TOP STORY, September: Colony suspends hotel operations

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ORIGINALLY PUBLISHED Sept. 24, 2009


The Colony Beach & Tennis Resort, a hotel institution on the Key in the midst of its 40th year in business, is suspending its hotel operations Sunday, Sept. 27 until further notice.

With tears in her eyes and a hesitant voice, Colony General Manager Katie Moulton announced Tuesday, Sept. 22, in The Colony Dining Room that hotel operations are closed, for now, as a result of the failure of the condominium unit owner association’s board to assess unit owners to fund operation expenses and repairs to the property.

The Colony and its association have been in the midst of a legal dispute over funding requirements since April 2007.

“I’m sorry we have to do this,” said Moulton, her voice cracking as she spoke. “But we will return our operations soon, get renovations done and be the gem of the Gulf that we have been.”

Colony Chairman and owner Dr. Murray “Murf” Klauber called the announcement “the toughest decision I have ever made in my life.”

“This place is my love,” Klauber said.

As of 9 p.m. Sunday, Sept. 27, Moulton said preparations to close the hotel will begin, including shutting off all utilities to the condominium buildings that house 237 individual condominium units on the 18-acre site.

Eighty full-time hotel staff employees are being laid off and approximately 60 employees will remain on-site to continue restaurant, bar and catering operations, Moulton said.

Mayor Lee Rothenberg and others were saddened to hear the news.

“It would be very sad to lose a great and famous landmark like the Colony,” Rothenberg said. “I hope a way is found to keep it in operation.”

Longboat Key Club and Resort General Manager Michael Welly also voiced support for The Colony.

“I remember reading about The Colony for years before I even came to Longboat Key,” Welly said. “It’s an international facility that set the pace for tennis, and I hope they can work out their differences for the sake of the island.”

Michael Klauber, proprietor of Michael’s On East, moved to The Colony with his family when he was 14 years old. He ran the Colony Restaurant as food and beverage director from 1980 to 1986.

“My hope is that this line in the sand will bring the parties to the table once and for all and that both sides will be able to develop a long-term plan and ultimately long-term success for the Colony,” he said.

When asked how the decision to close the hotel has affected her 83-year-old father, Moulton said: “This is killing him. His heart is breaking in several different ways.”

Moulton said her staff is working to find accommodations for all guests that previously made hotel reservations. An effort is also underway to assist employees, which Moulton called “my family,” in finding work elsewhere.

The Colony Spa, The Monkey Room Patio and The Colony Shops, which includes tennis shop Le Tennique, will also be closed until further notice.

The Colony Dining Room, however, will remain open permanently Tuesdays through Sundays, serving dinner starting at 5 p.m. The restaurant will also continue its Sunday brunch from 10 a.m. to 2 p.m. weekly.
The Monkey Room Bar and catering operations will also remain open. Klauber owns all of the businesses that remain open.

Moulton said the businesses that will be shut down “were very dependent on the hotel and are incredible profit centers for the resort operation.”

The suspension of hotel business, Moulton said, means that restaurant revenues could decline by 35%.

The Colony, which opened in 1969 and has annual revenues of more than $20 million, was the first tennis-themed resort in the country with beachfront views, Klauber said. Those tennis courts will remain in operation, but are now only available for members of the public who pay for Colony-offered tennis clinics.

Unit owners will not have access to the tennis courts or any other amenities (besides the open-to-the-public restaurant and bar) during the suspension.

Moulton said it’s impossible to operate the Colony as a world-class resort anymore without the cooperation of the association, which has been in a dispute with the Colony since 2006.

The announcement was made two months after a federal bankruptcy judge ruled the association’s board does not have to assess unit owners $14.1 million in resort repair costs or make payments to a recreation lease the judge declared null and void. Moulton said the Colony will appeal the judge’s rulings, a process that will take a year or longer to go through.

Meanwhile, foreclosure proceedings are ongoing in Sarasota County against Klauber and seven of his resort corporations, alleging they have defaulted on three loans whose outstanding amounts total $8.02 million.

Moulton said the reopening of the hotel hinges on reaching an agreement with the association board to fund expenses or finding capital from an outside source with which the association is also willing to work.

Klauber and Moulton said they reached their decision early last week after the association did not respond to a proposed maintenance agreement with financial terms that could have reinstated the Colony as manager of the property.

Said Moulton: “We have an association board of directors that’s not interested in participating in productive dialogue with us and we are forced to suspend hotel operations in order to protect the Colony’s financial security.”

Moulton said her father has been paying for the hotel operation expenses for more than three years.
“It simply has to stop,” Moulton said.

Following the close of the bankruptcy trial in July, Moulton said she and Klauber have attempted to meet with the association to move forward with a plan for future obligations of association expenses. Moulton said the association has declined meeting attempts.

Moulton said she and Klauber are working “with a number of viable investment groups that could potentially provide operating capital.”

“The suspension will hopefully help investors make their decisions more quickly,” said Moulton, who admits the condominium documents as written mean the association would have to be in agreement with any investor who signs on to help the property.

Klauber said it’s his goal to continue to work toward renovating the facilities, adding a world-class meeting facility and taking advantage of the town’s 250-tourism-unit ordinance to bring an additional 85 tourism units to the property.

Klauber also pointed out that any investor who works with the Colony will have to adhere to the independent vision that he and his daughter have created.

“Certain (association) members have stated it’s their goal to starve Dr. Klauber out and have no intentions of making payments until that time comes,” Moulton said. “We hope this action will cause the unit owners to reconsider.”

Association president Jay Yablon, however, said there is no truth to the fact that the association has refused to meet with Klauber.

“If it was their intention to meet with the board, we on the board would have appreciated knowing that,” Yablon said. “We told them last week a reply would be forthcoming (regarding the maintenance agreement), and they chose to take this action anyway.”

Despite the disagreement, Yablon called the news “a sad day for The Colony.”

“It was clear following the (bankruptcy) judge’s decision that Dr. Klauber would now have to sustain the hotel as a profitable business without subsidy from the owners,” Yablon said. “At this time, the board will be working rapidly and prudently to protect the property, protect the interests of the unit owners and plan for the future.”

In the meantime, unit owners, who have 30 days annual use of their condominiums as part of the existing condominium documents, will have to work individually to turn the utilities back on to their units if they plan to use them.

Carl Rentschler, a 17-year unit owner of The Colony, was upset to hear the news.

“The whole situation is extremely disappointing,” Rentschler said. “But it seemed like an inevitable outcome the way things we’re proceeding.”

In a letter sent to Colony attorney Charles Bartlett on Tuesday, association attorney Jeffrey Warren states that the Colony’s statements regarding efforts to resolve the current dispute “are false and misleading.”

Warren also requests that keys to the condominiums be distributed Wednesday, Sept. 23 and requests that furniture and fixtures in the units be left intact. Bartlett has already stated that Klauber owns room furnishings.

Moulton also pointed out that the documents in place prevent the association and its board from trying to re-open hotel operations without Klauber’s involvement as the hotel’s general partner.

Meanwhile, a pending Sarasota lawsuit filed by several unit owners in February requests the removal of Klauber as general partner.

Klauber, however, said he has no plans to leave the facility that he built from the ground up.

“We have been a big force of fun on Longboat Key,” said Klauber, who will continue to live on the top floor penthouse of the soon-to-be deserted hotel building. “We shall return.”

BOX
Timeline

• 1968 The Klauber family moves from their home in Buffalo, N.Y., to Longboat Key.
• 1969 Klauber and a business partner purchase The Colony property for $3.5 million and turn it into the first “tennis-centric resort” in America.
• 1972 Klauber forms the first condominium hotel rental partnership agreement in the state.
• 1985 The Colony is inducted into the Nation’s Restaurant News Fine Dining Hall of Fame.
• 1988 Katie Klauber Moulton becomes president and general manager of The Colony.
• 2001 Moulton is awarded Hotels magazine’s “Independent Hotelier of the World” award, selected by more than 80,000 of hotel peers worldwide.
• 2004 The Colony is recognized as the No. 1 tennis resort in the U.S. by Tennis magazine for an unprecedented eight consecutive years.
• 2006 Child magazine lists The Colony as “one of the top-five family resorts in the U.S.” The honor was bestowed again in 2008.
• 2007 Klauber files a lawsuit in Sarasota County, alleging The Colony association unit owners  owe $14.1 million in resort repair costs.
• November 2008 The Colony’s association files for Chapter 11 bankruptcy in Tampa, forcing a federal bankruptcy judge to make the final decision on a two-year-old disagreement between the unit owners and resort operators.
• April 2009 Bank of America files a foreclosure suit against Klauber and seven of his corporations, alleging he has defaulted on three loans whose outstanding amounts total $8.02 million. The majority of the Colony property owned by Klauber is listed as collateral in the existing loans.
• July 2009 A federal bankruptcy judge rules in favor of the association.
• Sept. 22, 2009 Klauber and Moulton announce hotel operations will be suspended until further notice.

UPDATE: The Colony re-opened Dec. 18.

Contact Kurt Schultheis at [email protected].