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The rise, the fall and the future of Longboat Key’s Colony Beach & Tennis Resort

STEVE REID
Editor & Publisher
sreid@lbknews.com

As we digest our Thanksgiving feast and continue the sentiment of appreciation for the bounty bestowed upon us, an oftentimes tense and tenuous issue facing Longboat Key continues — the redevelopment of the Colony Beach and Tennis Resort.

This week, Longboat Key News looks at how we got to this moment in time as well as analyze what is to come in this most pressing issue for our island.

 

Genesis: The Colony rises near the sea…

The story of the Colony Beach and Tennis Resort is akin to a lengthy tapeworm full of discord, litigation, false hopes and pitfalls for our town and town government.

To set the stage, the Colony in its modern form was developed by Murf Klauber who built a family-owned and managed enterprise centered on two things: the beach and tennis.

Klauber officially bought the resort from Herb Field in the late 1960s, and when he started to build out the 237 units that exist today, he once told Longboat Key News, “We adhered to a height limitation at the Colony that no building would exceed the height of the tallest palm tree.”

Klauber, simply known as “Murf,” realized this vision and built the wood framed structures on grade, which lent a walk-out-to-the-beach-and-sand ambiance that he invariably referred to as “simple beach elegance.”

The formula worked. Those who knew Klauber and his family saw an owner and manager fully engaged in the operation of the resort.

Klauber would take his daily lunch at the dining room and on his way from his mid-rise office he would pepper directives and commands. He told employees what flowers to put where, which paintings would adorn the Monkey Room Restaurant and which entrees belonged on the menu.

Perhaps even more importantly, Klauber was something of a celebrity in his own world. He knew everyone and everyone knew him. The reason that came about was twofold.

First, Klauber could be very outgoing and enigmatic. Secondly, and perhaps most importantly for the rise and eventual fall of the Colony, was the very ownership structure that he single-handedly used to capitalize the resort.

 

Klauber’s ownership model

Klauber was one of the first resort owners in the country to create an ownership structure that in effect condo-ized the 237 units. This was before condominium law was in effect, and Klauber was approved by the Security and Exchange Commission to sell the ownership deed to each unit while retaining the complete authority to market, manage and operate the unit and collect and manage the revenue. The owners were considered investors and were given 30 days a year wherein they could use their unit.

This method was eminently successful for Klauber. Throughout the 1970s and 1980s, Klauber sold units to friends, vacationers who wanted to be part of the resort and its ambiance, as well as to what was an additional key ingredient – families who enjoyed the myriad of kid-friendly camp programs and activities that freed them up for tennis, adult beachside fun and allowed the enjoyment of Sarasota’s arts and culture.

 

The erosion begins…

This formula worked well through the 1980s and into the 1990s and then several dynamics eroded the stability of the operation.

First was the fact that Klauber as General Partner and Manager essentially ran the resort and was entitled to keep all of the rental money of all the owners units to pay expenses, maintenance as well as operating costs.

After a series of tropical storms and low-level hurricanes battered the buildings as well as the fact that the wood framed structures were now showing signs of aging, it became apparent maintenance had to become a priority if the resort was not to grow dilapidated.

Klauber made a $15,000 assessment on owners to pay for a renovation of all the units after the housing collapse in 2006.

At the same time Klauber was seeking the assessment initially of $15,000 for the renovations, he became embroiled in a dispute with unit owner Andy Adams who owned three units in the mid-rise below Klauber’s penthouse apartment and his personal office headquarters.

Adams wished to join his three units in the mid-rise into one large residence and stay longer than the normal 30 days asserting that he was entitled to 30 days per unit.

Klauber would not allow the deviation from the standard 30 days, and would not allow units to be combined and used for an extended stay. That dispute acted as a catalyst in which Adams joined the Association of Unit Owners Board of Directors and became active lobbying against Klauber and questioned his management.

Eventually, Adams was named Association President and the Association subsequently refused to pay the assessment Klauber had requested for the deferred maintenance as he called it.

Adams and Board Members as well as unit owners started to question Klauber’s management of the money.  For years, while they had not paid any expenses or taxes, they also had not been assessed repair money.

 

The stakes rise

Next, Klauber raised the stakes. He substantiated through Karins Engineering and other professionals the extent of repairs necessary and then assessed the owners $50,000 per unit arguing that the repairs would bring the resort back to a pristine and updated condition and that his role as General Partner and Manager allowed and required him to undertake the repair work.

Soon the litigation ensued, and that coupled with a tougher economic climate following the Great Recession, left the resort operating on a shoestring with enmity and lawsuits proliferating. All the while everything from banisters to tennis courts to windows and roofs continued to deteriorate.

Limping along, Klauber operated the resort with far fewer units in the rental pool, namely those who were cooperating and he operated the restaurant, which he owned. By the winter of 2009, the normally packed dining room was reduced to Sunday brunch buffets and scaled back menus.

Klauber was spending money defending lawsuits while the Association legally sought to use the courts to eject Klauber as the Manager of the property and the litigation forced Klauber into bankruptcy. U.S. Bankruptcy Judge Rodney May agreed with the Association and ended Klauber’s reign.

Klauber appealed May’s decision and Appeals Court Judge Steven Merryday reversed May’s decision and remanded it back to Judge May with instructions to award Klauber $23 million in damages for actions leading to the closing of the resort. He offered another option of paying the distribution, reinstating Klauber as Manager and as Merryday said, “Putting Humpty Dumpty back together.”

The case languished in May’s courtroom for years as Klauber watched the resort enter a receivership wherein the entire operation was evaluated and was found that Klauber had not acted improperly with Association Funds.

 

The Key to the future

As Klauber’s interests were thrust into bankruptcy, it became apparent that Klauber had an outstanding loan with Bank of America with his assets including the restaurant, spa, tennis courts and 2.3 acres of property pledged as collateral.

Klauber owed more than $10 million on this note, and he reportedly told Randy Langley, who later formed Colony Lender with David Seigal, that the key to owning or redeveloping the Colony is to pay off the Bank of America loan and to gain control of the pledged assets. Langley and Seigal did just that. They paid a reported $4.5 million and gained standing in much of the litigation that ensued.

In Judge May’s courtroom, Colony Lender continually argued that the ownership interests of the Unit Owners should go to auction and be sold to the highest bidder and the debts be repaid.

The Association sought to find a financial backer or developer partner who could rebuild the resort that was closed in August 2010. The Association was also under pressure from the Town of Longboat Key, which found the closed Colony to be a nuisance, unsafe and uninhabitable without major renovation or repair.

The court ordered mediation, which was unsuccessful, and the parties grew further apart than ever.

 

Town grandfathers units, false starts

The Longboat Town commission grandfathered the 237 units at the Colony year after year since it closed in 2010. They did that for two reasons. First, the commission stated that the Colony was perhaps the most important incubator for future residents and property owners who first started enjoying Longboat Key by staying at the Colony.

The town also feared the loss of tourism and encouraged strongly since 2010 that the Association and Board of Directors find a developer who was viable and could tackle resolving the litigation and rebuilding the Colony anew.

The town also almost stumbled into a quagmire as it went down the path of condemning the buildings, which would mandate their demolition. The Town Commission abandoned that tack after it became apparent the threshold of justifying the demolition of private property was high and could place the town in legal jeopardy.

For five years the Association got nowhere with developer suitors. The Association entertained several development proposals and even chose developers to partner in rebuilding, but in each instance, nothing materialized.

In 2013, Unicorp President Chuck Whittall became involved.

Whittall, an Orlando-based developer, negotiated a contract for Colony Lenders’ interests and joined forces against the Association in the courtroom.

In the end, Judge May left the Association intact and litigation continued.

Last year, the Association of Colony Unit Owners heard proposals from two competing developers.

The first was made by Whittall of Unicorp. He promised to pay each unit owner $138,000 for their deed, and a premium for water view and waterfront units. He told the unit owners then that his plan to redevelop the property would include 180 hotel rooms and 180 residential units with shared amenities.

The other proposal was made by Manfred Welfonder who stated that he would rebuild the Colony with the same number of units as existed with solely tourism on the site.

The problem with Wellfonder’s proposal was twofold. First, he did not and does not own any assets at the Colony whereas Whittall controls the 2.3 acres and the amenities on the site.

Additionally, and perhaps more damning, is when Wellfonder’s proposal was vetted next to Unicorp’s, was his answer to the question repeatedly asked which is how much each unit owner would be paid for their deed. Wellfonder said over and over it would be “a very fair amount,” and when pressed offered that it would be in the neighborhood of $50,000 per unit.

Soon after that day, the Colony board of directors and redevelopment committee started negotiating with Whittall and they eventually refined a contract and a purchase proposal that was sent out last month to each unit owner and is currently being voted on.

 

Anatomy of the vote

That brings us to the present state of affairs.  To understand if, how and when the Colony will be redeveloped, the dynamic of ownership of the units is paramount.

As of press time, Whittall has received 119 Yes votes and 36 no votes.

In pure mathematical terms, that does not leave him on track to receive more than 90 percent of the vote, which is what he needs for his deal with the Unit Owners to move forward. But nothing at the Colony is ever so simple.

One owner, Andy Adams, who initiated in many ways the unraveling of Klauber’s operation, owns a controlling block of votes due to the fact that he owns 70-plus units and therefore can dictate the outcome.

In fact, Adams submitted 30 of the 26 ‘No’ votes two weeks ago, which would on its face kill Whittall’s proposal. But by the end of the day, Whittall and Adams communicated and Adams has agreed with Unicorp to continue negotiations. Adams has since written to Whittall a letter voicing support for the passage of the referendum in March. Whittall has represented to Longboat Key News that he is confident he and Adams will ultimately reach an agreement.

The value of Adams’ 70-plus units if he were to simply agree with Whittall’s proposal is approximately $13 million. Longboat Key News has heard numbers all over the board that Adams is seeking a number between $13 million and $25 million.

 

The value of entitlement

What Adams and unit owners demand or desire for their holdings and what Whittall can afford to pay is directly related to whether Longboat Key voters and the town commission will go along with his redevelopment plan, which now calls for 180 tourism units, 180 residential condos and 57 fractional units.

For Whittall to add the residential units he must win over the support of Longboat Key voters because the Town Charter requires any additional density be approved by a majority.

Whittall argues that to build a five star resort, it needs to be in tandem with luxury condominiums similar to the Ritz-Carlton in downtown Sarasota.

Whittall and his team plan to campaign from homeowner association group to association group their vision for the property and attempt to quell fears of traffic and overdevelopment.

Most recently, Longboat voters turned down more than three to one a north-end hotel plan as well as two subsequent referenda asking for residential units at Whitney Beach Plaza as well as a single unit at Harbor Square.

Whittall plans to address traffic concerns through a trolley system he will provide as well as utilizing residential units that he said will likely be second, third or fourth homes in the luxury condominium market.

 

Land use rules in play

Meanwhile, the town of Longboat Key is in the middle of crafting a Planned Unit Development (PUD) ordinance that will directly affect and set parameters on any redevelopment proposal.

Even though the resort has been closed for more than six years, the town has failed to either rezone the property or set up land development rules to allow or encourage the kind of resort or redevelopment it wishes to see on the site.

Now the town and Planning and Zoning Board in particular are working on the PUD ordinance. But instead of accomplishing the task absent an oncoming redevelopment plan, it is now creating rules in the face of a specific development proposal and when a developer has come forward with a plan that is out for a vote.

The Planning and Zoning Board chair Jim Brown specifically asked the P&Z Board last month to not allow residential mixed use on the Colony site in an attempt to set up a process that would not allow Whittall’s plan to come to fruition. That attempt failed and the board has moved forward with an ordinance that does allow mixed use but has capped height on the Colony site at 80 feet, which also would preclude Whittall’s plan for 10-story condominiums.

Whittall said he will present a study on Dec. 5 to the Commission showing that over 20 buildings on Longboat Key are 10 stories or greater. He hopes the Commission will change the height and open space requirements to be able to at least consider his proposal. Whittall said his plan will have more than 15 times the open space than the current Colony and that is only possible by going vertical.

The Planned Unit Development ordinance will go to the town commission next month and the commission can either adopt it or amend it if it seeks to change the parameters. The PUD ordinance will be the town’s mechanism for considering redevelopment applications at the Colony as well as other multi-acre sites.

 

Ballot language on agenda

The next event will take place in Town Hall on Dec. 5 when the commission will hold a final vote on the ballot language Longboat voters will consider in March asking for the residential density Unicorp seeks for the Colony site. The proposed ballot question reads as follows:

 

TOWN OF LONGBOAT KEY DENSITY REFERENDUM

March 14, 2017

REFERENDUM QUESTION:

May the Town allow The Colony property at 1620 Gulf of Mexico Drive (approximately 17.3 acres), zoned T-6 (allowing 6 units per acre) but having a non-conforming density for tourism uses of 13.6 units per acre and 237 tourism units, to increase density to add 180 additional residential units for a potential density of 24.11 units per acre (417 total units)?

If the Ordinance is adopted on Dec. 5, the final approved referendum language will be provided to both Supervisor of Elections offices for placement on the March 14, 2017, ballot.

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9 Responses for “The rise, the fall and the future of Longboat Key’s Colony Beach & Tennis Resort”

  1. A non Bias person says:

    Of course you must leave room for any Bias from the writer of the story, but as i read it. This entire event is sparked by one selfish person by the name of Adams that through a fit and caused a lot of drama. The fact that in the start of the story he had 3 units then in the end he has 70 this hole thing sounds like a ploy. He creates a big problem to cause the whole mess then buys up enough units when they are nearly worthless unless there development value is accessed. So now hes got a controlling factor in what happens to a place that he had no investment in creating or running. its called a hostile takeover i hope the city gets tired of there politics and drama and forces Mr Adam and friends to pay to tear it down.

  2. whos on first says:

    You have to wonder just how much baksheesh old Andy Adams wants for his collection on homes on Baltic and Mediterranean Avenues – probably he’s looking to put a hotel on Park Place and Boardwalk by his asking price. You’d think the guy would vote with the rest of the “owners”, not that owning such a worthless hovel is appealing. About the only appeal will be found in the courts (and not the Tennis Courts) provided the anti-growth crowd stays home on election day. But if they smite Jay Yablon, Andy and the boys holding deeds, just means more taxes and legal fees while this travesty staggers forward.

  3. Lorraine says:

    180 rentals units, 180 hot rooms and 57 mixed use whatever.. plus visitors for tennis dining etc. will add over 400 MORE CARS on the road on Longboat. He can provide a trolly (already one on the key) He can provide a Ferry(exactly where it is going to LAND is interesting).. So what does this overpopulated over built small key do? We need to VOTE NO AGAIN AGAIN AGAIN until town leaders put a moratorium on all building… enough is enough is enough.. the infrastructure on Longboat is stressed as it is we do not need 400 +more people daily..nor can this towns politicians afford to continue to pander and kiss the butts of the investors who are only looking at Longboat as a cash cow.

  4. marglo says:

    What is the new resort going to be? I realize the quickest way to recoup the investment is to build and sell condos. I can see the need to build up over 10 stories. Is the hotel going to be another unnecessary
    5 star resort in an area that cannot support another 5 star resort without something to attract vacationers and buyers. The concept of a tennis resort is being eliminated? What is the vision here? I am certain Unicorp wants a positive vote. I am sure Unicorp wants the support of Adams. All I hear about are changes in zoning laws. Mr. Whittall has a great reputation in Orlando. He is a straight shooter and no gamesmanship. The new resort what is the vision. That is what he needs to sell and the zoning stuff will follow.

  5. ghostrider says:

    “I own property on Longboat Key as a second home. What a bunch of old cranky a**holes you all are. Development is needed, quit being so selfish.” —David

    Thank you, David.
    I’m glad you believe development is needed. You neglected to say why, other than, it’s an investment and your SECOND “home”, and, NOT your PRIMARY residence.

    —A cranky a**hole.

  6. Simon2366 says:

    The association and its members got what they wanted by pushing out Murf, but at what cost?

    No access or use for the past 6 years, each unit owner paying attorneys fees that now far exceed the $50K assessment, and given the aging population of unit owners from 2009, how many will likely be alive and physically capable of using their new units at a new resort? I suspect not many and there is still no end in sight.

    For such a litigious group of people, it seems uncharacteristic that none of the members have filed suit against the association’s board of directors for breach of fiduciary duty, given their overwhelming incompetence that’s caused the loss of value to their properties.

  7. David says:

    I own property on Longboat Key as a second home. What a bunch of old cranky a**holes you all are down there. Develoment is needed, quit being so selfish.

  8. Bob Haley says:

    We live next door at Sea place and always enjoyed going to Colony for Starbucks in the morning,lunch at Taste buds,wine tastings on Saturdays,Fireworks on July 4th,including the Ringling trapeze acts.
    Dinner at the restaurant,when it actually required jackets was always great.It was truly first class.
    I assume the owners have been paying real estates taxes for the past 6-7 years,plus all legal fees involved.
    How can that many seemingly intelligent people , be so greedy,or stupid,or both to not be able to work out a deal in the past six years.
    I miss my coffee!!

  9. marglo says:

    The citizen’s of Longboat Key will reject the referendum. No one knows what this new resort will be. A resort based on tourism will fail unless it is remade as a tennis resort with indoor courts. The area just doesn’t need another 5 star hotel in an area where the weather in winter is horrible and is burning hot in summer. A tennis resort with indoor courts is a winner. Longboat Key and St. Armends needs tourists and not absent owners who will come 2 months a year. Ten story condos are out of character. This will never be approved. A great tennis resort will bring people to Longboat Key from all over the world and people who will spend money at local businesses. Indoor courts will keep tourists coming during cold, rain, thunderstorms and if designed correctly at night. The Colony failed because the business plan was flawed so a 4 star property turned into 1 star property. What is needed is one owner with cash and no so called part time owners or time shares.

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