|

Judge blesses Unit Owners’ offer; Klauber to be paid $350,000 cash

STEVE REID
Editor & Publisher
sreid@lbknews.com

Following days and weeks of court wrangling between Unicorp and The Association of Unit Owners, U.S. Bankruptcy Court Judge Rodney May at the end of the day Friday approved the offer by The Association to buy the assets of a Bankrupt Colony Estate.

The situation was a turn around in the sense that last week the Judge indicated Unicorp’s offer would be accepted unless superseded. In the end, the Judge agreed with the final offer made by The Association of Unit Owners to pay the Trustee $3.1 million within two business days along with a separate settlement that pays former Colony Chairman Murf Klauber $350,000 in cash.

Initially, the Friday hearing was slated to be “Evidentiary Hearing” wherein The Association planned to challenge the proposed agreement between Unicorp and the Estate’s Trustee. Instead, there were back and forth offers and both entities enhanced their offers twice.

The day started with Unicorp offering $750,000 in cash. But as the hearing opened, the attorney for the Estate, Michael Markham, said that in the week that followed the previous high offer by Unicorp of the $750,000, a counter-proposal came from The Association totaling almost $1.2 million in cash. The Association also offered to escrow another $1.965 million to fund Icard Merrill attorney claims. The attorney Markham said those amounts appeared sufficient to pay all the claims in the estate except for the outstanding claims made by The Association itself.

Markham then went on to tell the Judge that The Association’s new offer was a better offer than Unicorp’s offer, but Unicorp had advised that the developer would over-bid and exceed The Association’s offer.

The attorney for Unicorp, Michael Assaf, argued that The Association did not have signed and executed offers and loan agreements to fund its offer and that it was dependent on a promissory note. Assaf also later said the Board of Directors had no authority to enter into the agreement since they have not held elections nor a vote of its members to authorize the escalating offer.

The attorney for The Association of Unit Owners, Jeffrey Warrren, said that the Board had wide authority to settle legal disputes and this fell under that rubric.

Attorney Warren told the Judge on behalf of The Association, “We are not selling a widget, we are selling disputed claims. The only party in the courtroom who can settle these claims is The Association. Public Policy mandates that the court prefers and favors a settlement not a perpetuation of litigation. We want to end claims, Unicorp wants to perpetuate it.”

At issue, according to The Association attorney, was the specter that The Association filed numerous claims that Warren says could total $15-30 million against the Bankrupt Estate it was bidding to buy.  Warren said that if The Association wins in the bidding, all of those claims become subordinated and everyone else would get paid and essentially the claims would go away. He stressed that that offers the simplest and cleanest path for the Estate to distribute the money.

Unicorp’s position was that the claims filed by The Association have no value and were found to have no value by a superior court and that Judge May cannot arbitrarily assign a value.

In Unicorp’s offer, Unicorp agreed to pay the cost of any litigation The Association might bring against the Estate in those claims and to indemnify and assume all responsibility for the claims. Unicorp’s President and an associate even offered to personally guarantee and escrow in cash up to $30 million to not let the issue become a deciding factor.

The Estate attorney kept deferring to the Judge instead of recommending which bidder the Estate Trustee preferred. Markham kept telling the Judge that Unicorp, “Cannot settle outstanding claims but will assume liability. He added, “If the court is going to give any credence to the Association’s claims, then they are an issue that needs to be dealt with.”

Unicorp attorney Michael Assaf spoke of the simplicity of his client’s offer.

“Unicorp is willing to pay $2.2 million in cash to the Trustee today and has already settled Icard Merrill’s attorney claims. The total value of that package is $3.247 million. Here is how it works: we would give them a check, the Estate would pay 100 percent of the claims, and there would be a distribution to equity (Murf Klauber).”

Klauber would receive the money because as the equity holder of the estate, he receives anything beyond the claims that must be paid.

“Dr. Klauber lost everything and maybe he should be entitled to get something back, if bidders are willing to bid up the assets,” said Assaff.

 

What a difference a lunch makes

After lunch, the terms in the courtroom changed yet again. The Association said it would wire $3.1 million immediately with a separate agreement to give Klauber $350,000 in cash. The money for The Association was being funded by Andy Adams as a loan to be paid back by Unit Owners.

Estate Trustee Markham suggested to the Judge that the Association’s offer would pay everybody in the Estate and it would remove the Association’s claims rather than litigate them.

Assaf reiterated that the Board had not held an election in over three years and that The Association is facing the appointment of a receiver in another case in Circuit Court. Assaf asked for a delay to hold an ‘evidentially hearing’ to ensure the Trustee was acting in the best interest of the Estate.

Judge May in the end decided that it is the business judgment of the Trustee and if he wants to wait to see if he gets the $3.1 million in his bank account or not. If not, and The Association doesn’t pay, then Unicorp would have the backup offer.

“Look at where this process has taken us. We now have enough money to pay everyone,” said Judge May.

 

Meaning of the outcome

For The Association, the desire to buy the Bankrupt Estate was important because if Unicorp bought it and was successful in its bid, it would guarantee that Unicorp was entitled to and owned the Recreational Lease and the Recreational Lease damages claim. The Recreational Lease is an agreement that bound the Colony Unit Owners to the recreational entity controlled by Klauber to lease the tennis courts and amenities for decades and has a damage claim for breaking the lease totalling several  million dollars. Unicorp bought the 2.3 acres  the tennis courts are situated on and has asserted it owns the Recreational Lease and asserted it was conveyed when it bought the recreational property at auction last year. The estate trustee has asserted that the lease did not transfer with the land to Unicorp and that it remained in the esate that was sold yesterday. Judge May plans to make that determination in about a month.

In essence, The Association at least on Friday, avoided the threat of litigation and collection under that lease. It cost The Association the $3.2 million that it had to pay in court on Friday. That left Unicorp owner Chuck Whittall satisfied with the outcome.

“We are pleased with the outcome. What happened is the estate got a wheelbarrow full of cash, and what did The Association get? The Judge made it clear that the Recreational Lease is not conveyed and the Lease and Recreational Damage Claims did not change hands. The amount that was bid today started to get into stupid money. This will amount to about $15,000 to $17,000 in additional cost to each unit owner and I’m glad to see that Klauber will get to see some of that money. It is absolutely poetic justice that this Association pays Klauber since they led to the damages at the Colony,” said Unicorp President Chuck Whittall.

Next week, on Sept. 8, there is scheduled to be an auction of more assets, including the $23 million judgment against the Unit Owners in the General Partnership Bankruptcy case in Judge May’s courtroom. That auction and asset represents a major liability for unit owners who will seek to purchase it as wel.l as a startegic componant for Unicorp and other bidders including Longboat Key Club owner, Ocean Properties.

Tags: , , , , , , , , , , , , ,

Longboat Key News

2 Responses for “Judge blesses Unit Owners’ offer; Klauber to be paid $350,000 cash”

  1. Dan says:

    So what is the short of this story. Does this move the needle in the direction of re development any sooner?

  2. Klauber had all those 200+ units free for 11months a year.The deal was he kept the whole place up to standard . He didn’t and then wanted the owners to pay. The owners were right to fire him. Sadly, they should have thought before they bought.

Leave a Reply