Tampa-based U.S. Bankruptcy Judge K. Rodney May announced Dec. 4 he’s wrestling with confirming a settlement plan that gives $3 million to longtime Colony Beach & Tennis Resort owner Dr. Murray “Murf” Klauber, while Colony Lender LLC is left in limbo.
May announced he will schedule a date in January to make his final ruling on both the proposed settlement and the Chapter 11 reorganization plan for Klauber-owned entities.
In the meantime, he expects Colony Beach & Tennis Resort Association attorney Jeff Warren to reassess the settlement when it comes to the money Klauber receives.
“One thing that still bothers me is if I confirm the plan, Klauber and investors get money that’s spendable and protected from collection,” May said. “That’s taking a right away from Colony Lender.”
In the proposed settlement, a U.S. bankruptcy Chapter 7 trustee receives $2.3 million. An amendment to the settlement proposed Dec. 3 revealed 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 be paid to creditors, $75,000 to Carolyn Field through the Field Trust and $25,000 to Adams through Breakpointe LLC. Klauber receives a separate $3 million payment as part of the settlement.
Colony Lender, the case’s largest affected creditor, is still left wondering what it receives and when it receives it.
Colony Lender principal David Siegal told the judge Dec. 3, “It can’t be right to sell all the assets, not pay your debts and leave with $3 million,” referencing Klauber receiving $3 million as part of the settlement.
On Dec. 4, May agreed with Colony Lender.
“It seems to me if Klauber is getting paid as a consultant, perhaps thought should be given to not paying him until the pie comes out of the oven,” May said.
Although Warren noted that Colony Lender would either receive fair-market cash value for its assets within a year of the settlement closing in March or be signed over the deed to 2.3 acres of land in the middle of the shuttered resort, Colony Lender LLC attorney Michael Assaf said there was still a fairness issue that needs to be resolved.
“This is like someone saying they are going to buy your house eventually, but not tell you what they are going to pay or when they are going to pay you,” Assaf said.
“Approval of this plan is in the best interests of the overwhelming majority of creditors,” Warren said.
May struggled with the issue.
“If approved as is, Colony Lender is deprived of control and an opportunity to collect against other sources,” May said. “I have to think that through. That’s the biggest single issue here remaining in the case.”
May gave both sides 14 days to file briefs for his review. Warren told May he “will address the Klauber issue” in his brief.
“We will have a date in January to pull all this together,” May said. “This won’t go on forever. None of us can tolerate that.”
The decision led May, though, to announce he wouldn’t allow Colony Lender to hold a foreclosure sale of its assets in Sarasota that was scheduled for Dec. 6, while he reviews the materials. He will decide next month whether to approve the settlement and a reorganization plan.
“This is an important matter,” May said. “You all have informed me as well as I can be informed. I just need some time now and don’t want to take the easy way out.”
Commission reviews Colony Wednesday
The Longboat Key Town Commission will will review a 67-page staff report and a recommendation from Town Manager Dave Bullock that requests existing units at the resort be torn down.
Bullock notes the buildings are a nuisance and a threat to the health and safety of the general public during a storm. He suggests that Colony structures be torn down as a condition to attaining the grandfathered tourism uses on the site in the future.
Colony owners and Colony Beach & Tennis Resort Association President Jay Yablon say the request isn’t legal.
Commissioners, which meet at 1 p.m. Wednesday and review Colony matters at a special meeting after their workshop, will also review a request from the association to ask for another extension of the grandfathered tourism uses at the shuttered resort.
The resort contains 237 tourism units on 18 acres. But, because the hotel and resort buildings were built before the town created its tourism resort commercial classification, 129 of the resort’s 237 units are considered grandfathered, or legally non-conforming.
Contact Kurt Schultheis at [email protected]