The lender holding a mortgage on the Colony Beach & Tennis Resort property outlined a renovation plan for the resort Friday, April 23, that involves paying Colony Chairman and owner Dr. Murray “Murf” Klauber $12 million in exchange for his departure from resort affairs and acquiring most of his property and on-site businesses.
David Siegal, one of the partners of Colony Lender LLC, testified in a Colony Chapter 11 reorganization bankruptcy hearing at the request of U.S. Bankruptcy Court Judge K. Rodney May. May requested that Siegel divulge his group’s plans.
Siegal spoke of three options, one that would include York Capital Management LLC, a New York-based investment company that has an ownership interest in ResortQuest International, a national resort rental company with an office on Longboat Key.
Siegal, a Longboat Key resident who practices business law in New York state, told the court he expects to sign an agreement with York Capital in two weeks that would allow him, his partner Randy Langley and York Capital to buy out Klauber.
Siegal told the court he and Langley purchased the Colony’s $10 million loans for $3.75 million in March from Bank of America. The collateral on the loans include the Colony’s restaurants and buildings, tennis courts, spa, a penthouse office and other assets.
Siegal said he hopes the Colony’s 232 unit owners will agree to what he called “The A Plan.”
The A Plan includes:
• Paying Klauber $3 million upfront and an additional $9 million over the course of 10 years in exchange for the resort owner’s interests and all of his businesses on site.
• Absolving all of Klauber’s resort debts and loans.
• Giving Klauber “a life estate” for his fifth-floor penthouse living quarters.
• Investing $20 million at no cost to the 232 unit owners to turn the Colony into a “brand-new, five-star hotel and resort.”
• Increasing unit owner use-time at the resort from 30 days to six weeks and allowing owners to use their time any time of the year.
• Funding $1.5 million for the first year of reserves for the new Colony, at no cost to the unit owners.
• Free use of all recreational faculties on site for unit owners.
• Unit owners receiving 60% of the profits for unit rentals.
“This is what they say that they want,” Siegal said. “They want the Klaubers to retire their interest in the resort. This plan allows for that and more.”
But Plan A comes with a caveat that Colony Beach & Tennis Resort Association attorney Jeffrey Warren insinuated Friday that unit owners will not accept.
In exchange for Plan A, unit owners must sign over the titles to their units, converting the resort from its current state into a timeshare facility. Currently, the owners hold title to each unit and are part of a partnership with Klauber in the management of rentals to resort guests.
Siegal said he needs board approval and 75% of the unit owners to agree to the plan, or an 80% vote of the unit owners without board approval.
If the unit owners don’t agree to Plan A, Siegal said Plan B calls for making arrangements with unit owners individually to upgrade their buildings and continue to operate the Colony under the current operating agreements.
“We need seven out of eight unit owners per building to upgrade everything from interiors to replacing new windows at a cost of $90,000 per building,” Siegal said. “If they agree, they will get use of the amenities.”
Siegal said he and his partners will not spend $20 million for a new facility under Plan B.
“Plan B allows a 40-year-old resort to continue aging with renovations that wipe away termites and other issues with the buildings,” Siegal said.
If Plan B is not accepted, Siegal said, Plan C, dubbed “the least desirable alternative,” involves building a six-story hotel building on Colony property near Gulf of Mexico Drive that his corporation, Colony Lender LLC, eventually could own.
“We would build 50 to 90 condos and exist among unit owners that don’t want any part of the resort,” said Siegal. He said Plan C would significantly lower the value of his corporation’s investment because his new hotel “would be surrounded by dilapidated conditions.”
Warren told Siegal he didn’t understand why Siegal and Langley could not submit their proposal to the association, along with other interested parties, once the bankruptcy case was resolved.
Siegal suggested he wouldn’t have a chance to present a plan if the judge decides to convert the bankruptcy filing from a Chapter 11 case to a Chapter 7 liquidation at the association’s request.
When Warren questioned why Siegal was working toward his proposals even though Klauber has signed a letter of intent to work with Days Inn founder William M. Hitson on a renovation plan, Siegal downplayed the question.
“A letter of intent doesn’t concern me,” Siegal said.
Warren also asked Siegal why he and Langley are interested in the Colony.
Said Siegal: “Eighteen acres of island property, 1,200 feet of beachfront, a known name in the Colony, a quaint village concept and a tennis-oriented family facility that has everything one needs for their vacation on-site.”
May called Siegal’s testimony “very helpful to the court.”
For more information about the Colony bankruptcy hearings, pick up a copy of Thursday’s April 29 Longboat Observer and check www.yourobserver.com for live updates.
To read the contractors’ testimony from Friday’s hearing, click here.
Contact Kurt Schultheis at firstname.lastname@example.org.
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