A federal bankruptcy judge has approved the $13.4 million purchase of the scandal-plagued One Bal Harbour Resort and Spa by the residential condominium association.
A Chapter 11 reorganization plan approved Friday by U.S. Bankruptcy Robert A. Mark in Miami did not discharge former co-owner Thomas Sullivan, the owner of Virginia-based Lumber Liquidators Holdings Inc., from a pending derivative suit that seeks up to $30 million.
The civil negligence lawsuit filed in August, which seeks more than $20 million from Sullivan, alleges his One Bal Harbour partners, Jorge and Juan Arevalo, siphoned off millions of dollars from the property to live a life of luxury.
The crescent-shaped oceanfront tower consists of 185 condos with individual owners, 124 hotel rooms owned by investors and shared facilities including a spa, pool, lobby, restaurant and valet parking.
Financing of the purchase, which closed Monday, was provided by Gibraltar Private Bank & Trust Co. The sale includes both towers, including the shared amenities.
The sale of the property at the northeast tip of Bal Harbour to the 10295 Collins Avenue Residential Condominium Association Inc. was part of the bankruptcy plan approved by Mark for Elcom Hotel & Spa LLC and Elcom Condominium LLC, which shared ownership of the property.
“The intrinsic value of the One Bal Harbour property, which is located directly on the ocean at Bal Harbour Inlet, is unmistakable and has only increased since it was built,” said Louis Mayberg, president of the residential condo association.
The association acted after realizing the governing documents would leave owners open to trouble with any other buyer, he said.
“We took the only logical step and elected to purchase the property ourselves so that we have full control over our world,” Mayberg said.
The association of hotel-condo owners was not involved in the sale.
Akerman attorney Michael Goldberg was appointed by Mark as liquidating trustee for Elcom and is in charge of pursuing pending clawback lawsuit against Sullivan.
Mark also approved a $1.9 million fee settlement for attorney Jorge J. Perez for work he and his firm, McDonald Hopkins, did as a state court-appointed receiver before Elcom filed for bankruptcy protection.
Perez, a former Miami-Dade judge, initially sought $2.8 million. He said he was happy with the settlement.
One Bal Harbour was built in 2005 and touted as one of the most luxurious residential and hotel condo projects in the world. Its developer, Bonita Springs-based WCI Communities Inc., filed for bankruptcy protection and sold the property for $14.2 million in 2009 to Sullivan and the Arevalos.
The residential condo association filed suit in Miami-Dade Court in 2010 after Elcom refused to account for the use of maintenance fees. Perez was appointed receiver to manage the property.
Miami-Dade Circuit Judge Barbara Areces said evidence showed “fraudulent, deliberate self-dealing” by the owners for the purpose of misappropriating funds.
Elcom’s bankruptcy set the stage for the auction won by the condo association.
Attorney Charles Tatelbaum, a Hinshaw & Culbertson partner representing the buyer, said the association is looking for a hotel operator and plans to place the spa and other amenities in a separate company to provide the owners with added protection.
“This will permit the hotel to regain five-star status under the ownership of the residential condo association,” he said.
Attorney Mark Meland, a partner at Meland, Russin, Budwick in Miami who represents Sullivan, said his client looks forward to sitting down with Goldberg to talk about the pending derivative lawsuit.
“We strongly contest the fact that there is a valid case there, but we are happy to talk to him,” Meland said. “But we are satisfied with the result. The bankruptcy process worked here.”