Issues to Watch 2014: Colony conundrum

Some would argue there’s no bigger issue on Longboat Key than the shuttered Colony Beach & Tennis Resort, its rapidly deteriorating state and its impact on neighboring property values.

Unfortunately for Key residents, it’s been an issue since the first lawsuits were filed in 2008 and the resort closed in 2010.

Longboaters can only hope that 2014 could be the year that matters most — the year that issues among the Colony parties are settled and Colony unit owners choose a developer to revitalize the property and restore the tourism property to its former glory.

A big first step in that process comes Jan. 27, in a Tampa courtroom.

U.S. Bankruptcy Judge K. Rodney May is considering a Colony settlement and bankruptcy reorganization plan for longtime Colony owner Dr. Murray “Murf” Klauber’s Colony entities.

That settlement would give $3 million to Klauber and distribute $2.3 million to a U.S. bankruptcy Chapter 7 trustee to pay creditors.

An amendment to the settlement reveals that Colony Beach & Tennis Resort unit owner and developer Andy Adams and his entities have agreed to resolve issues with the proposed settlement. That agreement also calls for giving $400,000 to be paid to creditors, $75,000 to Carolyn Field through the Field Trust and $25,000 to Adams through Breakpointe LLC. 

The settlement also absolves the Colony Beach & Tennis Resort Association of a $25 million judgment for damages Klauber won in a bankruptcy appeals court last year.

But the settlement leaves out Colony Lender LLC, the largest creditor in the bankruptcy case.

In December, May said he is wrestling with confirming a settlement plan that gives $3 million to Klauber, while Colony Lender LLC is left in limbo.

The association has urged May to consider that Colony Lender would either receive fair-market cash value for its assets within a year of the settlement closing in March or receive the deed to 2.3 acres of land in the middle of the shuttered resort.

“One thing that still bothers me is if I confirm the plan, Klauber and investors get money that’s spendable and protected from collection,” May said last month. “That’s taking a right away from Colony Lender.”

Colony Lender principal David Siegal told May in December “it can’t be right to sell all the assets, not pay your debts and leave with $3 million,” referencing Klauber’s right to $3 million as part of the settlement. 
Colony Lender LLC attorney Michael Assaf also said there was still a fairness issue that needs to be resolved. 

“This is like someone saying they are going to buy your house eventually, but not tell you what they are going to pay or when they are going to pay you,” Assaf said in December.

As town leaders and residents wait for a ruling, they’re struggling with the state of the property and what to do about it in the interim.

At a Dec. 11 special meeting at Town Hall, Building Official Wayne Thorne and Town Manager Dave Bullock recommended the existing buildings be torn down. They cited a public-safety issue as they showed pictures of the buildings falling down.

Commissioners approved a four-month extension of the grandfathered tourism units at the shuttered resort at that meeting, making the latest deadline April 30. Because the Colony’s 237 units were built on 18 acres before the town created its tourism resort commercial classification that allows for just six units per acre, 129 of the resort’s 237 units are considered grandfathered, or legally non-conforming. The town would have deemed the property’s tourism use abandoned Aug. 15, 2011 — one year after the resort closed — if the commission hadn’t granted a series of extensions.

“We have to think about town citizens who live nearby as a result of the decision by the collective Colony to let these buildings to continue to conduct a small implosion,” Bullock said. “It’s my opinion I will be here this time next year having this same discussion with the difference being the buildings will be in a state of further deteriorated condition.”

But the commission also learned Dec. 11 that it couldn’t legally make a teardown the condition of a tourism unit extension, as Bullock proposed.

Every unit owner and interested Colony party will be invited to a 9 a.m. March 4 hearing that will also be open to the public. At that time, the commission will review a building-by-building summary of the property to determine whether each structure meets the criteria for nuisance and dangerous buildings and needs to be torn down. 

Thorne said there are 782 items that “meet the conditions of being dangerous structures” and 177 “serious issues” that need to be addressed.

Bullock noted that Colony Beach & Tennis Association attorney Jeffrey Warren said at a recent bankruptcy hearing that the buildings will be torn down eventually. 

“I’m trying to find a logical way to deal with a multitude of issues this collapsing development gives us,” Bullock said in December.

The commission also mandated last month the association increase a bond the town can use to make improvements to the property from $50,000 to $250,000 despite objections from Warren.

Mayor Jim Brown said the town is not happy waiting for the property to be restored and on Dec. 11 urged parties to take action.

“Everyone’s been fumbling around with this extremely valuable asset that’s now harming our community instead of helping it,” Brown said.

Overview:
Colony parties, town residents, staff and commissioners hope 2014 will be the year of resolution for many of the issues surrounding the shuttered resort.

Players: Colony Beach & Tennis Resort Association, Colony unit owners, longtime Colony owner Dr. Murray “Murf “Klauber, Colony Lender LLC, other Colony parties, U.S. Bankruptcy Judge K. Rodney May, Town Manager Dave Bullock, Key residents

Timeline: A bankruptcy judge is expected to rule on a Colony settlement Jan. 27. In March, the commission will hold a hearing to review code violations in each building to determine whether each structure meets the criteria for nuisance and dangerous buildings and needs to be torn down. 

Contact Kurt Schultheis at [email protected]