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Longboat Key Wednesday, Mar. 31, 2010 7 years ago

Colony Association seeks to dissolve partnership

by: Kurt Schultheis Senior Editor

The Colony Beach & Tennis Resort Association is seeking to dissolve the resort and convert it completely to condominium buildings.

This is one of the potential outcomes Thursday, April 8, when The Colony Beach & Tennis Resort’s bankruptcy case goes before Judge K. Rodney May in U.S. Bankruptcy Court, in Tampa. May will hear pre-trial motions from all sides on the association’s motion to have the case converted from a Chapter 11 bankruptcy filing to a Chapter 7 liquidation.

If May grants the association’s request, the partnership in place between Colony Chairman and owner Dr. Murray “Murf” Klauber and the unit owners would be dissolved.

If the judge grants the request now or in the future, the hotel operating agreement and partnership in place would be liquidated and the unit owners would have complete control over their units, making The Colony a condominium association instead of a hotel resort.

If that scenario played out, Klauber would lose control of the 232 units for hotel use.

Asked to comment on the conversion request, Jay Yablon, president of the unit owner’s association, said: “It is the goal of the unit owners to seek the relief requested in our conversion complaint.”

In an e-mail obtained by The Longboat Observer that Yablon sent to unit owners last week, the association president stated: “We intend to proceed unabated with our challenges to the partnership’s reorganization and with our effort to eject the partnership from our units. We expect to be successful in these efforts in the next few months.”

Colony President and General Manager Katie Klauber Moulton, however, is hopeful the judge will approve The Colony’s most recent disclosure statement and reorganization plan next week and allow the resort’s creditors to review the plan.

Moulton said an objection to the association’s request to convert the bankruptcy case and liquidate the partnership would be filed soon.

Said Moulton: “It’s their intention to dissolve the partnership in place, but our new lenders are adamantly opposed to that.”

Moulton said the tourism aspect of the resort is crucial to the success of the property and Longboat Key as a whole.

“We understand some of the individual unit owners and board members would like The Colony to become a full-time condominium property,” Moulton said. “But we don’t believe that’s desired by the majority, and we will vigorously object to that, as will the lenders.”

The lenders are Randy Langley and David Siegal, who purchased in February a Colony loan worth more than $9 million from Bank of America.

Langley, the owner of Cedars Tennis & Fitness Club, and Siegal, a Longboat Key resident and Albany, N.Y., lawyer, told The Longboat Observer in March they hope to restore the resort and make it a place where Klauber can exist in harmony with the 232-unit owners.

Although the new loan holders declined to discuss their plan, the e-mail Yablon sent to unit owners last week shed some light on their plans.

Wrote Yablon: “Mr. Langley and Mr. Siegal have made a very rough proposal to the board that is predicated on unit owners deeding them their units and receiving timeshare interests in return. As we have previously reported, we believe it is premature for us to be entertaining proposals from outside entities until the partnership’s Chapter 11 case has been resolved by Judge May as is expected within the next few months.
“We wish to be especially circumspect about any proposal, such as this, which calls for the owners to agree to relinquish their fee-simple title to their units.”

Yablon states that Langley and Siegal will be treated no differently than any other outside parties expressing interest in the future of The Colony.

“When and if the time arrives,” Yablon wrote, “they (proposals) will be entertained on an equal and competitive footing with any and all other such interested outside parties, with involvement by the association membership in addition to the board of directors.”

Asked to comment on whether he believes that Langley and Siegal have a right, as loan holders, to object to the association’s motion to convert the bankruptcy filing, Yablon said that will be up to the judge to decide.
Meanwhile, The Colony’s revised bankruptcy reorganization plan is similar to the plan submitted by the hotel operating entity in January and makes no mention of Langley and Siegal.

In filings submitted in bankruptcy court Friday, March 26, it was mentioned briefly that a new loan holder has replaced Bank of America.

“It’s generally the same plan with some minor modifications made,” Moulton said.

Asked about a plan being proposed by Langley and Siegal, Moulton said: “We have a couple of groups we are working with that may allow us to amend the plan yet again, but we don’t know the timing of that.”

Contact Kurt Schultheis at [email protected].

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