Pier Pressure

Fertitta and friends take on the operator of Galveston's forlorn Flagship Hotel

Tilman Fertitta runs with an elite crowd. The CEO of Landry's Seafood Restaurants Inc. regularly rotates between the business and society pages, makes helicopter trips to oversee his extensive Galveston Island holdings and jets to New York to cozy up to Wall Street analysts.

But the man whose company reported record first-quarter revenues of $275.7 million recently found his interests represented in the most unlikely of settings: a justice of the peace courtroom, the place typically populated by penny-ante landlords trying to oust their often, um, colorful renters from six-pack complexes or garage apartments.

On June 18, Fertitta's legal team showed up for an eviction of its own. They argued that a tenant hadn't been taking care of property acquired by a Landry's subsidiary. Justice of the Peace Jim Schweitzer agreed, giving the renter five days to get off the property.

Some locals wondered if the topless mermaids were 
really hotel renovations.
Greg Barr
Some locals wondered if the topless mermaids were really hotel renovations.

In this case, the property is the 220-room Flagship Hotel, which sits on the 1,000-foot pier jutting into the gulf along the seawall at 25th Street. The tenant is Flagship Hotel Ltd., which operates the hotel and is owned by Sugar Land businessman Daniel Yeh.

The eviction ruling is the latest bizarre twist in the long-running battle over Fertitta's efforts to expand his oceanfront empire with a luxury inn on the pier. He wants to erect another entertainment attraction complete with -- what else? -- the same signature Ferris wheels now marking his turf in Kemah and downtown Houston.

That leaves some locals referring to the venture as more of the tourist-trap "Tilman World" glitzy transformations. Fertitta gained the eviction notice and has a strong ally in the City of Galveston. Despite that, he still finds Yeh -- a relatively small-time operator -- in the way of his proposed $20 million renovation of the Flagship.


Civic boosters and current and former city officials have referred to a rejuvenated Flagship as having the potential to become the "crown jewel" of the seawall district. That's roughly the same phrase recycled from 41 years earlier for the hotel complex. Two years after Hurricane Carla roared in to ravage the island in 1961, construction began on the Flagship. It was to be the city's shining beacon, a building that would restore the community's battered sense of pride and beckon tourists to Galveston once again.

City bonds funded construction of both the pier and hotel, built over state tidelands. Nide Corporation signed the original city lease to operate the complex. But it was not to be one of those win-win partnerships that politicians love to cite when TV cameras are rolling.

The lease changed hands three times before Yeh took it over in 1990. City officials say the hotel gradually lost its luster during that decade, despite calls for elevating the standards and maintenance of the property.

Yeh's attorney J. Michael Fieglein says relations between the city and his client were cordial in the beginning but "took a 180-degree turn" in 1996 after the operator began asking the city to live up to its obligation to maintain the swimming pool, railings, pier and driveways. The lease was amended in 1993, when Yeh's Flagship Hotel Ltd. made a second round of improvements demanded by the city.

Yeh says the operating company has spent about $1 million on renovations and interior remodeling. He argues that property surrounded by the surf would put any operator at a disadvantage because it requires constant upkeep.

According to the lease, the city is responsible for maintaining the pier from its surface down, but that issue spawned the first lawsuits in 1998. Fieglein says his client has paid the city $20,000 a year toward pier maintenance since 1990 but that the city spent none of that on repairs.

Houston attorney Bill Helfand, who represents the city against the Flagship operators, says the pier issue is "a red herring," an attempt to deflect attention away from the condition of the hotel. "It's like saying, 'The curb is not maintained, so I don't have to maintain the building.' "

And some of Yeh's supposed renovations have given the locals ample reason to chuckle. In 2000, the Flagship commissioned Houston sculptor Sergio Pineda to add a pair of identical mermaids stretching the full height of the hotel's 50-foot north-facing wall -- complete with breasts the size of Volkswagens.

The addition immediately raised the hackles of the island's conservatives and made local headlines as the city's scandal of the month. Later, when the L in the huge neon sign proclaiming the hotel's name remained burned out for several weeks, a whole new set of jokes made the rounds.

By 2001, the city had firmly planted a "For Sale" sign on its once-prized possession. That escalated the arguments about whether the city or the hotel was in violation of the lease. The city would go on to take a position that the lease would legally expire in 2006, although an appellate court ruled with Yeh -- that the terms were as stated, effective until 2031.

Fertitta's presence was felt as his redevelopment plans mushroomed along the seawall. That push exposed more prickly shards left over from the tumultuous power struggle between Fertitta and the Moody family, one of the city's most influential clans and creators of the Moody Gardens attraction.

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