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Judge agrees Colony Condo will be dissolved; victory for Whittall and St. Regis Hotel plan

STEVE REID
Editor & Publisher
sreid@lbknews.com

Sarasota Judge Hunter Carroll has decided the Colony Condominium will be terminated.

In fact, the judge cancelled a hearing on the issue scheduled for Aug. 1 and 2 and last week asked the attorneys for Unicorp — the Orlando-based development company that plans to build a St. Regis Hotel and condominiums on the 17.3-acre Gulf front site on Longboat Key — to draft the order that allows for termination and he would enter the decision.

Unicorp President Chuck Whittall was ebullient following the news. The decision is a necessary step toward consolidation of the property, which must occur before any redevopment can occur.

“We have good news to share. This past week in court, we received a major victory. The Judge determined the condo would be terminated. The opposing side’s arguments were so weak that the Judge even cancelled the Aug. 1 and 2 trial on right to terminate,” Whittall said following the judge’s decision.

The Judge’s decision does not mean the condo is terminated yet, but does mean Unicorp and the Association have the right to terminate.

 

The unravelling…

The Colony was originally comprised of 237 units all deeded independently. It operated for decades under the model of deeded units managed by the General Partner, Murf Klauber, who had the right to rent the units for 11 months of the year. The owners received one month of use.

In August 2010, the Colony closed doors for good in the midst of protracted fights over assessments not paid, management and the rights and responsibilities of Klauber and the owners.

During the unraveling of the Colony, Andy Adams bought up more units than anyone else — about 35% of them — and he has not come to terms with Whittall to sell his units and has fought the St. Regis redevelopment plan at the Longboat Commission level, has fought the termination in court and fought the decision by Longboat Key allowing Unicorp to erect a sales center to start marketing its condominiums on the former Colony site. Under Florida condominium law, Adams owes enough units to give him a blocking vote when it comes to the question of terminating the condominium — hence the need for the judge’s determination.

 

The value of everything

The next and last decision in this whole process is what is the most equitable method of termination. That is due to be decided at a hearing next April. That hearing will center on whether the former Colony units should simply be auctioned to the highest bidder or whether Whittall’s terms that were agreed upon by more than 90 of the unit owners will serve as the guide for value and a viable means to consolidation.

Whittall has a contract with 90% of the unit owners wherein he is paying them just under $150,000 per unit with a premium for water view and waterfront units.

Part of the complexity in the valuation argument is Unicorp owns outright 2.3 acres spread throughout the 17.3-acre site that once housed all of the commercial and office and restaurant and commission area functions.

Adams will argue that the only way to truly determine value is auction the units to the best and highest bidder. If that scenario prevails, Whittall has a specific performance clause in his contract with the unit owners so he could close on the units prior to the auction and anything bid over the amount he is paying the owners would either be his profit if he sells, or he could run the bid up and if he prevails he would have to pay Adams that amount for Adam’s units.

 

Butressed optimism

Whittall’s optimism has been buttressed by Judge Carroll’s rulings and approach since he started hearing the case last winter. First there was the debate over whether the matter should be “expedited.” Judge Carroll from the very first hearing said he wanted to proceed on a “fast track.”

That “fast track” was challenged by Adams in the courtroom with his attorneys raising due process issues. The prevailing view was that under no scenario was the Colony going to be rebuilt under the legal framework of the existing owner’s association.

That argument included the fact that there is are no tangible structures at the Colony left and there is simply grass on the site and the only value in play is the property and the commensurate development rights. And of course, that intrinsic value basis is reduced by any liabilities, which can include legal claims and unresolved challenges.

Several hearings ago, Judge Carroll said his only hesitancy with the termination of the condominium was just that: how could any outstanding issues or claims be funded or resolved if the legal entity no longer exists?

Since that time, the main outstanding claim against the Association – the lawsuit brought by former unit owner Sheldon Rabin – was ruled upon and Rabin lost. That leaves no claims remaining against the Association.

The Rabin lawsuit argued that the Association failed in its fundamental duty under condominium rule: to assess unit owners and repair the property and protect the fundamental assets the association is responsible to protect. On its face, the argument is logical. But as in all things in courtrooms and law and lengthy legal documents with fine print, caveats and nuances of interpretation, the issue was not so simple.

The Judge in that case found that the Association acted within its rule and in good faith and was accountable to its members and did attempt as well as struggle to repair, renovate or redevelop the property.

 

Everything, for a price…

So if the Colony Association of Unit Owners is terminated, what is the value of a single Colony unit? Whittall has an existing contract to buy all of the units minus Adams,’ and that contract has a defined amount.

Whittall’s offer pays unit owners more than $140,000 each with an additional premium for water view and waterfront units. But Adams, who at one time sought to redevelop the Colony himself, has not come to terms with Whittall.

Whittall reportedly once offered Adams as much as $22.5 million to buy his 74 units, but Adams reportedly wanted more.

Since that time, several factors have inured in Whittall’s favor, including the town’s approval of the St. Regis plan as well as the disposition that seems apparent in Judge Carroll’s courtroom. Other major acts of progress made by Whittall include the successful court ruling that gave the town permission even though challenged by Adams to demolish the property. Unicorp performed that demolition work last Fall.

Removing the tangible, physical structures from the property eradicated any chance anyone could raise an argument about rehabbing buildings and existing development rights.

Another critical component for Whittall was his successful initiative in amending Longboat Key Town Code to allow a sales center on the former Colony site. Previously, ownership had to be consolidated and demonstrated and a permit issued before sales occur. The commission amended the rules earlier this year following the argument that properties with multiple units and on large-acre sites should be allowed to have a sales presence if a development plan is approved by the town. That code amendment gave Whittall the ability to rapidly move forward on the sales and marketing front.

 

The value of our future

As the St. Regis project slowly and seemingly inexorably moves closer to reality the interest in the market has piqued.

“We have 200 buyers who all say they want to buy a condominium at the St. Regis,” says Whittall.

Whittall says they have taken as many reservations and after the ownership issue is resolved, it will be time for the buyers to put down deposits.

The majority of the condominiums will be priced between $4 million and $7 million and the penthouses at about $10 million.

“The sales center will be built and open on the northwest corner of the property by early 2020. Next, I expect everything in court will be resolved by next summer and then we can receive our building permit and move toward actual construction,” said Whittall.

Whittall’s goal is the same as many condominium developers and that is to have no less than 50 percent of the units pre-sold before construction begins.

As is true to his nature and persona, Whittall remains ever-increasingly optimistic.  “The Judge will come up with the value of the unit. He might try to determine fair market value, we have our argument, or it could go to auction. But this is the last argument in court. We have proved that the state of affairs is nothing but an economic waste and I think the entire situation will soon change,” said Whittall.

In the meantime, the dilapidated fence that surrounded the decaying resort has been removed. The grass that was planted in January after the cleared site was graded is now turning the 17.3 acres into something of a Floridian anomaly. To the average driver it looks as if Longboat Key has suddenly gained one of the region’s largest waterfront parks. The town and Whittall have even talked about holding the annual Lawn Party at the site next Fall.

But that land is so inherently valuable, that this pastoral park will someday soon meet its modern calling to serve the next generation of upscale visitors and well-heeled residents.

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