Virgin Hotels Sues Owner of it’s New San Francisco Hotel

Main Photo: The Rooftop Bar at the Virgin San Francisco

Date: May 2020

Location: San Francisco, California, USA

No. of Keys: 194

Owner: Paradigm Hotels Group, owned by Jay Singh.

Management: Virgin Hotels sued the owner of its one-year-old hotel in San Francisco’s South of Market neighbourhood, accusing it of wrongly terminating the company’s 20-year contract to manage the hotel.

The lawsuit was filed Wednesday in San Francisco Superior Court against 250 Fourth Development LP, an entity tied to Paradigm Hotels Group, owned by Jay Singh.

The complaint says Singh used the hotel’s temporary closure due to the Covid-19 pandemic as the basis for issuing a letter that “prematurely and wrongfully” terminated the management agreement. He sent the letter April 8, with termination effective April 15, the complaint states.

Miami-based Virgin is seeking a court order preventing Singh from terminating the agreement or that he pay damages of more than $20 million — the amount due over life of the management contract — plus other legal fees. The company also wants the court to declare the termination letter null and void.

When reached Wednesday afternoon, Singh said an email from the Business Times requesting comment was the first he had heard of the lawsuit. He said he was surprised because he had a “good faith” expectation that he and Virgin Hotels were going to discuss the issue in the near future.

Later that evening Singh, the CEO of Paradigm Hotels Group, sent a statement from his attorney.

“Our client believes the lawsuit is a misguided attempt by Virgin Hotels deflect scrutiny by Virgin from its own failures, says William A. Brewer III, partner at Brewer, Attorneys & Counselors and lead counsel for Paradigm. “Paradigm believes the hotel suffered from gross mismanagement and Virgin Hotels’ failure to deliver upon the promise of a national brand. Paradigm believes Virgin Hotels is hiding behind the COVID-19 crisis – using the pandemic as a smokescreen to avoid taking responsibility for failures that began well over a year ago.”

The 194-room hotel, 250 Fourth St., a half a block from Moscone Center, fully opened in May 2019 after a soft opening in February. Its design combines nods to San Francisco’s Victorian-era past and influences from rock-and-roll and the Virgin brand’s British origins.

Virgin and Singh signed the hotel agreement in 2013 and the hotel was expected to open in 2016. Virgin’s complaint says Singh’s focus on other hotel projects and indecision on design and other matters delayed the project for three years.

Virgin’s lawsuit says the agreement could be terminated only after three full fiscal years, and then only if the hotel failed to meet certain revenue targets agreed to between the hotel and property owner.

“Despite numerous starts and stops with the project construction, at no fault of our own, we have gone to great lengths over the years to support Mr. Singh and those involved with the San Francisco hotel,” Virgin CEO Raul Leal said. “We are deeply disappointed that our partnership has taken this unfortunate turn and are hopeful to reach a resolution that serves the best interests of both parties.”

“Paradigm Hotels Group is committed to making its San Francisco hotel a leading worldwide destination,” says Paradigm CEO Jay Singh. “Unfortunately, under Virgin Hotels, the property was burdened by cost overruns and failing management – not to mention an affiliation with a brand that is essentially nonexistent. Our ownership group will deliver upon the promise of this extraordinary property – for customers, hotel employees, and the community. We look forward to welcoming guests as soon as California returns to business as usual.”

THPT Comment: Without wishing to prejudice and legal matters here, we hope this is not the beginning of such cases, where owner and management company use the Covid-19 as an excuse for other reasons where have fallen out.

First Seen: San Francisco Business Times

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