The legal fight between the owner of the property at 250 Fourth Street in San Francisco's SoMa district and Virgin Hotels will go to trial in early February, and it remains to be seen whether a hotel will ultimately reopen in that building ever again.
Virgin Hotels San Francisco had a big, splashy opening in February 2019, a half block away from the Moscone Center, boasting restaurants and lounges on both its ground floor and its rooftop. And just a year later, it would close at the start of the pandemic and then quickly it was mired in legal drama.
The property owner, Jay Singh of Paradigm Hotels Group, terminated Virgin's operating agreement in April 2020, shortly after which Miami-based Virgin Hotels sued claiming breach of contract — saying that Paradigm had "wrongfully and prematurely" terminated their operating agreement.
Singh would later countersue, in July 2020, claiming that it was Virgin that was in breach, and making multiple claims about why. Among them, Singh's countersuit says, is that Virgin inflated its gross revenue in 2019 in order to also inflate its management fee for the property, and paid out large sums in employee bonuses and severance that were inappropriate. And Singh claims that he was misled in entering into a management agreement with Virgin in the first place due to the company "making false and misleading claims about Virgin Hotels’ ability and commitment to building a durable hotel brand in the United States."
There's also a bunch of stuff in the cross-complaint about
As the SF Business Times reports, Virgin is seeking over $20 million, which is equivalent to what they would have been owed in management fees over the life of the contract. And Singh is seeking unspecified damages.
In a statement to the Business Times, Singh's attorney says, "In our clients’ view, this prized hotel asset fell victim to false promises, fraud and mismanagement... Our clients look forward to this trial.”
Virgin calls Singh's claims "baseless," and said in a statement, "Virgin Hotels went above and beyond its contractual obligations in supporting the successful opening of the Virgin Hotels San Francisco. Mr. Singh delivered an incomplete property to Virgin Hotels three years late. Despite that, Virgin Hotels turned the property into an acclaimed, award-winning hotel in one short year as Mr. Singh benefitted from Virgin Hotels’ deep commitment, expertise and global brand."
The judge in the case has denied Virgin's attorneys' requests to dismiss some of Singh's counter-claims. And now the case is going to a jury trial beginning on February 7.
What's clear from all the claims so far is that this was a troubled business relationship going back to before the hotel had even opened. Both sides are blaming the other for construction delays that led a 2016 planned opening to be pushed back three years.
Virgin Hotels has gone on to open four more hotels since the SF opening, in Dallas, Nashville, Las Vegas, and New Orleans — the latter two just last year. They also operate a hotel in Chicago, and a New York hotel may be opening sometime this year.
In a separate lawsuit, a South Bay cybersecurity firm is suing Virgin Hotels claiming they were overcharged for a February 2020 event. Attorneys in that suit are seeking summary judgment, and that case may not go to trial.
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