Planning mode: Rehab vs. rebuild

It’s currently the great debate among unit owners at the Colony Beach & Tennis Resort: rehabilitation versus rebuild?

Those who say “yes, yes, yes” to a rehab project argue that it would be a quicker, cheaper route and would preserve the 40-year-old charm of the resort.

Those who say “no, no, no” to the rehab route — advocating for a complete rebuild, instead — say that building a new resort would generate more value and investors would be better protected against a hurricane. Additionally, many believe a rehab project would be impossible because of engineering issues.

Over the past week, unit owners received two redevelopment proposals that suggest different courses for the Colony: a rehabilitation proposal from longtime Colony unit owner W. Andrew “Andy” Adams’ AdamsMark L.P. and a redevelopment proposal from Longboat Key resident Manfred Welfonder’s MW Group.

The renewed interest on the part of several developers comes after last month’s unanimous decision by the board to terminate its agreement with development partner Club Holdings Ventures.

Adams’ AdamsMark L.P. submitted its plan to the Colony Beach & Tennis Resort Association board in June 2011 but last week gave permission to the board to send it to unit owners. In distributing the proposal to unit owners, Colony Beach & Tennis Resort Association Board President Jay Yablon asked that they keep in mind, that the proposal is a year old and could change.

Adams has a growing stake in the Colony’s future. His Colony Beach Investors LLC has purchased at least 43 units since June, and he owns at least three units listed in his name. Any proposal for the Colony needs 75% of the resort’s 237 unit owners to vote in favor of it to move forward, meaning that a block of 60 or more unit owners could alter the course of the resort. Adams also owns 5% of recreation/resort assets that include the property’s tennis facilities.

AdamsMark was one of four finalists for the redevelopment project last year.

Welfonder’s MW Group was among the final six contenders for redevelopment. Since elimination, Welfonder has been making the case for his rebuild project to unit owners. Last March, he announced that he had partnered with Sarasota developer Jay Tallman, president of Ascentia Group LLC.

The board has also received a proposal not intended for distribution to unit owners from the Naples-based Coral Hospitality. The Atlanta-based Capella Group in affiliation with West Paces, a luxury hotel-management company founded by Horst Schultze, that was also among the final six, has also expressed interest in submitting a proposal, Yablon said.

AdamsMark proposal
Adams is the retired CEO of National Health Investors Inc., a real-estate housing trust that manages publicly traded senior housing companies.

The proposal, which refers to AdamsMark as the “manager,” states that the manager “has implemented many aspects of the Ritz-Carlton culture into its senior housing centers … ”

The plan lays out a vision for “a financially sound and restructured Colony” that would begin with the immediate rehabilitation of the property with the initial goal of pursuing AAA’s three-diamond rating and the ultimate goal of a four-diamond rating. The resort would operate as a hotel-partnership with either AdamsMark or a third-party operator managing the resort. (Earlier this month, Adams indicated that his company would be willing to discuss a management agreement with Coral Hospitality.)

The recreational property in which Adams is a 5% stakeholder has been referred to as the “hole of the doughnut” — i.e., if the Association doesn’t reach an agreement with the parties, it could have to develop the 15 acres it controls around the three acres.

The remaining 80% is owned by entities controlled by longtime Colony owner Dr. Murray “Murf” Klauber, while Colony Lender LLC controls 15% and also owns the mortgage on Klauber’s 80%.

AdamsMark would be willing to use a to-be-determined amount to buy out the interests in the recreational property and sell the property back to the Association at its cost, plus 5.5% interest on all cash advanced. But in the event that an agreement isn’t reached, AdamsMark would negotiate access for rights to other recreational facilities, including those at the neighboring TENCON, the Longboat Key Club and Resort and nearby public tennis resorts. The company could also explore the possibility of building a new swimming pool and tennis courts.

The proposal includes various rental options for unit owners but would require owners to make their units available for rent for at least 90 days during peak-season months of December through April.

Adams estimates that a complete inside-and-outside renovation would cost approximately $135,000 per unit. Unit owners could borrow money through an owner-finance program and would also have the option of fractionalizing units to a maximum of three fractions per unit to minimize costs.

Adams wrote in an email to Yablon, who sent it to unit owners last week, that AdamsMark is willing to provide evidence of a $20 million letter of credit from a “reputable regional bank that has operations in Sarasota, FL.”

• Seeks a financially sound and restructured Colony that would begin with the immediate rehabilitation of the property;

• Would allow owners to fractionalize units up to three fractions per unit;

• Has expressed a willingness to discuss a management agreement with the Naples-based Coral Hospitality

MW Group proposal
MW Group has been advocating for a rebuild of the resort since it first presented a proposal to unit owners in December 2007 and has maintained that a rebuild is the only way to overcome many of the Federal Emergency Management Agency (FEMA) compliance issues surrounding the property.

In the latest plan — the fourth it has submitted since then — MW Group has partnered with the architectural firm Fugleberg Koch to develop 3-D plans of an 18-acre rebuild project that would include the 190-unit Residences at the Colony and 160-unit Lodge at the Colony.

The Lodge would consist of a building with five stories at the center and four stories on the north and south portions, with the northern building housing meeting space, and a fitness center/spa/health club. The Residences would be situated among 12 villa buildings around the property.

The proposal calls for maintaining the “casual village atmosphere” of the Colony, while maximizing its green space. It includes 10 Har-Tru tennis courts, along with other tennis amenities such as a center court with stadium seating, renovated Monkey Bar, updated pool and additional dining.

MW Group states, in its proposal, that it would bring four-star level units to current owners at no cost and allow them annual deeded use of up to 30 consecutive days each year.

The plan states that MW Group has selected three nationally and/or internationally recognized hospitality companies as finalists for its plan, including the Intercontinental Hotel Group/IHG and its flag, Crowne Plaza Hotels and Resorts.

The plan also states that vacation ownership exchange-and-rental companies RCI and Interval International would participate in the project.

MW Group also proposes renovating the property’s beach cottages and allowing owners to keep some or all cottages with the option of exchanging ownership with new residences across the street.

MW Group estimates that the completion and opening of the resort could occur within 36 months.

• Would include the 190-unit Residences at the Colony and 160-unit Lodge at the Colony;

• Would allow owners up to 30 days of consecutive use per year;

• Has selected three nationally and/or internationally recognized hospitality companies as finalists for its plan, including the Intercontinental Hotel Group/IHG and its flag, Crowne Plaza Hotels and Resorts