The next Colony obstacles

Check that one off. Chuck Whittall and his Unicorp National Developments Inc. team won a big one: the support of the Longboat Key Town Commission and the Longboat Key citizenry.

With much compromise to please the town and its demanding (picky?) citizens, Whittall and his team created an extraordinary site plan for the defunct Colony Beach & Tennis Resort property. Rare is the occasion when a community attracts a five-star St. Regis Hotel, 78 luxury condominiums and an investment that will total $650 million. Yes, more than a half-billion. 

Longboaters have always said keep Longboat Longboat. And when (and if) completed, this will do that and add even more to the ambience, value and attractiveness of the Key.

Congratulations to Whittall. The Town Commission’s 6-1 vote last Friday on the second reading of an ordinance approving the site plan is a strong endorsement — in spite of Commissioner Jim Brown’s reluctant vote in favor and Commissioner George Spoll’s no vote. Lord knows it is never easy for any pioneer-developer to navigate the Amazon without multiple wounds — an apt description of Longboat Key’s development process. 

But as much as Longboaters would like to celebrate the end to a decade of strife and deterioration at the once iconic Colony and the start of construction on a new Longboat jewel, Whittall now faces three more obstacles. Unless overcome, they could keep the Colony property in more litigation for who knows how long. The three challenges:

• Andy Adams, owner of 74 Colony units, avid Longboat tennis player and former CEO and chairman of Murfreesboro, Tenn.-based National Healthcare Corp. and National Health Investors Inc.
• Blake Fleetwood, a New York-based Colony unit owner threatening a legal challenge to the town’s vote in favor of Unicorp.
• The 12th District Circuit Court in Sarasota County.

POKER PLAYERS AT A STANDOFF

Whittall and Adams are like two poker players. Adams started out with the better cards, but after a couple draws, it looks like Whittall is holding the upper hand. Adams isn’t blinking. He has been holding out for a buyout of his units that Whittall has declined to meet.

Whittall needs Adams’ units to avoid more costly litigation and begin construction.

To avoid the courts, Whittall needs 95% of the 237 Colony unit owners to agree voluntarily to dissolve the Colony Beach & Tennis Association (the unit owners’ condo association). As of this week, Whittall had 65% of the Colony unit owners agreeing to  dissolution. That includes the 30 units that Whittall entities own.

If Whittall were to acquire Adams’ 74 units, that would push him over the 95% threshold he needs to begin actual development — and avoid more litigation.

For almost two years, Whittall has been negotiating a purchase price for Adams’ units. He has offered Adams as much as $22 million, or $297,300 per unit, well above the average $170,000 other unit owners have agreed to accept. 

Adams has declined, asking for more than $25 million. 

As of today, they’re at a standstill. Whittall told us Tuesday he is giving up negotiating with Adams. Instead, he said he is pursuing “furiously” a judicial termination of the association. It’s as if Whittall has looked at Adams and said, “I call.”

Under the judicial process, state law allows for one unit owner to seek judicial relief when the property has fallen into disrepair and is not repaired in a reasonable time. Whittall, in fact, through Unicorp had already filed in January in Sarasota County Circuit Court a lawsuit asking the court to terminate the association; approve Whittall’s termination plan (his town-approved development plan); and approve the sale of the 237 Colony units to Unicorp.

THE RISK FOR ADAMS

This lawsuit presents a risk and a choice for Adams. 

The risk: If a judge rules in Whittall’s favor and terminates the association, one of the requirements in state statutes is “equitable relief,” meaning all Colony unit owners would receive about the same amount of money per unit in the sale to Unicorp.

For Adams, this would be costly. Rather than the $22 million Whittall offered, Adams faces the risk of having to accept roughly $12.6 million for his 74 units.

Adams could play another card. He could argue that Whittall’s $170,000 per unit is too low and petition the judge to put up the 237 units and all of the Colony’s 17 acres for auction.

The bet there would be the hope other bidders would emerge — a bidder willing to pay more than $40.3 million for the 237 units, plus enough to buy Whittall’s 95% stake in 2.3 acres of Colony property that included the old restaurant, delicatessen, swimming pool and tennis courts.

And that would be just to buy the land. Another buyer would then be faced with either flipping the property or starting from scratch to create another development plan.

Adams himself could buy the property. He has the wherewithal. Based on ownership stakes in National Healthcare Corp., a public company Adams’ father founded in 1971, and in National Health Investors Inc., a public real estate investment trust Adams founded in 1991, his family’s stock this week was valued at $171.7 million.

But since troubles began at the Colony in 2005, Adams rarely has shown his cards. He served as president of the association from 2006 to 2010, advocating to take the association into bankruptcy. After the Colony closed in 2010, Adams resigned from the board and began acquiring units, investing more than $5 million but never indicating his intentions. Colony insiders over the years have speculated Adams might attempt to acquire the property cheaply and then convert it to a new condominium complex. 

But as Jay Yablon, president of the association, put it, “Andy never really divulges very much.” Adams did not respond to a request to be interviewed.

WHITTALL HOLDS STRONG HAND

Whittall’s hand is looking stronger as he pursues judicial termination of the association. Consider the case he’ll be making to a judge:

• He has a ready termination plan, which, most importantly, includes the town of Longboat Key’s approval for his $650 million site plan.
• He has invested more than $30 million in the property already — acquiring the stakes of the Colony Lender, plus the 30 units he owns.
• He has a development agreement with the Colony Beach & Tennis Association, stipulating the $170,000 per unit average price he would pay after closing.
• He has “joinders” on 65% of the Colony unit owners — those who have agreed to a voluntary dissolution of the association.
• He has Colony neighbors begging for redevelopment to begin as soon as possible — to stop the decline in the values of their properties.
• He owns 95% of the Colony’s 2.3-acre commercial property — and says he will own Adams’ 5% of that property within 90 days. (“You can’t develop the property without that,” he told us.)
• He has the town of Longboat Key ready to issue any day a demolition order, which would level every structure on the site. 
• And he has a state statute that declares if a condominium is uninhabitable and not repaired within a reasonable time, the court can declare the association dissolved.

FLEETWOOD VOWS TO FIGHT

But there is one more obstacle: Colony owner Blake Fleetwood and perhaps others.

Fleetwood owns three units, two of them on the beachfront. He has told the Longboat Observer Whittall is not qualified to redevelop the Colony. He told us Tuesday his attorney is preparing to file a writ of certiorari, asking the court to determine whether the Colony Association board has the authority to enact “a material alteration” to the owners’ units without a vote of the unit owners.

“It may go on for six months to a year,” Fleetwood said. “With circuit courts, you don’t know.”

And if the town orders demolition to begin, Fleetwood said he would appeal to stop it.

“I’m not going to let someone take my home in an illegal fashion,” he said. “It’s going to be a long, long process unless Whittall wants to settle.”

The Colony saga continues.