Santa Monica Lookout
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School Board Looks Into DoubleTree Lease

Santa Monica Real Estate Company, Roque and MarkHarding Larmore Kutcher & Kozal, LLP  law firm
Harding, Larmore Kutcher & Kozal, LLP

Pacific Park, Santa Monica Pier

Santa Monica Convention and Visitors BureauWhen one lives in a city as breathtakingly beautiful and unique as Santa Monica, inevitably that city will be shared with visitors.

By Daniel Larios
Staff Writer

May 19, 2014 – On Thursday, the School Board heard testimony alleging that the Santa Monica DoubleTree Hotel, which sits on School District property, owes back money in rent and is violating labor laws.

Community members, Santa Monica students, labor organizers and clergy urged the District to examine the hotel’s lease more thoroughly, stating that the hotel owed much more than originally thought.

Under the lease, the District should receive a base rent plus a percentage of earnings after a certain profit level has been reached. According to public records, the District has never collected additional rent under the lease. A study posted on the City’s website indicates that the hotel had above market average daily room rates and occupancy in 2013.

“Additional rent is calculated by a formula, and at that formula’s base is the hotel’s net cash flow,” said Melanie Luthern, a community organizer for UNITE HERE Local 11.

As of 2010, the Procaccianti Group, a Rhode Island-based real estate investment and management firm that owns the hotel, had to recoup more $136 million in “cash contribution” before it would have to pay an additional revenue-base rent under the lease, according to financial records. 

Contributions have accrued at the Hotel since 1990, and the District has not provided estimates of outstanding “cash contribution” more current than 2010, according to Luthern.

This outstanding cash contribution prevents the School District from realizing all of its potential revenue from the property. 

“The District has a duty to the public to understand and explain to the public how net cash flow and other factors that determine additional rent have been taken over by the Hotel’s operators over time,” Luthern said.  

The Board also discussed passing a resolution in support Assembly Bill 1897, which would help address subcontracting in hotels like the DoubleTree. (“Santa Monica Doubletree Housekeeper Testifies on ‘Temporary’ Industry,” March 17, 2014)

The Board directed district staff to send a letter to the Procaccianti Group outlining some of the questions raised by the community during the meeting. The letter also would request documentation of current rent calculations and a response to the workers’ allegations of labor law violations. (“Union Pickets Santa Monica Hotel over Alleged Labor Abuses,” February 19, 2014)

“I support the board’s action and we’ll see what they [board staff] will come back with,” School Board member Ben Allen told the Lookout. “If there’s additional money owed to the district, of course we’ll pursue it.  We would be remiss not to.”

Said school board president Maria Leon-Vasquez, “We’re still in the investigatory phase, so there are still a lot of questions to ask concerning this issue,”.

The Doubletree did not return several requests for comment.

According to the Santa Monica Convention & Visitors Bureau’s 2013 Tourism Economic & Fiscal Impacts and Visitor Profile, more than 960,000 overnight visitors to Santa Monica spent $344,784,802 on lodging alone in 2013.

This generated around $42.3 million in hotel tax revenue for the City of Santa Monica, according to the report.

“In light of the PKF Study and the CVB’s report, we would expect that Hotel revenue will soon become an important source of District revenue,” said Luthern.

“But $136 million in outstanding cash contribution as of 2010 is a staggering figure, and we don’t know what the number is today,” she said. “The District should make understanding this situation its top priority,”

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