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Article Courtesy of Longboat Key News
By Steve Reid
Published July 25, 2019
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.
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“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. |
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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. |
