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Longboat Key Wednesday, Mar. 14, 2012 5 years ago

Our View: Colony needs a new knight


There is a simple solution to the legal morass that is killing the Colony Beach & Tennis Resort.


Everyone agrees on that.

“It’s a doable deal,” Charles Bartlett, attorney for Dr. Murf Klauber, told the Town Commission two weeks ago.

“There is nothing unsolvable,” attorney Jeff Warren, representing the Colony Beach & Tennis Association board, told commissioners.

“The easiest way to do it is to acquire (Klauber’s) interests,” Bartlett said.

“But this will never be settled by anyone sitting there saying ‘I have to get what I want,’” Warren said.
Warren obviously was referring to Klauber, but he, as well as everyone else in the Town Commission Chambers that night, knew his comment also applied to all parties involved.

Indeed, that is the crux of resolving the Colony litigation. While everyone knows a settlement is all about the money, the two keys to the kingdom are:

• The right amount of money.

• And someone willing and able to pay it.

The clock is ticking.

And it’s ticking faster. With each tick, odds of the Colony reopening in two, three or five years as an acclaimed tennis resort-hotel anything close to what it was in its heyday are increasingly unlikely.

As Bartlett stated unequivocally, unless Klauber and the association board can agree to a settlement, “this matter is going to go on for many more years.”

The Colony needs a white knight. On a big horse, with saddle bags bulging with money the knight is willing to spend and invest.

Would anyone stay there?
The clock is especially crucial for the Colony Association board and unit owners. They have a deadline with the town to reopen the Colony as a resort hotel before Jan. 1. If they don’t meet that deadline, the Town Commission will vote on whether to grant an extension to avoid the town triggering an abandonment of use.

That action would declare the Colony no longer able to operate at its current density of 237 units on 18 acres, or 13 units per acre. It would have to conform to the town’s codes of six units per acre — roughly 108 units total and a loss of 129 units.

This threat is real. Three commissioners already have indicated they would vote not to extend the deadline to keep the Colony’s current units per acre.

What’s more, if you’ve been to the Colony in the past four months, it’s difficult to imagine how the association can restore some of the beach-front bungalows to a point where any guests would want to stay there.

Indeed, we have heard plenty of Colony watchers who think the association board is kidding itself believing it could call the Colony “re-opened” if it refurbishes some of the beach units and operates with no amenities — no restaurant, no swimming pool or no tennis courts, all of which Klauber and his lenders own. Who, pray tell, would want to stay?

Let’s say the association does indeed lose its current-use rights and must reduce its units per acre. This no doubt would trigger another layer of complications and litigation among the Colony’s unit owners and association board.

The board would be faced with figuring out an equitable system of deciding: 1) which unit owners would lose their units; 2) how to compensate them; and 3) how much to compensate them. Not to mention, it would have to figure out where it will raise the funds to cover these buyouts.

Can you imagine? Can you imagine the blood-pressure levels among the unit owners who have forfeited use and enjoyment of their units for two years? “Many more years” of litigation would be an understatement.

The cost of the court’s options
The clock is ticking on another potentially costly bomb, too. Next Tuesday, Klauber and the association will go back to bankruptcy court in Tampa. Judge Rodney May is expected to preside over hearings ordered by U.S. District Judge Steven Merryday to determine one of two courses of action Merryday has ordered. Either:
• Reinstate the Colony Partnership — whereby Klauber and the association are partners again, as they were for 40 years. If the bankruptcy trustee agrees, this would put the Colony hotel units back under the operation of Klauber, with the association and Klauber working side by side again. To compensate Klauber for the past five years, Merryday also ordered the partnership be paid $7.7 million.

• Or, keep the partnership disbanded and pay the partnership $20.6 million.

Either option will bring huge concerns to the unit owners.

Back under the partnership, the association board, unit owners and Klauber would haggle again over how much unit owners would be required to pay to renovate their units — if, in fact, that’s still possible. Let’s not even open the discussion of what effect FEMA rules would play in this.

Capital would be needed to renovate the recreation facilities and restaurant, too. Who would be obligated for that? Klauber could argue for more damages, claiming the facilities would not have deteriorated had the association not caused the Colony’s shutdown.

If Judge May and the association opt to keep the partnership disbanded and only pay damages, this would trigger a sum greater than $20.6 million. We’re told the amount would rise to between $26 million and $30 million once you include legal fees and damages owed on the Colony’s recreational lease.

(Contrary to belief, all of those damage amounts would not go directly to Klauber as a big payday. They would go to the Colony Partnership and its creditors. Whatever is left from that would be split 50-50 between Klauber and the unit owners.)

In this latter option, with the partnership disbanded, not only would unit owners be obligated to fund the damages, they also would face the additional cost of renovating their units (or perhaps selling them for pennies on the dollar), as well as the issue of paying to buy out the three acres Klauber and his lenders hold.

Sunlight versus darkness
Those three acres have been called the hole in the donut. They are three scattered acres the association needs if it wants to redevelop the Colony. It’s probably more accurate to call them the true keys to the kingdom. If all of the combatants — Klauber, Colony Lender, the association board, unit owners, these are the primary players — can agree on a price for Klauber’s three acres and agree to forego future litigation, the years and years of more litigation can end.

The deterioration at the Colony and, by extension, to all of Longboat Key can end. The entanglements can end. The efforts to redevelop and reopen the Colony can move forward. Sunlight versus darkness.
No matter how it goes, though, the clock is ticking on Colony unit owners. They will have to pay. Pay now, stop the losses and move forward. Or pay later, endure still more grief and suffer still more losses.

The Colony needs a new white knight. A knight who has the financial wherewithal to stop the litigation and the vision re-create a new Colony in its former image — a world-class family, tennis resort that served as the gateway and springboard to living on Longboat Key.

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