after Landry’s purchased the property, has expired.

Yeh was sentenced in September to 30 months in federal prison for filing false claims in a Federal Emergency Management Agency lodging program for hurricanes Katrina and Rita, which struck the Gulf Coast in 2005.

Occupancy Issues

Landry’s bought the Flagship when the island’s real estate market was soaring and developers were flocking to the water. Credit markets have since tightened, making financing projects tough.

The Flagship wasn’t performing well compared to other island properties before the storm forced its closure.

It had an $80 rate with 46 percent occupancy, according to San Antonio-based industry tracker Source Strategies Inc. Revenue per available room, an important metric to the hotel industry, was $36 in the months before the storm. The island average then was $68.46.

The city built the Flagship in 1965 as a show of confidence after Hurricane Carla struck the coast.

If Landry’s developed an entertainment complex, it would return the 25th Street pier to its roots. In 1943, the city built the Galveston Municipal Pleasure Pier.

At 1,130 feet long, the pier held a dance hall, a 2,000-seat open air arena, restaurants and concessions, according to the “Galveston Architecture Guidebook.”

Landry’s officials declined to divulge what their specific plans were.

The company is assessing the price of repairs, Greenberg said.



No comments:

Post a Comment