Hilton’s Curio Collection Diplomat Resort Sold For More Than Any Hotel In Last 4 Years

The hotel used to be a Westin, and the story of how it became one is interesting.

In the 60’s and 70’s the original Diplomat was frequented by Rat Pack types. The hotel closed in 1991 and was acquired by the International Brotherhood of Plumbers and Pipefitters in 1998, torn down, and rebuilt at a cost of ~ $800 million in construction costs and $40 million for the property. That’s about what it’s being sold for today – without adjusting for inflation.

When the feds looked at a building project funded by a union pension to a tune just shy of $1 billion dollars they said… nah, fuggedaboutit.

The Department of Labor found that the union had done “no feasibility studies, market analyses, market-tested construction budgets, construction schedules, economic models or gathered other information with which to make an informed decision.” They just embarked on a billion dollar project with untold potential for untold sorts of activities. And since the union’s pension fund was doing it, ERISA law came into play.

The suit also alleged that the trustees failed to maintain adequate financial controls over construction costs and paid excessive fees to service providers on the project.

The suit alleged that the sale of the real estate from the union to the pension plan was prohibited under ERISA because of the relationship between the union and its pension plan, without special DoL permission.

In their DoL exemption application, the suit charged that the trustees failed to disclose that the anticipated development would require the further investment of hundreds of millions of dollars of the plan’s assets.

The exemption approved by the department covered only the terms of the $40 million sale of the property from the union to the pension plan, not the prudence of the property’s subsequent redevelopment using union pension funds, the government said the plan invested more than $800 million in the Diplomat project.

So the union’s pension fund was forced to get an independent trustee, and couldn’t independently manage the property.

The hotel was flagged as a Westin even before the case was settled, but I understand it still went ahead and purchased its own mattresses in what must have been an interesting contract for a 1000 room resort. While the sheets at time of opening were all Westin-regulation Heavenly Bed, the mattresses at the time were not.

The Labor Secretary who sued on behalf of union members to protect their pension investment, and obtained $10 million back from union officials, was future Transportation Secretary Elaine Chao.

As a Starwood Platinum this hotel was for years among my very favorites. There were 86 suites in the upgrade pool, most corner suites with wraparound balcony. The Atlantic Ocean views were fantastic. And the hotel’s club lounge was a serene space, once quite generous with its offerings, and itself featuring views of both the Atlantic and the Intracoastal Waterway.

I would stay there several times a year as my go-to when visiting family in the area, and over many years think I failed to receive a suite upgrade only one time.

by Gary Leff