Colony Association acquires triple debtor estate for $3.1 million

The Colony Beach & Tennis Resort Association purchased a triple debtor Colony Beach & Tennis Resort bankruptcy estate for $3.1 million Friday that allows creditors to be paid 100% of what they are owed.

But the sale of a long-disputed recreational lease and a $2.5 million rec lease judgment that U.S. Bankruptcy Trustee Douglas Menchise controls is still in question because both the association and Unicorp National Development both claim rights to it. 

The association put up $3.1 million in cash and agreed to waive all claims to the triple debtor estate controlled by Menchise. The purchase of the estate gives the association control of Menchise's estate, which comes along with ownership of two high-rise condominiums that owe a combined $160,000 in back taxes. The association also acquired longtime Colony owner Dr. Murray "Murf" Klauber's 23% interest in that estate for $550,000. 

U.S. Bankruptcy Judge K. Rodney May confirmed the bid in his Tampa courtroom, calling it the best offer because it comes along with the waiver of between $15 million and $40 million in potential claims unit owners could bring against the estate. The waiver of those association claims as part of a settlement proved to be the deciding factor for May.

Unicorp National Development President Chuck Whittall was willing to pay more than $3.1 million for the estate. But he wasn’t willing to pay between $15 million and $40 million more for it to erase the claims the association could bring against estate.

Unicorp will appeal May’s ruling, which will be official when May enters an order into the record. 

May, though, has still not made a ruling on future rights to the rec lease or the rec lease judgment.

"We believe we 100% own the rec lease and the judgment," Whittall said. "I am pretty darn confident the judge will acknowledge we own the lease, which encumbers the land. I've never seen a lease severed from the land before."

The association, though, believes it acquired the rec lease and the $2.5 million rec lease judgment that Menchise owns and controls by purchasing the triple debtor estate Friday. Whittall disputes that claim. 

"We believe we purchased whatever remains of the rec lease and we believe we got the rec lease judgment Friday," said Colony Beach & Tennis Resort Association President Jay Yablon. 

Yablon said he doesn't dispute Unicorp owns the recreational property at the Colony. 

“While there are still some issues that remain outstanding to be resolved, we have now taken the giant step of settling all of the litigation at the Colony, which began in 2007.”

– Colony Beach & Tennis Association President
Jay Yablon

"We believe we purchased whatever remains of the old rec lease and we believe a new lease for the land needs to be negotiated," Yablon said. 

Unicorp Attorney Michael Assaf argued the association board didn't hold votes of the unit owners to authorize the settlement agreement for the estate and continues to question the validity of a board that hasn't held an election in three years. May dismissed those concerns and called them "a red herring."

The association money used to pay for the estate is coming in the form of a loan from Colony majority unit owner and developer Andy Adams and Siggy Levy, a developer involved in many development projects in North America, including  numerous condominium projects on Longboat Key and some developments with the Four Seasons Hotel Corp. Levy is the senior partner of Longboat Key-based MW Development Group, which the association supports as a development partner to create a new luxury hotel project for the Colony property.

The $3.1 million pays creditors 100% of what they are owed once disputed claims and appeals are settled.

“We took a major step forward to clearing the legal clouds over the Colony Beach & Tennis Resort today,” Yablon said. “Very soon we can get down to the business of creating a brand new resort.”

The other large chunk of the Colony bankruptcy puzzle, which no one has laid any prior claims to, will be up for grabs next week.

The association, Unicorp and two other bidders will be back in May’s courtroom 10 a.m. Tuesday to bid for a $23 million judgment against unit owners that U.S. Bankruptcy Trustee William Maloney seeks to sell. Klauber won that judgment on appeal.

Developers like Unicorp seek Maloney’s judgment to assess unit owners for money owed and use the funds to redevelop the resort. The association wants the judgment to bury it and prevent developers from using it to assess unit owners so they have control over a Colony redevelopment project.

Contact Kurt Schultheis at [email protected].