Colony rec lease is up for grabs

Both the Colony Beach & Tennis Resort rec lease and its judgment will go to to the highest bidder at a hearing Friday in U.S. Bankruptcy Judge K. Rodney May’s courtroom.

By Kurt Schultheis
| 6:00 a.m. August 26, 2015

To develop the entire 18-acre Colony site, a developer needs approximately 3 acres of tennis courts, walking trails and other amenities that sit mostly within the middle of the property.

Longboat Key
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Future development of the Colony Beach & Tennis Resort must come with a long-disputed recreational lease, which includes a $2.5 million judgment that U.S. Bankruptcy Chapter 7 Trustee Douglas Menchise controls.

And at 10 a.m. Friday, both the rec lease and its judgment will go to the highest bidder hearing in U.S. Bankruptcy Judge K. Rodney May’s Tampa-based courtroom.

Why is the rec lease important?

To develop the entire 18-acre Colony site, a developer needs approximately 3 acres of tennis courts, walking trails and other amenities that sit mostly within the middle of the property. When the resort was operational Klauber collected $650,000 a year from unit owners for their right to use the amenities. The once 99-year lease has approximately 60 years left on it but payments haven’t been made in a decade. The lease represents a $70,000 per month obligation due from unit owners for use of the amenities and approximately $2 million in damages, which is a separate claim filed against the unit owners.

The judgment for rec lease payments and the rights to utilize the property is crucial to future development. Unicorp already has an agreement in place with Colony Lender LLC, which has agreed to give Unicorp rights to the 95% interest it owns on the property it acquired from Klauber’s collateral on overdue bank loans and Carolyn Field.

On Aug. 14, May denied an emergency motion from the Colony Beach & Tennis Resort Association to keep its $600,000 settlement with Menchise intact.

Menchise filed a motion Aug. 6 to rescind that agreement, which had expired and contained a mutual mistake of fact.

On Aug. 7, after the agreement expired, Unicorp President Chuck Whittall announced he reached an approximately $1.4 million cash settlement agreement with Menchise that acquires the rec lease judgment and provides more cash for Menchise to settle claims.

Colony Association attorney Jeff Warren urged May in the emergency order to consider that Menchise undermined the association agreement.

May denied the association’s request to uphold the previous agreement and decided the rec lease and its judgment will be sold to the highest bidder Friday.

May recently described the association settlement as “coming in second place” to Unicorp’s settlement as the offers currently stand.

Whittall, who has an agreement to purchase Colony Lender LLC’s 95% interest in the recreational property, said he expects to come in first place for the rec lease.

“We believe we already own the rec lease and the judgment, but we’re moving forward with this to end the dispute,” Whittall said. “If someone else walks out with the rec lease and the judgment Friday, we will appeal the decision in court because we’re confident we own the lease and the judgment against unit owners.”

Association President Jay Yablon, though, says he expects the association to place the winning bid Friday. A unit owner meeting held last week also approved unit owner assessments to fund settlement cash involved with settling disputes.