After seven years, Welfonder still pursues the Colony plan

In 2007, Manfred Welfonder first proposed tearing down the Colony Beach & Tennis Resort and building a new hotel under an international flag.

Former Colony owner Dr. Murray “Murf” Klauber said at the time, “It won’t happen in my lifetime.”

Since then, the Colony has closed, reopened and closed again. The Colony Beach & Tennis Association rejected Welfonder’s proposal multiple times, opting to pursue agreements with other developers that ultimately fizzled.

Seven years later, Welfonder still seeks to tear down the Colony and build a new hotel under an international flag — and now, the association is willing to listen. What’s changed?

“The other proposals at the time looked like they were better proposals, but unfortunately, it became clear that those proposals sounded good but could not be realized,” said Jay Yablon, president of the association. “It became clear that the other proposals just weren’t going to fly.”

“It was not an easy experience for the association to find out what is the best deal for the owners and the involved parties. I think nobody else, when I compare it, had assembled such a group with what we had with business experience and all types of knowledge,” Welfonder said.

Chuck Whittall, whose Unicorp National Development has an agreement to purchase Colony Lender LLC’s assets that include 95% of a 2.3-acre recreational property at center of the resort, has a different conclusion.

“I think they realize they’re out of options,” he said.

The association doesn’t have a development partner, but Yablon describes what Welfonder’s Longboat Key-based MW proposes is “a realistic starting point” for negotiations.

Welfonder, a native of Germany who was previously responsible for acquisitions at the Lehndorff Group, contends that he can develop a new, four-star resort at the shuttered Colony at no cost to current owners who opt for 1/12 ownership. For those who want to walk away, he says he’ll buy them out for the higher of $75 per square foot or the appraised value.

He says his team, which includes Bob Koch, principal of the Winter Park-based Fugleberg Koch, can build a new four-star resort.

The smallest Colony units are 705 square feet, meaning that Welfonder would offer a minimum of $52,875 for each unit — more than two-and-a-half times the $20,000 that Whittall offered unit owners in August, while also warning them that they face millions of dollars in liabilities.

“Current unit owners will agree to convert 100% ownership into 1/12 ownership deeds,” said Welfonder, explaining why he believes his plan is feasible. “We have to deliver to them and we will provide a competitive guarantee.”

Welfonder says that in the past two years he has received “three strong letters of interest from recognized capital partners based on detailed, conservative financial projections” but declines to name names.

“Two of them wanted to see an end of the litigation or a global settlement,” said Welfonder, who insists that he can offer a business resolution rather than further legal wrangling.

Welfonder says he has an audited budget of $155 million for the project, including costs to work out a global settlement. He says he didn’t bid on a $23 million judgment against the association earlier this year because he wants a business resolution. He won’t comment on other plans, including Whittall’s, saying “We are focused only on our work.”

Welfonder’s contention that a business resolution is possible is contrary to what many involved believe will be years of additional litigation.

U.S. Bankruptcy Judge K. Rodney May recently compared the case to “a Rubik’s cube, but someone squirted glue in the cracks.”

Colony Lender recently filed a lawsuit seeking more than $5.1 million in damages stemming from a disputed recreational facilities lease.

In a Sept. 25 memo to the Longboat Key Town Commission about the Colony, Assistant Town Attorney Kelly Fernandez wrote:

“With the newest court action filed by Colony Lender against the individual unit owners, it seems that the various parties in interest remain potentially years away from resolving fractioned ownership issues.”

Not surprisingly, Whittall is critical of Welfonder’s plan.

“It’s impossible for him to redevelop the Colony because he doesn’t have the common areas we have, including the swimming pool, the beachfront, even the lift station,” he said.

Whittall also has made it clear that he’s willing to fight for the property. In August, he told the Longboat Observer that he has budgeted $35 million to $40 million for what could be five years of further litigation and plans to invest nearly a half-billion dollars to build a new resort.

“We’ve invested millions and millions and millions of dollars at this point, and he’s never invested anything,” Whittall said.

While Welfonder doesn’t own property at the Colony, he insists that his costs plus the time value of what he has he has invested amount to more than $1 million.

Yablon argued that a business resolution hasn’t been possible only because of Colony Lender and Unicorp.

“We need a business resolution but we have one that doesn’t want a business resolution,” he said. “You can’t have a dispute and say to one party, ‘We’re willing to solve this by you committing suicide.’”

Chapter 7 Bankruptcy Trustee Douglas Menchise filed seeking sanctions against Colony Lender LLC for its assertions that it controls a recreational facilities lease constituted a stay violation that Colony Lender insists doesn’t exist.

Yablon believes a business resolution could occur if a judge rules against Colony Lender and said the association “is going to go after them for multimillions.”

Meanwhile, he expressed optimism about Welfonder.

“I think Manfred has been nothing if not consistent,” Yablon said. “He is as committed as anybody to seeing a business resolution occur. I think it is important to have someone who is as determined as Manfred.”