In the business world, a deal closes with a lot of fanfare.
There’s a big transfer of funds, a closing party, a ground breaking, or something to signify a new beginning.
But at the curious intersection between business and government, a deal is never quite a deal. Closings happen quietly, often without notice. And then the day breaks anew, some ground gets moved and the fights start again.
Which brings us to the curious case of the Miramar Hotel, one of the most closely watched resort projects in Southern California, and a roughly $180 million project that’s thrown its share of challenges at Los Angeles developer Rick Caruso.
In case you’ve been asleep for the past 15 years, the once-beloved hotel catering to a middle class clientele, has been shutdown for more than a decade. The rotting property has changed hands several times with Beanie Baby billionaire Ty Warner tossing in the towel before Caruso took over.
To look at the headlines, you would think that this deal is headed nowhere. In recent weeks, the Montecito Association has slapped a slew of new conditions on the project before granting a most reluctant approval.
Neighbors have appealed, citing traffic and other impacts. A visibly angered Caruso came away from the meeting griping about limits placed on beach club memberships among other things.
But in South Santa Barbara County development circles, as in the witches scene from MacBeth, “nothing is but what is not.” And the fighting over Miramar is a sign that this project is literally barreling down the road for approval, albeit one that is not going to be trumpeted from any rooftops.
The reason is, in a word, money. The Santa Barbara County Board of Supervisors, which will hear the Montecito group’s appeal, cannot afford to let the sales tax revenue from construction, property taxes and the hotel bed taxes slip off the table. Since the onslaught of the Great Recession, the county has been broke and every day its pension obligations get bigger and bigger.
County staff knows this, the Board of Supervisors knows this and so does Caruso. It is the elephant in the room when Miramar’s impact is debated.
Meanwhile, with interest rates at a decades-low level, construction loans are plentiful and greater L.A. room rates rising at double-digit levels amid a tourism boom, Caruso has nothing to gain by playing a long-term waiting game. Now is the time to strike a deal and build the Miramar — he knows it, the opponents know it and the Board of Supervisors does too.
Yes, there may be more drama. And getting anything through this board of supervisors is no guarantee. But for a group with a very wide range of political views, the five members of the board communicate fairly well and all have a pragmatic streak.
In a world turned upside down, you can take this to the bank. The louder the parties squawk from here on, the closer we are to breaking ground. No champagne, please.
What ever happened to antitrust
One of the ironies of the Obama Administration is its continued fawning all over big business while it professes to care about the middle class.
Consider two recent cases where antitrust issues are largely ignored and low-taxed private equity funds make a killing.
First, the Feb. 4 merger announced between Staples and Office Depot. Just a little over a year ago, Office Depot and rival Office Max merged, creating a duopoly in the office superstore space.
The companies argued before regulators that with Target, Wal-Mart and others targeting small businesses and home offices, there was plenty of competition. Now Staples and Office Depot are arguing the same thing to persuade regulators that the two biggest players should become one.
Second, the merger of Safeway into Albertson’s private equity owners. By selling off a relative handful of Vons’ stores in California and elsewhere to discounter Haggen, the Federal Trade Commission greenlighted a duopoly in which Ralphs and Vons will dominate the grocery category. That is, until one swallows up the other.