2015 Issues to Watch: Future of the Colony

The Longboat Observer has listed issues to watch in the new year for the past eight consecutive years. In all eight of those years, the Colony Beach & Tennis Resort made the list.

It’s a safe bet that litigation surrounding the vacant resort will still be on our list in 2016.

No one involved can say exactly what’s next for the Colony.

U.S. Bankruptcy Judge K. Rodney May has not yet ruled on a host of issues, including whether Colony Lender LLC violated a disputed stay when it told unit owners they could face millions of dollars in liabilities if they do not sell their units to Orlando-based Unicorp National Development Inc., which has an agreement to purchase Colony Lender’s resort assets. May had said during a Nov. 12 hearing that he planned to rule on the issues before him by the end of 2014.

No matter what May decides, his rulings are unlikely to settle disputes at the Colony.

May said on Nov. 12 that he will rule that Colony Lender cannot collect on damages for unpaid rent and taxes on a disputed recreational lease for a three-year period beginning in 2009. Although May has not officially ruled, Colony Lender already plans to appeal, and appeals of future rulings are likely.

Colony Lender principal David Siegal points out that May’s past rulings involving the Colony have been overruled on appeal. One of those decisions was an August 2009 bankruptcy ruling that eradicated longtime Colony owner Dr. Murray “Murf” Klauber’s hotel Partnership with unit owners. May’s subsequent rulings in August 2010 converted Klauber’s bankruptcy case from Chapter 11 to Chapter 7 liquidation and gave unit owners possession of units.

U.S. District Judge Steven Merryday reversed May’s August 2009 ruling in July 2011, leading to a $23 million judgment against the association that will eventually be scheduled for auction.

Because May is a bankruptcy judge, he could also decide that some parts of the dispute are not within his jurisdiction, which would result in certain battles being fought in other courtrooms, possibly in state court.

Another wild card in the future of the Colony: longtime unit owner Andy Adams, whose entities own 71 units, plus a 5% interest in the 2.3-acre recreational property at the center of the resort, of which Colony Lender owns the remaining 95%. Because future development plans and/or settlements could require terminating the property’s condominium agreement, Adams will play a key role in the resort’s future.

Colony Beach & Tennis Association President Jay Yablon believes Colony Lender’s goal is to make 2015 a wasted year.

“You have one party whose fundamental strategy is to burn through 2015 and 2016 so more and more people get fed up and abandon their units,” Yablon said. “The question is whether May issues an order that short-circuits that strategy.”

Unicorp President Chuck Whittall has said he is prepared for between two and five years of litigation in his quest to develop the resort.

Siegal believes that unit owners will eventually reach the 75% threshold they need to terminate the condominium agreement and work with a developer.

“I believe that that developer will be Unicorp,” Siegal said. “I think that’s more likely in 2016, but it could be 2015.”

FACTS FOR ’15
The issue: The Colony Beach & Tennis Resort has been shuttered for more than four years and remains embroiled in litigation.

Why you should care: The resort was once known as the “Ellis Island of Longboat Key” because so many future residents got their first view of the island while staying there. Since it closed, the property has dealt with trespassers and vandalism, and its vacancy deepens the void of tourism units on the Key.

Timetable: Uncertain