Colony ruling delayed again until February

Those expecting U.S. Bankruptcy Judge K. Rodney May to rule on a proposed Colony Beach & Tennis Resort left his Tampa courtroom Monday disappointed — again.

May stated in December he would make a decision on Colony matters at Monday’s hearing, but as soon as the hearing started he said he would not be making a ruling.

“I want to bring this in for a landing in the next 10 to 15 days,” May said. “I will make a ruling on Feb. 10.”
May used the hearing to ask if there were any new developments in the case.

Although there were a few procedural matters disclosed, attorneys used the morning session to make their cases yet again for why a proposed Colony settlement should or should not be approved.

That settlement gives $3 million to longtime Colony owner Dr. Murray “Murf” Klauber and gives $2.3 million to a U.S. bankruptcy Chapter 7 trustee to pay creditors.

An amendment to the settlement reveals that Colony Beach & Tennis Resort unit owner and developer Andy Adams and his entities have agreed to resolve issues with the proposed settlement. That agreement also calls for giving $400,000 to creditors, $75,000 to Carolyn Field through the Field Trust and $25,000 to Adams through Breakpointe LLC. 

Settlement money would come from unit owner assessments.

The settlement also absolves the association from a $25 million judgment for damages Klauber won in a bankruptcy appeals court last year.

But the settlement leaves out Colony Lender LLC, the largest affected creditor in the bankruptcy case.
Colony Beach & Tennis Resort Association Attorney Jeff Warren said Adams was still reviewing the settlement, which he has yet to sign.

Warren told May if Adams approves the settlement, “other issues will resolve themselves.”

Warren has urged May to consider that Colony Lender will either receive fair-market cash value for its assets within a year of the settlement closing or receive the deed to 2.3 acres of land in the middle of the shuttered resort.

Colony Lender LLC Attorney Michael Assaf, though, again told May the settlement “is fundamentally illegal.” Assaf said the settlement still needs signatures, has not been submitted to the court and does not offer Colony Lender any money or protect its collateral. Assaf also noted May has not set a value for Colony Lender’s collateral.

“It’s not the standard for you to approve a pillow with half of the stuffing out of it and half of it inside the pillow,” Assaf said.

The back-and-forth banter among both lawyers began to irk May.

“Issues keep blossoming out,” May said, “and it implies more proceedings.”

Assaf told May to realize he’s “the gatekeeper” and must protect his client.

“All the association is trying to do is buy time, which allows Colony Lender to wait longer and get less for its collateral as the buildings on the site deteriorate,” Assaf said.

In the meantime, Assaf explained that the town has asked for a hearing to review the buildings and decide whether some of them need to be demolished. That hearing will be held March 4; a public notice for the hearing was issued this week.

“Rome is burning and we have to put out the fire,” said Assaf, who suggested the judge throw out the case.

Said May: “I don’t have to throw it out. I could convert it (to a Chapter 7 liquidation) and let a trustee sell it all.”

When it was Warren’s turn to respond to Assaf, he urged May to concentrate on approving the settlement.

“We are on a path to being successful, and only one party is standing in the way of that,” Warren said. “Just decide if the settlement is legal and can be confirmed and we can move forward.”

May told those in attendance that “Assaf has done a masterful job pointing out every single flaw and detail” with the settlement and other matters.

“My job is to pick out what’s meaningful and what is just noise,” May said.

Assaf urged May to consider that none of his arguments was noise, explaining the association has let the Colony buildings deteriorate “and now seeks to benefit from that by trying to get the property for a third of what the value of the loans are.”

“They want to buy this on the cheap to build a new resort,” Assaf said. “We just want to be treated fairly and have gotten offers in the past that are significantly higher than the appraised value of this property.”

Assaf also disputed Warren’s claim that Colony Lender can sell its interest at any time if it is unhappy with how the case is proceeding.

“We can’t sell our interest and, frankly, that’s absurd to suggest we can,” Assaf said. “Whomever buys this simply takes my place here at the podium and nothing more.”

May finished the hearing without further responding to the attorneys’ arguments.

“I’m going to make a ruling on Feb. 10,” May said. “I need an opportunity to react to all of this.”

Contact Kurt Schultheis at [email protected]