Colony rehab efforts causing waves

STEVE REID
Editor & Publisher
sreid@lbknews.com

“I would have a lawsuit that that would shake the nation,” said Colony Beach & Tennis Resort founder Dr. Murray “Murf” Klauber when he learned a small group of Colony unit owners intend to perform limited renovations to their units in an effort to reopen the resort.

Part of the effort is that the grandfathering of the Colony’s 237-unit count could expire at the end of 2012 unless the Town Commission grants another extension.

Last March, the Commission told the Colony parties in a chilling tone that it would extend the grandfathering until year’s end, but that the Town was frustrated and disappointed with the progress.

In essence, the Town sought to use the specter of losing the zoning rights as a stick to cajole the parties to reach settlement or resolution and begin a redevelopment process. Instead, the parties are mired in the courts and no resolution has been reached or appears near.

 

Klauber victory remanded

Klauber won a victory in the U.S. District Court of Appeals last Fall, which ordered a lower bankruptcy judge to apply his ruling that Klauber was the injured party and entitled to about $20 million in damages or the Association could return control of the units and management to Klauber and a lesser award of $7 million.

That issue is playing out now in front of bankruptcy court Judge Rodney May with hearings continuing in July. Nonetheless, the Association of unit owners has said it will appeal the appeal if that ruling and remedy is upheld and carried out.

 

Rehab attempts

And on the street level, many unit owners have grown wary of the pending deadline and have made inquiry on performing limited repairs in an effort to bring some units or pods of units to a functional level.

For Town Manager Dave Bullock, the Town plays a limited role right now in making sure codes are followed and any work done is permitted and monitored.

“The extension (on the unit count) runs to the end of the year. Some of the individual unit owners asked what it takes to reoccupy the units,” said Bullock on Thursday.

Bullock sent out a detailed report telling the owners just that. In short, there are unit-by-unit code and construction issues as well as global property issues that need to be addressed and inspected such as the water and sewer system. Each individual pod of units would have to meet all the building and fire codes to be allowed to reopen. For Acting Longboat Key Building Official Wayne Thorne, the units today are simply non-habitable.

‘They would have to go through all the issues identified. If they even want to start caulking and painting we would need them to ask for a request for interpretation of minor work,” said Thorne.

Thorne said the certificate of occupancy for each unit has been revoked and only through meeting all the building codes will reactivation of the certificates of occupancy be contemplated.

Another necessity is to receive the certificate of occupancy the owner of each unit would have to show or demonstrate ownership by title or a deed to the unit.

“The question of who owns what is still unresolved. If someone gets a permit to do repairs, they may have to demonstrate ownership,” said Bullock.

But if the above is accomplished, Bullock said, “I do not think anything in the codes prevents an owner from occupying a unit for up to 30 days.”

Thirty days is the maximum stay in the tourism zoned district.

Bullock said the Town building official is driving through the property regularly to see if any work is underway that requires a permit. Bullock said there has been complaints of unpermitted construction activity, but to date no code violations for unpermitted work have been found.

In fact, Bullock said the property owners have been responsive in removing junk vehicles, clearing up dead landscaping and picking up debris — things the town was concerned over and have been remedied.

 

Unit count threatened

For Town Attorney David Persson, his role will come into play if the owners assert that a limited opening constitutes reopening the resort and thereby preserving the units. As of now, that extension ends at the end of the year and if no extension is granted or there is no reopening, the property reverts to the underlying zoning of six units per acre on the near-18 acre site.

The units themselves reside on 15 of the 18 acres and thus the unit count would be sliced by more than half. What that would do to the ownership rights of unit owners becomes another legal entanglement.

One interpretation is the owners would be left with a fraction of the residual development rights and the acreage. Others say that with the recent court rulings, ownership is now little more than a percentage of a liability that will some day have to be paid. That issue would play out in courts if not resolved.

 

‘The wrong way‘

Klauber said he is disappointed and shocked that some owners would contemplate opening up in such a limited fashion.

“I would not let anyone take a look at that property today for the world. Affluent people from New York, Atlanta and Chicago would see a horror. We are a simple, beach-elegant island and those owners are not paying attention to this,” said Klauber.

Klauber said, “Building the reputation of the Colony took decades and a fast push to reopen to preserve zoning would be the worst thing for the image of Longboat Key and especially for the future of the Colony.”

Klauber added, “They are supposed to be answering the judge’s two orders. If they are opening piecemeal, then they are abandoning their use.”

Klauber said the Association and perhaps the town will have to grant everyone some time. He said the owners, himself, Colony Lender and Andy Adams will have to work together to make this work — “It is the only way to get resolution.”

Colony Association of Unit Owners President Jay Yablon said the effort by some owners to reopen some units is a combination of efforts.

“We as the Association of the owners do not want any abandonment of the property. Some owners involved want this for that purpose solely. Other owners say ‘I want to use the unit, I am paying assessments and I want to use it.’ Others are saying ‘I would not use my unit for the world — I do not want to camp on Longboat Key,’” said Yablon. He added, “This initiative to open some units bubbled up through the owners. From my standpoint, if you can and it helps preserve the rights, go for it.”

 

Missed opportunity

For Colony’s Lender Dave Siegal, the whole issue is a huge disappointment. He says the Association has squandered a viable path to what they stated they wanted. He says that when he and Randy Langley brought in York Capital, a $12 billion hedge fund to finance the redevelopment, everyone’s stated needs were met. Siegal said Klauber had agreed to a negotiated amount, the Association of Unit Owners would receive six weeks per year of use and a unit renovated at no cost. In turn, York would receive ownership and manage the property. That agreement was made in early summer 2010.

“The property would have been completed and reopened,” said Siegal.

Now the unit owners have received an adverse ruling and money has been poured into legal battles. Siegal said the Association attorney said the owners did not accept York’s proposal. Instead they chose Club Holdings, spent monies retaining Club Holdings as the developer and then released the group earlier this year and have parted ways.

At the time of York’s proposal, unit owners did not want to turn over their ownership rights and management to a fractional ownership model of redevelopment. Currently the association of unit owners is interviewing and receiving other development proposals, but any proposal must receive 75 percent of the owners support to be retained.

 

To sum up the situation:

• Colony Lender is busy foreclosing on Klauber’s interests with a trial term scheduled for July 9. That is when Colony Lender will demonstrate how much it is owed by Klauber (estimated at $12.5 million). That would trigger a sale of the pledged assets and Colony Lender or any other party can bid at the auction.

 

• The Association of Unit Owners and Klauber are back in bankruptcy court where the judge has been instructed by a superior court to carry out his ruling which awards Klauber damages or control of the units. The Association is also evaluating four redevelopment proposals following the parting with Club Holdings. To date, Colony Lender and York Capital have not expressed interest since the association separated from Club Holdings, says Yablon.

 

• The Association filed legal briefs two weeks ago since the adverse ruling claiming offsets to the damages through actions taken by Klauber and the manager and General Partner. Those counterclaims exceed the award indicated by Judge Merryday says Yablon. Those briefs will be considered by Judge May as he considers the remand from the District Court of appeals. Klauber says those filings reiterate what was already considered and ruled on and lack any merit.