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Longboat Key Wednesday, Apr. 14, 2010 7 years ago

Colony dispute escalates

by: Kurt Schultheis Senior Editor

Add the founder of the Days Inn hotel chain as another potential white knight in the three-year, ownership-bankruptcy dispute at the Colony Beach & Tennis Resort.

But even the announcement in a court filing of his identity — William M. Hitson — isn’t bringing the clashing sides any closer to resolution. Indeed, the dispute appears to be escalating.

On Monday, April 19, Tampa-based U.S. Bankruptcy Court Judge K. Rodney May will hear a barrage of arguments from all sides in the dispute over who’s responsible for maintaining the historic Longboat Key tennis resort.

On one side, the board of the Colony Beach & Tennis Resort Association, representing 232 unit owners, will argue to convert the Colony’s amended Chapter 11 bankruptcy reorganization filing to a Chapter 7 bankruptcy liquidation — with the intent of booting Colony Chairman and owner Dr. Murray “Murf” Klauber out of any involvement in the unit owners’ property.

The board will also argue, as it has in court filings, that Klauber’s reorganization plan is full of “serious defects.” In addition, it will attempt to discredit the character of one of the partners who recently purchased the Colony’s $10 million bank loans.

On the other side, Klauber and his daughter, Colony President and General Manager Katie Klauber Moulton, will plead that May send all parties back into mediation. Their hope is to bring in the expertise and capital of Hitson and create a new revenue-sharing agreement with the unit owners similar to that of the
Longboat Key Club and Resort.

And on yet another side, partners David Siegal and Randy Langley, the two who purchased the Colony bank loans, will argue that the association board, through a Chapter 7 liquidation, is attempting a “land grab” that would be “a disaster” to the assets of the Colony and to Longboat Key.

“If they win,” Langley told The Longboat Observer, in reference to the association board’s liquidation plan, “they lose. The unit owners win the right to spend $30 million.”

Langley, owner of Cedars Tennis & Fitness Club, and Siegal, a Longboat Key resident, said he and Siegal are not working with Klauber, the unit owners or Hitson on any plan. “We are just lenders,” Langley said. “But we would love to participate in a mediation session.”

Although Langley and Siegal have declined to discuss any plans to resolve the dispute, Yablon sent an e-mail to unit owners at the end of March revealing potential 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 time-share interests in return. 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.”

Langley said Yablon’s e-mail was correct.

Yablon and the association went a step further last week, however, when they filed an objection to the Colony’s amended bankruptcy reorganization plan. They attempted to discredit Langley in two pages describing Langley’s criminal convictions for racketeering and grand theft when he was 18, a federal tax lien “in excess of $440,000” and a foreclosure action against him.

“It is difficult to see how Colony Lender LLC will have the ability to consummate any plan or obtain the necessary financing to rebuild The Colony and operate the hotel or assume the role of the general partner,” the association said in its objection to the reorganization plan.

Siegal filed a response to the objection, saying the association is attempting to divert attention to Langley’s past and away from his and Langley’s reasons for opposing a Chapter 7 liquidation.

Siegal’s response also noted that Langley has paid $358,000 of the federal tax lien and court records reflect that he is due a tax refund. The foreclosure on his Longboat Key home also no longer exists because he sold the property.

Said Langley: “It’s totally irrelevant for the association to lash out at the lender.”

“The only relevant point I submit to the court,” Siegal wrote in his response, “is that a Chapter 7 conversion is premature, a disaster to the assets of the estate, deprives Colony Lender of its right to submit a reorganization plan, would be highly injurious to the community of Longboat Key and would create chaos both in the court system and with respect to this resort, this very important piece of real estate in the town of Longboat Key.”

Siegal called the association’s liquidation pleading “nothing but an attempt at a land grab with the sanction of the court.”

If May grants the association’s bankruptcy-conversion request, the hotel operating agreement and partnership in place would be liquidated, Klauber would be removed as general partner and the unit owners would have complete control over their units.

In response, Klauber said: “They want to get the land for nothing and have a free condominium for something they paid an average of $85,000 for years ago.”

Klauber also says the association’s plan to convert their units into condominiums “is nonsense.”
Yablon, however, called the land grab accusations “ludicrous.”

“The members of our association already own that land and have owned that land since 1973,” Yablon said.

Yablon also disputes claims being made that the association wishes to convert strictly to condominiums.

“We already are and have been a condominium association since 1973, when Dr. Klauber set it up that way,” Yablon said.

Association attorney Jeffrey Warren maintains that the association will look at any and all proposals presented for the property once the bankruptcy case is resolved and does not believe a mediation session will be productive.

One of those proposals is likely to come from yet another party, Longboat Key resident Manfred Welfonder, the owner of a Sarasota-based real-estate development and investment company.

Welfonder continues to assert that he is working with an international hospitality client to purchase the resort and all of the owners’ assets for a complete teardown and rebuild of the property.

Welfonder says his client is developing a new world-class hotel and resort property that would also be open to the public.

Said Welfonder: “We hope that the right time for negotiations will be soon.”

Condo-Conversion Issues
Longboat Key Town Attorney David Persson said this week The Colony Beach & Tennis Resort’s unit owners would have to have the resort rezoned from a tourism parcel to a residential parcel before unit owners could consider living there for more than 30 days at a time.

The Colony’s 18 acres of land at 1620 Gulf of Mexico Drive is currently zoned T-6, or six tourism units per acre.

Further complicating matters, the 40-year-old resort was built years before the town’s six-tourism-units-per-acre mandate was implemented.

“We have 237 units today,” said Colony Chairman and owner Dr. Murray “Murf” Klauber. “If they (the association) want to change the zoning, they would only be allowed to have 106 rooms. I’m curious which unit owners are willing to give up their units.”

Persson confirms that if the Colony were converted to six units per acre of residential use, the property would not be in compliance with town codes.

“The future use of the property would be a zoning issue,” said Persson, who explained the code-enforcement department could get involved if owners are using their units for more than 30 days a year, which is how the town designates tourism units.

Colony President and General Manager Katie Klauber Moulton said a group of unit owners at the Colony doesn’t want to see the resort converted to condominiums.

“It’s not what we believe is in the best interest of the unit owners,” Moulton said. “They bought here for the amenities of a first-class resort. They would have purchased a condominium if that’s what they wanted.”

Colony Beach & Tennis Resort Association President Jay Yablon says the unit owners have decisions to make in terms of how the unit owners move forward once the Colony’s bankruptcy reorganization is resolved.

Contact Kurt Schulteis at [email protected].

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