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Longboat Key Wednesday, May. 19, 2010 7 years ago

Colony closing arguments submitted

by: Kurt Schultheis Senior Editor

The Colony Beach & Tennis Resort Association has obtained the signatures of more than 80% of the unit owners, who have signed a statement supporting the motion to convert the resort’s bankruptcy case to Chapter 7 liquidation.

The signatures were filed Monday in Tampa’s U.S. Bankruptcy Court, as a part of the association’s closing statement.

Bankruptcy Judge K. Rodney May will make his ruling on whether the bankruptcy case will be converted, which could dissolve the current partnership in place between the resort and the unit owners, Tuesday, May 25, in Tampa.

According to the association’s closing statement, “The motion to convert (the) case to Chapter 7 reflects the unified voice of the unit owners who own fee simple title to the condominium units used by the partnership in its hotel business operations.”

The statement includes a list of 189 of the 232 Colony unit owners, who want the bankruptcy filing converted.

The association’s closing statement urged May to convert the case, because the partnership “has incurred substantial and continuing losses” and “has demonstrated gross mismanagement.”

The association states in its filing: “Although the debtor and Colony Lender LLC (the owner of the resort’s loans) object to the conversion, there is no reasonable likelihood that a plan will be confirmed within a reasonable time. The various proposals for The Colony outlined by the partnership, Mr. William Hitson and Colony Lender all depend on support of the unit owners. Such support does not exist. The overwhelming unity of the unit owners conclusively proves that there is no possible way any plan can be confirmed that (a) requires a large infusion of cash from the unit owners (b) is predicated on a vote of the unit owners to amend the governing documents or (c) is predicated on the unit owners agreeing to transfer title to their units. As a result, the motion should be granted.”

The Colony, meanwhile, urged the judge in its closing statement not to convert the bankruptcy filing.
States the Colony in its closing statement: “There can be no doubt that the limited partners (unit owners) are engaged in a systematic effort to sabotage the Colony’s hotel operations and this bankruptcy case.
Their self-professed goal is to dissolve an investment limited partnership, with which they have grown dissatisfied. In this manner, they seek to bypass the pending state court action to dissolve the partnership and circumvent the creditor protections inherent in state law governing the dissolution of the partnership …
This motion is about the limited partners’ desire to control the property. It has little to do with what is in the best interests of creditors, the estate or the debtor’s 40 employees.”

The Colony submitted an exhibit showing its financials for the month of April, explaining that the resort’s financials have improved every month since the resort reopened Dec. 18 a portion of its buildings near the Gulf of Mexico.

Michael Assaf, attorney for Colony Lender LLC partners Randy Langley and David Siegal, also submitted a closing statement Monday. As the principal secured debtor of the Colony, Colony Lender LLC opposes the bankruptcy conversion.

Colony Lender LLC’s filing called the conversion request “premature” and says that Siegal’s three plans for Colony renovation could help the resort reorganize for the benefit of all the creditors.

Colony Lender’s filing states that the group has a first-priority secured claim in the assets of the debtor’s estate in the approximate amount of $3.7 million, which includes the contract rights of the resort’s partnership pursuant to the partnership agreement. The filing also maintains the association does not have the authority to represent the unit owners as a class in this bankruptcy proceeding.

Contact Kurt Schultheis at [email protected].

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