Selling the common areas and amenities at the luxury One Bal Harbour hotel and residences may be the way to end litigation draining the condo owners’ resources.
The glass tower has 185 condos owned by individual owners, 124 hotel rooms owned by investors and shared facilities owned by Elcom Hotel & Spa LLC. The shared facilities include a spa, restaurant, pool, lobby, elevators and valet parking.
Elcom, which is trying to emerge from bankruptcy protection, proposes selling the shared facilities as its exit strategy.
With all the parties gathered Monday before U.S. Bankruptcy Judge Robert Mark in Miami, they agreed they were close to reaching a sale agreement. They asked Mark to continue the hearing to today to give them time to finalize the deal. Mark scheduled a hearing for 4 p.m. today.
The agreement would include replacing the court-appointed receiver and bringing on board a chief restructuring officer to manage and market the facilities.
Elcom, which filed for Chapter 11 protection this month, is proposing to retain Alvarez & Marsal Real Estate Advisory Services and its managing director, Embree C. Bedsole, to fill that role.
Elcom tried to sell the shared facilities last year, but the deal fell through. At the time, investor Mark Pordes offered $16.99 million. But Elcom was unable to resolve pending state litigation among the condo and hotel room owners as Pordes requested to close the deal.
The “offer by Pordes is indicative of substantial equity in the property that can translate into a 100 percent dividend to unsecured creditors,” according to a motion filed by Elcom on Friday.
Pordes and partner Atlanta-based Kapello Hotel Group are still interested in buying the facilities.
“We’re certainly willing to close the deal depending on how the bankruptcy outcome will affect the cost of the deal,” Pordes said after the hearing.
‘Inherited A Mess’
When it comes to creditors, Elcom owes about $15 million to one of its principals: Thomas Sullivan, founder of publicly traded Lumber Liquidators Holdings Inc.
Bal Harbour-based Elcom was created in 2008 by Sullivan and Jorge Arevalo to buy the shared facilities. In 2009, the partners paid about $14 million in bankruptcy court for 51 hotel condos, the 10,000-square-foot spa, 8,000-square-foot restaurant and about 4,000 square feet of meeting space from WCI Communities Inc.
Arevalo managed the facilities until he was removed in 2011 as allegations of mismanagement surfaced. At that time, Miami-Dade Circuit Judge Barbara Areces appointed Jorge Perez as the receiver for the shared facilities.
Miami attorney Joseph DeMaria, who represents Arevalo, said his client is being unfairly characterized as having mismanaged the property when in reality he inherited a “mess” from WCI Communities. He said the financial books were in disarray when Elcom took over.
“My client will be happy to testify,” said DeMaria, a partner with Tew Cardenas. “He has nothing to hide. He inherited a mess and did the best he could to make the best out of it.”
DeMaria asserts the shared facilities began running in the red when the residential condo owners failed to increase their maintenance fees and the hotel condo owners reduced their maintenance fees, creating a budget shortfall to operate One Bal Harbour Resort & Spa at 10295 Collins Ave.
In 2010, the condo association sued Elcom alleging fraud and mismanagement, and the hotel condo association sued Elcom to increase its share of revenues generated by the hotel rental program run by Elcom.
The parties said they reached the tentative agreement over the weekend. Until Friday, the residential condo association was rejecting Elcom’s proposal for a chief restructuring officer. The association also wanted the receiver out and was asking Mark to appoint a trustee.
Bankruptcy attorney Charles Tatelbaum, who represents the owners of the residential condos, said the association is now OK with retaining a chief restructuring officer as long as all the parties agree to the person or company.
He said appointing a trustee to run the place could prolong litigation and cost residents a lot more money as Elcom opposes the idea of a trustee.
“We want to end [the litigation,] and there are many means to get there,” said Tatelbaum, a partner with Hinshaw & Culbertson in Fort Lauderdale.
DeMaria said this wouldn’t be the first time the parties agreed to a chief restructuring officer. They agreed in 2011 to hire Robert White of KW Property Management & Consulting, he said. But Areces rejected that proposal and appointed Perez, a former Miami-Dade circuit judge who chairs the national receivership practice group at McDonald Hopkins in Miami.
“Instead, we have 18 months and over $1 million in legal fees,” he said, adding his client hopes to get some money from the sale. “If there is any money left over, then my client has a 50 percent interest in that.”
The condo association and Elcom support Perez’s removal. He and his law firm are owed about $2 million in fees, according to a court document.
Perez said he is willing to step aside if a settlement is reached and Mark approves it.
“My only concern is that the property is protected,” he said. “If the settlement protects the property, I will agree with it.”