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Unicorp moves to buy Colony estate; Association argues back

STEVE REID
Editor & Publisher
sreid@lbknews.com

A Colony redevelopment suitor, Orlando-based Unicorp, finalized a contract last week to buy critical assets including The Colony Recreation Lease from one of the resort’s bankrupt estates.

If the contract is approved on Aug. 28 in Judge May’s courtroom, it could spell a blow to the Association of Unit Owners who had a contract in place that expired and was not executed last month according to Unicorp and the Chapter 7 estate trustee.

The arguement that the contract expired allowed Unicorp’s President Chuck Whittall to create a reorganization plan with the Bankrupt Estate’s Trustee Douglas Menchise.

But for Colony Association of Unit Owners President Jay Yablon,  “Any talk that the agreement expired is sheer advocation and the Association has money in the bank to execute its own agreement.”

The Association had an agreement to buy the Estate for $600,000 but there were two issues clouding the sale: the Estate was in dispute with law firm Icard Merrill over the amount of legal fees due, and the Estate maintained it owned The Colony Recreational Lease but Colony Lender and Unicorp bought the Recreational Properties at auction earlier last year and maintained that the lease transferred with the property.

The Recreational Lease is important because it was and is an ongoing obligation of $70,000 per month due from unit owners for the use of The Colony spa, tennis courts and recreational amenities. The lease continues far into the future and the right to collect goes with whomever controls the assets in the bankrupt estate. There are also about $2 million in damages due under the recreational lease that is also a separate claim and liabity against the unit owners.

The Association of Unit Owners sought to buy these assets, but, according to Whittall, their agreement expired on August 2 and subsequently Trustee Douglas Menchise filed a motion seeking to sell the property of the Estate to Unicorp.

Also, Unicorp recently paid more than $1 million to settle the disputes and bought Icard Merrill’s interest in the Estate. Whittall says that not only gives Unicorp standing, it also removed the largest creditor in buying the Icard Merrill claim.

Whittall says, “The bankruptcy court’s job on Aug. 28 is to make sure money goes back to the creditors. These are not bills we created, the Association of Unit Owners created these bills and debts and in their scenario, people do not get paid. I get the feeling that Judge May is tired of kicking the case down the road.”

But for Yablon, the agreement and contract it had in place with Menchise is binding and there is no expiration. Yablon added that the Association is filing a motion in court next week to enforce the agreement.

Whittall said that if Judge May approves the contract in place between Unicorp and the Chapter 7 Estate, it does three things: cleans up a significant piece of The Colony mess, gives the ability to enforce the claims or forgive them, or, it gives the ability to settle the claims.

 

Doc Klauber’s docs are strong

Unraveling the nexus of Colony legal agreements and contractual obligations is no easy task because former Chairman Murf Klauber, says Whittall, fashioned very strong agreements.

“Murf’s documents were very good; he did an excellent job in setting up The Colony agreements,” said Whittall.

Part of why all of the above is of such importance is that until the above interests are resolved, there will be an encumbrance on the title for anyone who wants to build on the property. In essence, the Recreational Lease goes with the property and must be either satisfied or resolved.

Judge May on Aug. 28 can take several paths with the Association arguing that it has a deal in place and will seek to enforce the deal and Unicorp argueing the Association’s deal is expired and their agreement supercedes the Association’s.

Whittall said Unicorp’s agreement, if approved, will leave about $600,000 for creditors in the Estate since they have already paid Icard Merrill; which was the largest creditor.

 

What about the $23 million judgment?

The other case set to be resolved on Sept. 8 is the sale of the other bankrupt estate that holds the $23 million judgment against Colony Unit Owners.

Four bidders including Unicorp, the Association of Unit Owners, Naeco (owned by the Key Club’s Walsh family) and Bluewater Oceanfront Investments have qualified.

Unicorp has an agreement in place for the $23 million judgment with the Chapter 7 Trustee, William Maloney, at a price of $3.5 million, but Judge May last June said that an auction would determine the highest and best bid.

The $23 million judgment was won by former Chairman Murf Klauber against the Association of Unit Owners on appeal when Judge Merryday found the Association of Unit Owners at fault for not paying assessments due in order to repair and renovate the Colony to the General Management Partnership, which led to the demise of the resort in August 2010.

Judge May will hold the final auction for the $23 million on Sept. 8 in an all-day bidding process between the four contenders.

 

Analysis

If the Association argues successfully that it still in fact has a deal in place for the Estate containing the Recreational Lease, there will be ongoing legal disputes since Unicorp maintains that the lease went along with the recreational property it acquired at auction last year. Unicorp would also be owed the claim that it bought from Icard Merrill.

If the Judge agrees with the Trustee and Unicorp on Aug. 28, it will continue Unicorp’s consolidation of Colony assets and Unicorp would be able to demand the rent payments or settle or negotiate for their interests.

If on Sept. 8, the Association of Unit Owners succeeds in being the highest bidder for the $23 million judgment, the Unit Owners will have successfully retired the largest liability they face at roughly $100,000 per unit in claims.

If Unicorp succeeds at being the highest bidder, the entity will be in the strongest position to either seek repayment of a judgment or negotiate.

Even if the entire $23 million were paid, it is only for past expenses and a damages claim and does not include money to bring the resort back into shape. The units still would need to be restored or rebuilt with estimates coming in at about $150,000 per unit or $37 million in total.

Additionally the sewer, fire and electrical systems would have to be restored and roads would have to be put into place.

For Whittall, even though other entities are bidding, if anyone else wins on Sept. 8 he maintains they will have to partner with Unicorp. That is because Unicorp owns the 2.3 acres that contains the waterfront, the recreational property and possibly on Aug. 28, the Recreational Lease.

“There is excitement in the air. Some day a new Colony will be a great economic driver for Longboat Key,” said Whittall.

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