Email details Colony road map

Colony Beach & Tennis Association Board President Jay Yablon released detailed information about the board’s plans to move forward in the redevelopment of the shuttered Colony Beach & Tennis Resort in a seven-page email sent to unit owners the afternoon of Monday, Nov. 21.

The board is still negotiating with the Broomfield, Colo.,-based Club Holdings LLC, which it voted to recommend in late September, however, Yablon’s email outlines the likely course of action for many of the key issues facing the resort.

Owner options
The email states that each individual owner will be able to choose one of the following three options for his unit.

Buyout: Club Holdings intends to offer a buyout to owners who wish to sell their units at a value range of $100 to $150 per square foot, subject to conditions still under negotiation. (One-bedroom units have just more than 700 square feet, while two-bedroom units range from approximately 1,100 to 1,200 square feet.) The email states that the board believes the prices are “considerably greater than prices at which units have been recently sold” — an offer Club Holdings was willing to make in part because it recognizes the increased equity that each unit will have once rebuilt.

Voluntary fractional: For owners who still want to vacation at the Colony but don’t want to pay for rebuilding costs, a voluntary fractional agreement is available in which Club Holdings will pay the full costs of rebuilding and refurbishing the units in exchange for title to seven-eighths of the unit. These owners will maintain a deeded title to a one-eighth fractional interest and have usage rights of 42 days per year. Owners who choose this option will pay their proportional share of annual operating costs inclusive of common-area costs, however, Club Holdings is willing to finance these costs for the first three years of operation. The number of fractionalized units will be limited or phased to avoid creating more fractions than the market can absorb, and unit owners will be able to sell their fractional interests after a predetermined holding period.

Whole ownership: Owners willing to pay to rebuild their units will be able to pay for unit reconstruction costs, keep their entire fee simple title, use units for up to 42 days per year and keep 100% of the upside on the equity of their units. “There will be flexible usage over the most desirable vacation periods but this will not be unlimited as it was in the old Colony, and there will be a responsibility for annual maintenance costs, which would be offset by real distributions of hotel revenues,” the letter states. “We are still negotiating with Club Holdings over exactly how the vacation time and cost/distribution arrangement will work.”

Those who choose to remain as whole or fractional owners will receive a free, three-year membership in Club Holdings’ Duo or Quintess Collections, which would allow them to book vacations at the vacation networks’ destinations throughout the world.

Litigation
The email states that Club Holdings will reduce the exposure of unit owners to the legal uncertainties surrounding the resort and share in liabilities by “placing substantial funds into escrow to be expended on owners’ behalf in the event of an unlikely ‘worst case’ scenario in the courts.”

According to the letter, Club Holdings is prepared to proceed with a two-phase plan that would involve moving forward with redevelopment of assets already owned and controlled by the Association — a total of 15 acres — and later integrating the remaining three acres if the Association can acquire them.

A mediation conference that took place Nov. 12 did not result in a resolution between longtime Colony owner Dr. Murray “Murf” Klauber, the Association and other involved parties. The Association’s appeals of U.S. District Judge Steven D. Merryday’s rulings, which favored Klauber, remain pending.

According to the email, Association attorney Jeffrey Warren has offered to handle the appeals and further proceedings before U.S. Bankruptcy Judge K. Rodney May “on a significantly reduced fee basis with a premium to be paid only when Jeff succeeds in overturning Judge Merryday’s recent ruling.”

The email continues:

“Jeff is making a good bet here, because these recent rulings are indeed terribly flawed on the law and on the facts.”

Property plans
The board is still weighing whether it will recommend a rehabilitation, or rebuild, of existing units or a new build.

But Yablon wrote that board members are leaning toward a hybrid approach.

The likely recommendation will include rebuilding and relocating the property’s mid-rise building — a step that Yablon wrote will “maximize Gulf and/or Sarasota Bay views for many more units than at present,” eventually translating to higher room rates. Because new-build construction laws require buildings to be elevated against floods, parking would be relocated to underneath elevated villa buildings.

Units to the west of the FEMA line — a boundary past which obtaining flood insurance for new construction is difficult — existing units would likely be rebuilt.

Club Holdings will not invest in redeveloping the existing Colony restaurant.

“Simply put, it is not prudent to invest what would likely be $10 million to $15 million into an asset on the wrong side of the FEMA line which cannot be properly insured and could be lost with one bad hurricane,” Yablon wrote. “The existing restaurant and pool complex would then be recreated to its historical look and feel elsewhere on the beachfront of Association property, but just behind the FEMA line where the investment can be properly insured. The only exception to this restaurant and pool application plan is that the pool would be enlarged and improved to something much more suitable to the expectations of a guest of a 21st century beach resort.”

Current midrise owners, along with the owners of the presidential and vice presidential units, which sit atop the current restaurant, would receive their first choice of comparably valued units in the new Colony.

The next steps
The email states that Club Holdings is submitting a new site plan to the town to start the preliminary review process. The board will also hold meet-and-greet events on the island, the first of which will take place in the next few weeks to allow owners to informally discuss plans with Club Holdings representatives. A special, two-day Association meeting will take place in early 2012 and include a detailed presentation of the proposal and distribution of owner surveys. The board will review the surveys, make adjustments to the plan according to findings and, then, release the final proposal for an owner vote. An affirmative vote of at least 75% of owners is needed to move forward with plans.

The board will also hold a meeting at 10 a.m. Wednesday, Dec. 7, as required by Florida Condominium Law, to reconfigure $150,000 worth of funds for redevelopment that were previously budgeted for other line items in the 2011-12 Association budget.

Yablon ended his email on an optimistic note.

“With this email, I reiterate my personal commitment to remain at your service and again ask for your continued support as we kick off a new period of optimism and excitement for a reborn Colony,” he wrote.
But Klauber wasn’t optimistic about the plans.

“I don’t think it’s the best thing for the island, and I don’t think it’s the best thing for the investors,” he told the Longboat Observer approximately two hours after the email was sent to unit owners.

Klauber said he was doubtful that it could meet zoning requirements or obtain financing. He also said he is working on his own plan, although he declined to discuss specifics at this time.

Click here to read the full email.