March 3, 2009 - Robert Falor - Grand Jury, Cuyahoga County, Ohio

Illinois developer with Florida ties indicted

A developer is accused of pulling a scam involving a fizzled condo-hotel venture in Chicago.

Chicago hotel developer indicted in Ohio

An Ohio grand jury has indicted Robert Falor, the Chicago developer whose failed attempts to redevelop three downtown hotels left a trail of bad feelings and lawsuits from investors and lenders.

Mr. Falor stole $400,000 from an Ohio man who invested in a plan to convert the former Hyatt Printers Row into a so-called condominium-hotel, according to the indictment by a Cuyahoga County, Ohio, grand jury. The project failed, and a mezzanine lender ultimately took over the hotel at 500 S. Dearborn St., now called the Hotel Blake.

The grand jury last week returned an indictment of one count of theft, a felony, meaning Mr. Falor, 41, could face as much as five years in prison if convicted, according to a spokesman for Cuyahoga County prosecutor Bill Mason.

The developer’s arraignment is scheduled for March 12. Attempts to reach Mr. Falor were unsuccessful.

Mr. Falor attracted national attention starting about five years ago by launching a series of hotel projects in Chicago and South Florida. He was one of the country’s boldest promoters of condo-hotels, a hot investment fad during the real estate boom that failed to live up to the hype of its boosters.

In a condo-hotel, developers sell off individual rooms as condos to investors, who are free to stay in the hotel or have their units rented out when they’re away, generating income.

While Mr. Falor had a knack for raising money, he failed miserably when it came to executing his conversions. All three of his local condo-hotel projects — the 162-room Hotel Blake, the 454-room Hotel 71 at 71 E. Wacker Drive and a 98-room project at 202 S. State St. — wound up in Bankruptcy Court after entities led by Mr. Falor defaulted on construction loans.

Nicky Hilton and Robert Falor planned “Nicky O. hotels,” to include the Edison Hotel in Miami Beach.

At one point, Mr. Falor planned to rebrand the Printers Row property as a Nicky O hotel, a chain launched by Hilton Hotels heiress Nicky Hilton. But that plan fell apart and the two ended up in court.

The Ohio investor, Michael Voll, met Mr. Falor in July 2004 when the developer was raising money for the Printers Row project. In a meeting at a downtown Cleveland hotel, Mr. Voll gave Mr. Falor a $400,000 check for a stake in the Blake development, according to the prosecutor’s office. The developer broke the law when he falsely told Mr. Voll that an entity he led owned the hotel, the spokesman says.

“None of (the money) went to the thing that he told us it was going to go to, which was to convert the hotel into condos,” Mr. Voll says.

As it turned out, the money was used for other purposes not related to the hotel project. The Falor-led entity had the hotel under contract under an installment sale, but it never closed on the transaction.

The indictment comes two years after Mr. Voll sued Mr. Falor in federal court, accusing him of “fraud, self-dealing, theft and gross mismanagement” at the Hotel Blake and three condo-hotel projects in Florida.

To settle a related suit filed by Mr. Voll, Mr. Falor agreed in January that he owed the investor $1.5 million. But Mr. Voll says he doesn’t expect to see a dime, estimating that Mr. Falor has nearly $100 million in legal judgments against him.

Original Story - Crains Chicago Business

Related Story - February 21, 2009

Suit alleges Falor misled investors, mismanaged projects

Condominium-hotel developer Robert Falor is fighting a lawsuit alleging that he misled investors and mismanaged several projects, including the Hotel Blake in Printers Row.

Mr. Falor engaged in “fraud, self-dealing, theft and gross mismanagement” as developer of the Hotel Blake, according to a 40-page complaint filed last month by an Ohio investor, Michael Voll.

Mr. Falor’s alleged transgressions include loaning money from the hotel to a failed Falor-led condo-hotel project on State Street, and paying money from the hotel to support his father’s estranged wife, who didn’t work on the Blake development.

Mr. Falor referred a reporter to his attorney, Ariel Weissberg, who denies the allegations.

“Mr. Voll is pursuing litigation to obtain an unfair advantage over other investors and we will not cave in to his tactics,” Mr. Weissberg says. “We are vigorously defending the lawsuit and we believe we will prevail on the merits.”

Mr. Falor had planned to convert the Blake, a former Hyatt at 500 S. Dearborn St., into a condo-hotel, selling off its 162 rooms to individual investors as condominiums. But the project hasn’t worked out as planned.

Mr. Falor decided to drop the condo conversion last year after agreeing to rebrand the property as a Nicky O, a chain launched by Hilton Hotels heiress Nicky Hilton. That prompted a lawsuit last fall from an investor group that had signed a contract to buy 90 of the hotel’s rooms. Mr. Falor says he has severed his ties with Ms. Hilton after filing a breach-of-contract lawsuit against her last week.

Now, Mr. Falor faces a challenge from Mr. Voll, who filed a lawsuit in U.S. District Court in Cleveland in January. The suit says Mr. Falor indicated that Mr. Voll, who invested $400,000 in the condo-hotel project, would receive a “guaranteed return” of more than double his original investment.

Yet Mr. Falor “unilaterally altered his business plan” when he decided to drop the condo conversion and “disavowed his obligation to pay investors at all,” the complaint says.

Mr. Voll also accuses the Chicago-based developer of a litany of other misdeeds in three condo-hotel projects in Florida: the Mayfair Hotel & Spa in Coconut Grove; the Breakwater and Edison in Miami; and the Tides in Miami Beach.

Nearly three years after announcing his planned condo conversion of the Hotel Blake, Mr. Falor still has a contract to buy the property under an installment sale. Mr. Falor recently renegotiated terms of the contract with the owner, an affiliate of Chicago-based Marc Realty, after a dispute over whether the contract was still valid, Mr. Weissberg says. He declines to provide specifics.

Mr. Falor recently “demanded additional capital from investors,” something he didn’t disclose was a possibility when he was raising money, the lawsuit says. But Mr. Weissberg, his attorney, says the decision was “necessitated by development costs and acquisition costs that were totally above board.”

Mr. Voll, who is seeking compensatory damages in excess of $3.8 million, says he has spoken with about 25 investors in Mr. Falor’s projects. He expects to see more lawsuits filed against Mr. Falor.

“They are coming if they haven’t already come,” he says.

Original Story - Chicago Real Estate Daily

Update March 13, 2009

Robert Falor Fails To Show For Arraignment - Warrant Issued

A Chicago developer accused of scamming a Bay Village businessman out of more than $1 million failed to show up Thursday for his arraignment on a theft charge.

A Cuyahoga County judge is sued a warrant for 41-year-old Robert Falor.

Michael Voll of Bay Village invested more than $1 million in a concept called condo-hotels that Falor peddled. Falor has been sued in several states and agreed to repay Voll $1.45 million as part of a January court settlement.

Voll said recently that he has lost hope of ever seeing a dime of the money but that he would get some satisfaction from seeing Falor prosecuted.

Falor faces up to five years in prison if convicted of selling Voll property Falor didn't own. The transactions involved posh hotels in Chicago and South Florida. Falor sold people on the idea of buying hotel suites for private use and renting them out as hotel rooms the rest of the year. But Falor didn't have the authority to sell the suites, prosecutors contend.

County Prosecutor Bill Mason said he is confident Falor will be returned to the area to face the charge.

"There is no doubt," Mason said. "He can't hide forever. He will eventually be arrested and then brought back to Cuyahoga County to answer for his crimes."

Mason's spokesman, Ryan Miday, said that now that the warrant has been issued, Falor will be sought by police anywhere he goes.

Update Story - Cleveland Plain Dealer