An undisclosed term sheet that lays out The Colony Beach & Tennis Resort Association’s settlement guidelines was submitted to U.S. bankruptcy trustee William Maloney the evening of July 26.
Maloney, who is in charge of all of the resort’s operations, will now oversee a settlement conference between affected parties 10:30 a.m. Wednesday, July 28, at the law office of M. Lewis Hall III, in Sarasota.
The news comes on the heels of an initial report filed by Maloney Thursday, July 22, which states he is considering closing the resort in early August, in part, because the resort is breaking even and occupancy rates are expected to decline in August and September.
In the trustee report, Maloney states he is holding deposits for guests who book after Aug. 7, with the intention of refunding deposits subject to the Tampa-based U.S. Bankruptcy Court.
The Aug. 7 closure date could not be confirmed by Maloney or acting Colony President and General Manager Katie Moulton.
Maloney told The Longboat Observer last week he would not talk to the press during his time overseeing the resort.
And Moulton said the Aug. 7 closure date is not yet concrete. She is trying to convince Maloney to keep the resort open during the slower summer months.
“There have only been discussions about closing the resort,” Moulton said. “I am trying to show Mr. Maloney we can make a profit and continue to operate in August. Shutting the resort down causes issues. We are working hard to keep things running and trying to show how we can operate without losing money in the slower summer months.”
Moulton also noted that a couple of interested investors, who are willing to make contributions to keep the resort running (see below), have approached her.
David Siegal, a partner of Colony Lender LLC, which owns the resort’s bank loans, also thinks closing the resort is a bad idea.
“Closing the resort would diminish the name of the Colony, but the Colony has been closed before, and if the Colony is resurrected rapidly within a couple of months of closure, then, in reality, the fact that it closed for awhile would in the end not be very meaningful,” Siegal said.
Moulton declined to comment on what a future closing would mean for the resort’s employees and the fate of Colony owner and Chairman Dr. Murray “Murf” Klauber’s on-site business entities, including the Colony restaurant, Monkey Bar and Le Tennique shop.
The resort, which at its peak had 320 employees overseeing the 18-acre property, now has 55 employees on-site.
But, for now, all matters are focused on Wednesday’s private settlement conference.
Settlement attendees, in addition to each party’s respective attorneys, include Klauber and Moulton; Colony Lender representatives Siegal and Randy Langley; Colony Association President Jay Yablon and other board members; and Carolyn Field and William Merill, who hold a combined 20% in the Colony’s recreational facilities lease (which has been rejected by Judge K. Rodney May in bankruptcy court.)
Trustee uses leverage
Maloney, who told May last week that he does not believe the resort has enough assets to warrant a Chapter 7 liquidation, believes the best chance at rejuvenating the cash-strapped Colony resides in a meaningful settlement talk.
Maloney warned all parties involved that if a settlement is not reached, he will recommend the bankruptcy case be thrown out. The case would then be decided in a civil courtroom.
Maloney told the judge that he has identified 13 “potential investors” who have expressed an interest in sponsoring a plan or restructuring of the resort, complete with financing its renovation.
“There is a strong interest from many players,” said Maloney at Thursday’s hearing. “I feel highly confident a deal could be made to put the Colony back together again.”
But, the problem with that, Maloney noted, is he has the least leverage, and he hopes both the Colony Association, the resort’s owner and Colony Lender LLC, which is attempting to foreclose on the resort’s loans (see below), can reach a satisfying agreement for all parties.
Noting that the Association has not been willing to come forward with a plan that would be acceptable, Maloney writes in his report “that no plan has a strong prospect of success without the cooperation and support of the association” and he hasn’t been successful in achieving a commitment on its part to consider any plan.
Yablon told The Longboat Observer he and other board members are willing to negotiate in good faith, in part, because Maloney and Maloney’s attorney, Jordi Guso, agreed last week at the hearing to consent to an ejectment complaint filed by the Association, which would dissolve the partnership’s (Klauber’s) right to rent the units and return possession of the units to unit owners.
Maloney has agreed to this request only if the association negotiates in good faith this week.
“I will be there, as will a number of other board members, and we very much look forward to working in good faith with Mr. Maloney and all of the other parties, including Dr. Klauber and Ms. Moulton, Mr. Langley and Mr. Siegal and Ms. Fields and Mr. Merrill, to resolve the issues outstanding at the Colony,” said Yablon.
Siegal hopes a settlement can be reached this week.
“I think if we don’t work something out, the trustee will ask the judge to dismiss the bankruptcy case,” Siegal said. “If it’s dismissed, the disputes between the Association and Dr. Klauber will remain and they will continue litigating in state court and I imagine that much of what was decided along the way in bankruptcy court might not be applicable.”
Moulton is also hopeful a resolution can be reached.
“Mr. Maloney is a seasoned receiver/trustee and we look forward to his guidance and that of our other counsel as we move toward this opportunity for resolution,” Moulton said. “We are confident we will come out of this conference with a positive plan for the resort’s future.”
The next scheduled bankruptcy hearing is slated for Aug. 9, in Tampa, during which Maloney is expected to make his second report to and update May on the settlement conference.
On that day, May can also decide to agree to give the units back to the unit owners if he agrees with Maloney’s assessment that the association has been working in good faith toward a settlement.
The following are the 13 potential groups and/or persons, identified by Colony Beach & Tennis Resort trustee William Maloney, who could become financial backers of the Colony and help fund a revitalization of the property.
• Charley Aker — Represents a private family fund out of Kentucky.
• Colony Lender LLC — The partnership formed by Cedars Tennis & Fitness Club Inc. owner Randall Langley and Longboat Key resident and attorney/businessman David Siegal that purchased key portions on the Colony’s loan for an undisclosed amount.
• Coral Hospitality LLC — The Naples-based hospitality-management-and-investment company has a portfolio that includes hotels, private clubs and residential communities. Managing members are John Ayres Jr. and Lee Week, both of Naples.
• Bill Hitson — Hitson is managing partner of New York-based real-estate investment firm Devonwood Investor’s Atlanta office. He was the co-founder and former vice president, president and CEO of Days Inn of America.
• Midlan International Resort Realty Inc. — The Celebration-based company specializes in resort real estate and timeshares. The company is registered to Michael and Christine Butler, both of Celebration.
• Glenn Miller — Glenn and Linda Miller, of Windemere, own a condo at Grand Bay.
• MW Development & Investment Advisory Inc. — The St. Armands Circle-based real-estate corporation is registered to Ronald Lewis, of Sarasota.
• Rusovich Group — Gregory and Suzanne Rusovich, of Metarie, La., own a unit at The Colony and at The Water Club. Gregory Rusovich is CEO of TransOceanic Shipping Co., in New Orleans.
• Bob Shleider — A longtime member of The Colony Fitness Center.
• Harper Sibley — Miami-based Sibley Corp. developed Boca Grand Club and owns properties throughout the state.
• Steep Rock Capital LLC — The Russia-based company manages two late-stage private equity funds, the Steep Rock Russia Fund and the Steep Rock Russia Fund II. Paul Swigart is the managing partner.
• TENCON — Tencon Beach Association Inc. is located at 1511 Gulf of Mexico Drive. Officers are President Dennis Haley, of Grand Blanc, Mich.; Vice President Patricia Finneran, of New York City; June Haley, of Grand Blanc; Joseph Jacobson, of Bloomfield Hills, Mich.; and Arlene Skversky, of Longboat Key. The Colony has leased on-site tennis-court property from TENCON for years.
• Zuccarello Group —The Zuccarello Group has expressed interest in building a tennis academy and carving out the tennis portion niche of a revitalized Colony resort.
The following are excerpts from the Chapter 11 trustee report about The Colony Beach & Tennis Resort’s operation, as submitted by bankruptcy trustee William Maloney July 22 to the United States Bankruptcy Court Middle District of Florida.
It is certain that Colony Beach and Tennis Club, Ltd. (“Colony”) will ultimately be restructured in a new form, either as a condo-hotel, timeshare/fractional units/shared ownership, or other model. I have identified, met with or spoken to 13 groups who have expressed a genuine interest in participating as sponsor in a restructuring plan for Colony. I believe many of the plans are professional, feasible and several — but perhaps not all — likely financial capacity to fund a restructuring.
Unfortunately, no plan has a strong prospect of success without the cooperation and support of one of the significant players, the Colony Association (the “Association”). I have NOT been successful in achieving a commitment on their part to consider any plan. It seems clear to me, the Association’s agenda is to force a liquidation of Colony so as to terminate the partnership and gain control of Colony’s property and any plan to restructure …
… The Debtor has a few assets, primarily condo unit furnishings, (subject to a lien, which I consider to have little, if any, value) and the contractual rights to use the condo units for 335 days a year. This right will vanish unless the debtor can confirm a plan, which in my view, can only happen with successful mediation. The Association claims to hold the lion’s share of the unsecured claims asserted against the estate, and is the rightful beneficiary of the claims, if any, under the Directors and Officers insurance policy. There do not appear to be any meaningful assets that could be administered by a Chapter 7 Trustee. Therefore, in the absence of a commitment by all constituents — including principally the Association — to participate in a mediation in good faith, I recommend the Chapter 11 case be dismissed …
… I decided to continue with the July 4th fireworks and to issue summer promotion, with the sole purpose of increasing room occupancy in July. At latest count we have more 1,000 room night reservations in July, which is a fairly strong showing …
… Generally I found the finance area did not receive a lot of oversight and suffered a general condition of neglect, rather than a spurious effort to deceive the debtor or its creditors ...
… I have discussed, met with and reviewed proposals from 13 different groups. Each group has a slightly different approach but in general all groups propose a condo-hotel, timeshare or blend of these concepts. Some of the groups are familiar to the court, some are not. Those that propose a condo-hotel feel that timeshares have gone the way of the leisure suit. Those that sponsor a timeshare claim a condo-hotel is not financially feasible. Perhaps not all, but many of the groups I believe can deliver the funding commitments needed to confirm a plan ...
To read the entire report, click here.
Contact Kurt Schultheis at [email protected].