Two powerful Mexican developers are in a legal face-off over a large vacant parcel west of Miami’s Brickell Avenue, where one of them planned to build a pair of condo towers during the real estate boom.

U.S. Bankruptcy Judge A. Jay Cristol is being asked to decide (read motion) whether an affiliate of Aventura-based Cabi Developers, Cabi SMA Tower I, should keep control of the 2.27-acre site or whether the property should be auctioned off to help pay a defaulted loan worth about $30 million.

Brickell Central, an affiliate of Mexican construction company Grupo Mexico, acquired the loan for $21 million from HSBC Bank in February. Brickell Central now wants to foreclose on the property that’s valued at $18.5 million, according to court documents filed by Brickell Central.

Brickell Central wants Cristol to allow it to proceed with a foreclosure auction that was put on hold when Cabi SMA filed for Chapter 11 bankruptcy protection in December.

Cabi Developers is owned by the Cababie family, among Mexico’s most prominent developers. Cabi is proposing a reorganization plan in which it would pay back the debt over 10 years while it develops the site, which is strategically important for developers, but the subject of code enforcement actions by the city.

Cristol this week gave both parties until Aug. 17 to submit competing orders to help him decide how to rule on the future of the development site.

For Brickell Central, the stakes are especially high. It already owns a three-acre parcel at the corner of South Miami Avenue and Southwest 15th Road — across the street from the Capital at Brickell site. By owning both sites, Brickell Central could potentially develop a large project in the city’s financial district.

The property is also near the site of the planned Brickell CitiCentre, a 4.5 million square foot office, retail, residential and hotel project planned by Hong Kong-based Swire Properties, which developed much of Brickell Key.

Cabi’s Plan

Under Cabi’s proposed reorganization plan, the loan owned by Brickell Central would be canceled and Cabi would issue two new promissory notes — a senior note for about $15 million and a junior note for about $15 million. The senior note would mature in 10 years with a 30-year amortization rate. The junior note would mature in 10 years with a balloon payment.

Cabi said in bankruptcy court filings that it is in the process of securing a $48.7 million construction loan to build a mixed-use project on the site where it once wanted to build a $584 million, two-tower residential and office project. Cabi has not disclosed details of the proposed project or lender.

Brickell Central opposes the plan.

“Any attempt to confirm a plan over Brickell’s rejection would be a futile, value-wasting exercise,” Miami attorney Leyza Blanco wrote in a court filing. Blanco, who represents Brickell Capital, declined to comment.

Blanco, a partner with GrayRobinson, said the value of the property is declining under Cabi’s control.

Fight over records

Cabi said Brickell Capital is trying to push through the foreclosure in order to develop the site itself.

“The debtor’s plan provides for full payout on Brickell Central’s claim, with interest, but Brickell Central nonetheless appears committed to a path designed to thwart the debtor’s reorganization,” Miami attorney Mindy Mora wrote in a court filing. Mora, a partner with Bilzin Sumberg Baena Price & Axelrod, represents Cabi.

Cabi this week unsuccessfully asked Cristol to seal some of its bankruptcy filings that related to its plans for the site, including architectrual plans and details of the construction loan. Mora made the request saying it would prevent Brickell Central, which her client views as a “direct competitor,” from learning about its business plan for the site.

“This is really not just an entity trying to foreclose on a loan,” Mora said during a court hearing Monday. “This is trying to put us out of business.”

But Blanco persuaded Cristol to keep the records open, noting that Brickell Central would be forced to make decisions in the dark.

“We cannot do what we need to do to evaluate this plan,” Blanco said during the hearing. “What they’re asking of my client is to come to confirmation with handcuffs.”

Cristol seemed put-off by the request and quickly turned Mora down after listening to Blanco’s objection.

City Concerns

Meanwhile, the city has told the property’s owner to fill in the excavated site.

In a lawsuit that seeks to foreclose a code enforcement lien on the property, the city describes the site as being “in complete deterioration for over a year,” and claims “containment walls are in danger of collapse, thus endangering the safety and health of the community by possibly sinking the foundation of the right of way.”

“If the city is successful with its public policy argument, my client will be harmed,” Blanco said at the hearing.

The recession hit Cabi Developers hard. An affiliate of the developer last year lost nearly 600 unsold condos at the Everglades on the Bay in downtown Miami after filing Chapter 11 bankruptcy.

The Cabi affiliate had defaulted on a $209 million construction loan by Bank of America and had to sell the condos to pay the debt.

Another affiliate of Cabi is also involved in a bankruptcy case concerning a 5.8-acre property on the New River in Fort Lauderdale. The developer once planned to build an indoor storage facility for more than 500 boats at that location. That case is still pending.

Brickell Recovery

The Brickell real estate market has had a significant recovery since the worst of the recession in 2009. Sales and rental rates have improved in some condo high-rises completed during the recession, and international investors and developers are flocking to the area, according to commercial broker Fabio Faerman.

Faerman, with Miami-based Fortune International Realty, said he isn’t surprised that Cabi and Grupo Mexico are fighting so hard for the 2.27 acres. The parcel is at one end of a five-block stretch of South Miami Avenue filled with restaurants, nightclubs and shops that blossomed in the last five years.

He said investors and developers are positioning themselves for the next wave of development in Brickell, where there are few sites available.

The glut of condos that emerged in Brickell during the boom years has almost been absorbed and rental rates are rising in sold out buildings, Faerman said.

“In 1060 Brickell, the average rental rate for a one-bedroom unit was $1,200 two years ago, now it is between $1,500 and $1,550,” he said. “It is a significant jump.”

Sales in some of the new buildings are also rising.

“Last year, the bank gave us three years to sell about 1,000 units at Icon Brickell,” said Faerman, who handles sales at Brickell Icon on behalf of HSBC Bank. “In the first year, we sold 85 percent of the condos.”

Retail rental rates have also gone up despite the recession. He said some leases have gone from $50 per square foot to up to $70, a 40 percent jump.

Fabio said Cabi’s site has so much potential that it doesn’t really matter who will own and develop it.

“If Cabi ends up with it, they will do a great project there and if Brickell Central ends up with it, I am sure they will also build a great project.”

Two big developers are fighting over a large parcel of undeveloped Miami land, the former site of the failed Capital at Brickell project.

U.S. Bankruptcy Judge A. Jay Cristol is being asked to decide whether an affiliate of Aventura-based Cabi Developers should keep control of the 2.27-acre site or whether the property should be auctioned off to help pay a defaulted loan of about $30 million.

The Cabi entity is opposed by Brickell Central, an affiliate of Mexican construction company Grupo Mexico, which acquired the loan for $21 million from HSBC Bank in February.