In response to a request for public records submitted on behalf of Lagniappe last December, the Alabama Department of Conservation and Natural Resources (ADCNR) responded May 29 with a two-page financial summary of the Gulf State Park Lodge, indicating it recorded a net operating income of $1,779,682 in 2019.
Lagniappe has sought financial records related to the $140 million Gulf State Park Enhancement Project since the ribbon was cut on the lodge in November 2018 and ADCNR subsequently concealed the relevant details of a 22-year management agreement it signed with Valor Hospitality, a multinational company which operates the lodge, cabins and cottages at the park.
ADCNR has indicated the agreement contains proprietary information that if disclosed could harm the park’s competitiveness in the vacation market; therefore, it is not of public interest.
The most recent information provided by ADCNR is the bare minimum of the records request submitted last year, which sought profit and loss statements, monthly reports, check registers, average daily room rates, occupancy statistics, balance sheets and audits, all of which are required under the management agreement.
Instead, the simple “financial summary” prepared for the Alabama Trustee Implementation Group indicates that in addition to the $1.7 million in total net operating income generated in 2019, $1.8 million in “remaining lodge revenue” was repaid to the state park system. The summary also notes a 2017 legal settlement with the Gulf Restoration Network (GRN) requires Valor to establish and submit an annual budget and reports on the “operation and maintenance, management fees, capital reserves and insurance reserves (OMCI)” for a period of 15 years, but the first reporting period does not end until Sept. 30.
The settlement requires the state to fund the OMCI more than $65 million over the 15-year period, “assuring certain financial milestones would be met with respect to the project.”
Officials at ADCNR did not respond to requests to elaborate on the summary, but according to the management agreement, net operating income is the difference between gross operating revenues and gross operating expenses. Gross operating revenues is defined broadly as “all revenues and receipts of every kind derived from the operation of the lodge and enhancements and all departments and parts thereof,” while gross operating expenses include such deductions as Valor Hospitality’s management fees, the cost of sales, salaries, wages, bonuses, payroll tax, administrative and general expenses including third-party vendors, the cost of replacing equipment and supplies, the cost of uncollectible accounts receivable, insurance and more.
As Lagniappe previously reported, ADCNR has refused to provide information on fees Valor Hospitality would earn over the 22-year life of the contract, including its base fee, incentive fee, cap on its management fees, and more.
The two-page financial summary provided by ADCNR indicates the lodge and enhancements generated around $148,306 in net operating income each month last year.
Separately, a Valor Hospitality management agreement detailed in an offering statement on file with the U.S. Securities and Exchange Commission (SEC) indicates that at a proposed hotel in Cape May, New Jersey, “Valor will be paid a management fee of the greater of $90,000 per year of operation or 3 percent of gross revenue.”
The offering statement was filed last July on behalf of an entity called HCO Cape May LLC, and to date it doesn’t appear the hotel has been built.
“Prior to the hotel being completed and open for business, Valor will be responsible for the hotel’s technical services,” it continues. “The payment for the hotel’s technical services is $120,000. Valor will also be responsible for pre-opening services. Valor will be paid $150,000 for this service. Once the hotel is open and operational, Valor will be responsible for the day-to-day operations and management of all aspects of the hotel, including all revenue streams and the operational costs of the hotel. Valor will receive a hotel management fee of the greater of 3 percent of gross revenue or $90,000 per annum.”
As Lagniappe reported last September, invoices submitted to The University of Alabama reflect Valor was paid at least $8.4 million to open the doors at the Lodge at Gulf State Park.
Lindsey Hughey, an open records and policy specialist at The University of Alabama explained, “The University of Alabama is the payment processing agent for the [ADCNR’s] payments related to the Gulf State Park Project (GSPP). Any contracts for the GSPP are directly between ADCNR and Valor Hospitality Partners LLC. ADCNR approves the payments before the university makes payment to the vendor on DCNR’s behalf.”
Since the project’s completion, The University of Alabama has processed no further payments to Valor, while records on file at the Alabama Department of Finance indicate Valor has only been reimbursed once from state coffers since the park opened: a $20,405.64 payment for the rental of meeting space and communication equipment.
The park improvements and management agreement were enabled by legislation passed in 2013, and a first-of-its-kind constitutional amendment approved by voters in 2016, while funds were largely provided by the Natural Resource Damage Assessment (NRDA) and a legal settlement resulting from the 2010 BP Deepwater Horizon oil spill.
One of the sponsors of the enabling legislation, Senate Bill 231, was former State Sen. Rusty Glover. Glover left the Legislature and became an employee of ADCNR, accepting a job as education specialist at Gulf State Park for $2,432.80 per pay period, an amount which increased to $2,481.50 per pay period in the 2020 fiscal year. As a legislator, Glover earned between $1,865.21 and $1,927.38 per pay period in his last year, according to state records. Glover messaged after this story was originally published to report he only worked at Gulf State Park for nine months — with an annual salary of $58,000 per year — before leaving late last year to work with schools on behalf of the Alabama Alcoholic Beverage Control Board. At ABC, he now earns around $47,000 per year, or about “$15K less than what I would make as a teacher.”
According to the statement on file with the SEC, last summer Valor Hospitality comprised the ownership of two entities: Valor Hospitality Partners Holdings LLC with shares of 66.875 percent and Wilson Hotel Management LLC with shares of 33.125 percent. Valor Hospitality Partners Holdings LLC is owned by Steve Cesinger and Euan McGlashan with 47.5 percent of shares each, plus Brandon Hatfield with 5 percent of shares.
Updated to clarify state pay received by Rusty Glover and his length of employment at Gulf State Park.
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