Final chapter for Colony

OK, we’ll admit it. You probably could say we underplayed the story last week of 12th Circuit Judge Hunter Carroll ruling that Unicorp National Developments Inc. is entitled to terminate the Colony Beach & Tennis Club Association Inc. and that “the Court will enter a judgment terminating” the association.

This is big. “Yuge,” as someone else might put it.

Judge Carroll ruled explicitly and unequivocally on a matter that has held up redevelopment for years on the Colony Beach & Tennis Resort property. He definitively stated he will dissolve the 45-year-old Colony condominium association.

This is precedent-setting. It will mark the first time that a court has ordered the termination of a condominium association in Florida. 

But much more important to Longboat Key, terminating the Colony Association has been one of the major hurdles to overcome for Unicorp and its owner, Chuck Whittall, to begin development of the St. Regis hotel and condominiums on the 18-acre Colony site.

As Longboaters well know, this has been a long, costly and brutal battle. And although Judge Carroll’s termination ruling is a big victory for Whittall and Unicorp, it sets the stage for what will be the final chapter and decisive battle to the Colony saga — the Colony’s “Battle of Gettysburg,” the final stand: Whittall and Unicorp versus Andy Adams and his Breakpointe LLC.

Winner take all.

The crucial step

Next April, Carroll will rule on the important question of “how” the Colony Association is to be dissolved. Carroll calls this next major step “Phase 2” of the termination process. It will be, for sure, the most crucial step to burying this 12-year-old ordeal in the history books of Longboat Key.

Between now and April, Carroll will be researching and weighing the details and process for the fairest method to address:

•  The disposition of 15 of the Colony’s 18 acres;
• The “unclean hands claims” of Adams — 14 accusations Adams and Breakpointe have leveled against Unicorp and the association board of improper dealings, conspiracies and misrepresentations;
• A plan to dispose of the association’s assets and liabilities; 
• What each unit owner will receive (“i.e., land or money or some other consideration or some combination”);
• Whether further assessments are necessary; and
• Any liens or mortgages.

Suffice it to say you would not want to be in Carroll’s chair. He will be poring through mounds of court testimonies and depositions and Florida Statute 718.117, which spells out in detail the complicated process of terminating a condominium. And all the while he must keep in mind how to be fair to the 126 individuals and corporations that owned the Colony’s 244 units that no longer exist.

And let’s make this assumption: Of the 126 unit owners, two owners (Whittall and Adams) and one nonowner (Longboat Key resident Manfred Welfonder) will be particularly anxious to hear how the judge orders the property to be disposed. It gets down to this: 

Will Carroll declare the 15 acres owned by the unit owners to be sold to Unicorp on the basis of its existing development agreement with the association, or will he call for a public auction of the 15 acres and 244 units, which he already has indicated is an option?

Strategic poker

If he opts for an auction, it has the ingredients to become an intense and expensive battle of strategic poker. Follow along:

For starters, before the auction, Whittall said he immediately would close on the purchase of 118 units that have committed to the price he has offered in the development agreement with the condominium association. That would give Whittall control of 158 units — more than twice as many as Adams — and additional leverage over any bidder.

And if Carroll calls for an auction, he could declare the bidding begin at whatever price anyone is willing to bid, at fair market value or at the price Whittall already has agreed to pay the unit owners in his development agreement, $44 million.

In all likelihood, a bidder would have to top Whittall’s $44 million, otherwise unit owners likely will reject anything less. 

The question is: Who would top that $44 million? Adams? Welfonder (and his backers)? Perhaps a Middle Eastern sheik? A Russian oligarch? 

But it’s not just a matter of outbidding Whittall. The terms of the bid will be important to Carroll. Here’s why: 

At least 40 of the unit owners have agreements with Unicorp that the sale of their units would include what they had before when the Colony operated: 30 days a year of free access to their units for vacations. These are unit owners who purchased units at the Colony many years ago for family fun. They want what they had. They’re not interested in flipping for cash.

If, say, Adams or Welfonder’s group outbid Whittall but did not include the 30-day vacation time, those 40 unit owners could foil the sale.

Biggest obstacle

That’s one obstacle. Here is the biggest one: 3 acres of land that constituted what was known as the Colony’s recreational property. Unicorp and Whittall own them outright.

These are prime parcels. They included, among other parcels, the Colony Restaurant, Monkey Bar, swimming pool and the tennis courts behind the former six-story mid-rise. They are smack-dab in the middle of the property, a 5-carat diamond surrounded by smaller ones in an engagement ring.

If Adams or anyone else outbids Whittall at $50 million, $60 million or more, not only would the bidder pay all of the unit owners their proportionate share, but the bidder would also be faced with another dilemma: To develop the property, the winning bidder must either spend more millions to buy Whittall’s three recreational acres or go into partnership with Whittall.

Here’s why: Unicorp previously obtained a zoning determination letter from the town of Longboat Key, and that letter stipulates the 15 and 3 acres cannot be split. All 18 acres must be part of one development. 

That gives Whittall the equivalent of a straight flush. 

Here’s the irony to that: If, say, Adams were to outbid Whittall, Whittall would be in the position that Adams has tried to capitalize on over the past five or so years. Adams has been holding for ransom his 75 Colony units from Whittall and unwilling to sell them, except at a high premium. Before the Colony was demolished, Whittall needed approval from 95% of the unit owners to terminate the association and to be able to develop. Adams had denied that. 

Indeed, we have heard repeatedly Adams has asked for as much as $30 million for his 75 units while Whittall has bid $15 million. We’ve also heard that lately the spread is shrinking.

Playing a weak hand

Take this bet: Adams will not outbid Whittall in a public auction. Throughout this drama, if you remember, Adams was the former president of the association

and was instrumental in triggering subsequent events that led to the shutdown of the Colony. Throughout, he has had the means at any time to acquire all 244 of the Colony’s units and redevelop the property. But he hasn’t done it.

Is that someone who wants to pull together $300 million to $400 million in financing, plus manage all of the development teams to complete a new resort?

On top of that, Adams is playing another weak hand. If he is unable to reach an agreeable price for his units with Unicorp before Carroll’s Phase 2 begins, Adams runs the risk of a judge declaring he can receive no more cash than all of the other unit owners. If he wants a premium for his 75 units, he has an incentive to sell to Whittall before next April.

The table appears to be turning against Adams as well. He argued against the right to terminate the association, and he lost. He filed an appeal to have Carroll removed, and he lost.

In contrast, Whittall’s hand appears to be growing stronger. If he were to purchase the 118 units and Adams’ units before Carroll’s Phase 2 begins, it’s a good bet Carroll would approve of the sale of the land and units to Unicorp and forego an auction. Indeed, if Unicorp controls Adams’ units, 97% of the units would be in the hands of owners who want Whittall’s deal. State statutes require 95%.

Welfonder waits

Altogether, the final chapter of the Colony disputes will play out over the next seven months. No one knows at this point whether Carroll will order a public auction in April. No one knows whether Whittall and Adams will reach an agreement on Adams’ 75 units. No one knows whether Adams will appeal the dissolution of the condominium association or drag out in court his accusations of conspiracies and improper dealing, delaying still longer redevelopment of the Colony’s vacant lot.

And all the while that plays out, the Colony property’s longtime wannabe developer Manfred Welfonder will continue to sit patiently and quietly through Colony court hearings. 

Welfonder maintains Whittall’s St. Regis project isn’t financially feasible. He’s hoping for a public auction that will give him the opportunity to place a winning bid. 

“The public auction will open the doors for other interested parties in the 15 acres, so that the owners will receive the highest and best price for their assets directly after the auction and without contingencies,” Welfonder said in an email to the Longboat Observer. 

But if you were to place a bet on the likely victor in this final stand — Whittall, Adams or Welfonder — based on the factors above, you’d have to say it appears Whittall and his Unicorp National Developments have seemingly unbeatable momentum.

Too bad we must wait until April.