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Pier Pressure

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

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.

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.

In recent years, Fertitta has stolen -- some would say purchased -- the political thunder away from the Moodys and Woodlands oil magnate George Mitchell, who pumped millions into the downtown Strand district.

During the past two years, Landry's has invested more than $50 million into Galveston properties, adding to substantial holdings on the seawall and the downtown Pier 21 area. Landry's has proclaimed a six-block area as the "Galveston Island Convention Center District at the San Luis Resort." Signs bearing that title were attached last month to light poles in front of Landry's cluster of hotels and restaurants along the seawall.

During high-stakes fights with the Moodys and others over the convention center three years ago, opponents began calling his overall plans "Fertittaville." One even brought up the Galveston-born businessman's family ties going back to the infamous bootlegging duo Sam and Rose Maceo, who were primary players on the island until the mid-1950s. Fertitta is on the record saying he would like to see some form of gambling on the island. That sparked rumors that his convention center, which opened in May, already has all of the electrical wiring securely in place for slot machines -- just waiting to be plugged in.

However, some of the anti-Fertitta sentiment washed over the 2004 race for a successor to departing mayor Roger "Bo" Quiroga. The election pitted restaurant owner Johnny Smecca against the eventual landslide winner: wealthy, self- proclaimed independent Lyda Ann Thomas.

Smecca had been a Fertitta ally on City Council and a close friend of Quiroga, a regular supporter of Fertitta and other large-scale developers. Shortly before he left office in May, Quiroga proposed naming the street next to the convention center Tilman Fertitta Boulevard. It didn't fly.

Fertitta "never came to the city with his hand out looking for tax abatements," says Quiroga. "He helped to put Galveston on the map, and yet people down here always find something to complain about. People here get jealous or something when someone is successful."

And to no one's surprise back in November 2003, the city formally sold the Flagship Hotel to Fertitta. Others had shown interest in the deal, but he was the sole bidder left in the final round.

Opponents revived their criticism that it was another sweetheart deal for the dominant force in local development. Others maintained that Fertitta is obviously the one with the deep pockets needed to transform the hotel to elite status.

Now Fertitta is the leading the charge against Yeh, saying he's run the above-the-ocean hotel straight into the ground.


Former Galveston officials and the city's Houston attorneys share the opinion that the hotel's condition is poor, as do some recent guests who wrote letters and sent e-mails about their experiences to city officials.

On two trips to the hotel, the Houston Press took informal polls of several guests. There were complaints about fuzzy TV reception, broken soft drink machines and ice dispensers on several floors and nonexistent room service. However, an equal number of guests said that at only $75 a night (with discount coupons) it was a clean, inexpensive place to bring the kids, especially for the view over the water.

For every creaky elevator, stained bathtub and musty odor -- another smell was repulsive -- encountered by a reporter, there were also scenes of freshly vacuumed hallway carpets and fresh linen being applied to beds inside tidy, Spartan rooms. A stroll around the fifth floor, which was closed to guests, revealed extensive renovations. Workers were ripping apart numerous bathrooms for drywall and plumbing repairs.

In April, a Landry's inspection team photographed what it called decrepit conditions at the hotel. Steve Scheinthal, Landry's executive vice president and general counsel, shows one photo that he says indicates several months' worth of accumulated bird droppings in a target zone -- at the edge of the hotel swimming pool. "You'll look at this photo and be outraged," he says. "Well, maybe that's too strong a word, not outraged like in comparison to the photos coming out of Iraq."

At the nub of the legal arguments is a strange, Clintonesque disagreement over the definition of two words found in the lease: "first class." The contract stipulates that the operators are to maintain the hotel to that standard.  

Yet to Yeh and attorney Fieglein, the list of deficiencies cited by Landry's is "vague," and the meaning of "first class" is open to interpretation.

"This is the most ridiculous thing I've ever heard," says Scheinthal. "The expert witness we had [in JP court] said that if you thought of the lowest level of a hotel, like a Motel 6, the Flagship couldn't even qualify for that status. They breached the contract, and they're out as far as we're concerned."

Yeh has appealed the eviction notice, setting the stage for a full trial in county court.

"Our position is that we can either continue to manage the hotel, or perhaps sell the lease to someone else. Maybe to Landry's, or maybe to a third party," Yeh says.

"We're here if he wants to talk to us," Scheinthal says, "but he is terminated as far as we're concerned, and we expect the court to rule in our favor, so it's too little too late."


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