Article Courtesy of The Sarasota
By Justine Griffin
Published June 20, 2014
LONGBOAT KEY - Is there light at the end of the tunnel for the empty and bedraggled Colony Beach & Tennis Resort?
In fact, depending on how some court action goes this week, the resort could be one step closer to reopening.
There is an auction scheduled for Thursday in Tampa's U.S. bankruptcy that would decide who will own much of the dilapidated property.
U.S. Bankruptcy Judge K. Rodney May will hold an auction in a Tampa courtroom of the estate of Colony Lender LLC, the group representing the hotel's master developer Murray “Murf” Klauber.
“The auction will grant the highest bidder the rights to pursue litigation,” said Jeff Warren, a Tampa Bay area attorney who represents The Colony unit owners. “The unit owners are interested in only resolving this and getting the bankruptcy trustee out of the way. This could be the first step toward that.”
Last year, unit owners hoped to settle with Colony Lender, but that trustee organization said its rights were not protected in the plan for settlement, so the court did not approve it.
“We had hoped for the settlement, but this is the next step in the right direction,” Warren said.
The Colony opened in 1979 and was one of Southwest Florida's most popular vacation destinations for decades, know by visitors from around the nation and Canada.
But the once-lively tennis club and 237-unit waterfront resort on Longboat Key — named tops in the nation by U.S. Tennis magazine from 1996 to 2004 — closed in August 2010 because of a dispute between condominium unit owners and Klauber over millions of dollars in needed repairs.
Klauber and the unit owners have been locked in legal battles ever since, while the Colony has fallen further and further into disrepair. The vacant resort buildings have structural problems, mold and broken-in facilities.
Both Citizens Insurance and Longboat Key town officials have noted that the resort is beyond repair.
Earlier this week, Colony Lender filed an emergency motion to delay the auction.
That motion was denied, but Judge May allowed for the trustee's company to take part in the bidding process during the Thursday auction.
Colony Lender will be allowed to bid the full amount of its claim as a creditor, without putting up any more cash. The right to bid as a creditor is part of the federal bankruptcy code.
At least two other companies are expected to bid on The Colony estate, which brings with it $23 million judgment ruling against The Colony unit owners.
In September 2012, a judge awarded nearly $25 million to the group led by Klauber.
The ruling required that unit owners pay $23 million — or roughly $100,000 per unit — and 6 percent interest to a Klauber-led partnership that also includes unit owners over five years.
The owners have since appealed.
One interested bidder is Kevin Daves, known for developing the Sarasota Ritz-Carlton and Concession Golf Club.
Daves could not be reached for comment.
While the Colony has been sidelined, Southwest Florida's tourism has rebounded sharply from the Great Recession and other hospitality properties have been changing owners.
But tourism officials also have lamented the lack of new available rooms, particularly on Longboat, Siesta and Lido keys.
At times during February and March, there was not a hotel or motel room to be booked in the region.
The year after the Colony closed, Stephen “Dr. Beach” Leatherman named Siesta Key the nation's top beach. That year, 2011, Sarasota County's tourism growth performance exceeded both the state's and the nation's.
Ocean Properties, which bought the Resort at Longboat Key Club in 2012, has become one of the biggest hospitality players on Longboat Key.
Last year, the Delray Beach-based company acquired the 33,000-square-foot building and three acres that house the Chart House, adjacent to the resort, for $6.2 million.
The company also pumped $25 million into the 102-room Hilton property on Longboat, and will close the hotel for a year beginning this summer to start renovations that will add 85 rooms.
Lost on Longboat still is the recruitment strength that The Colony had provided for both visitors and future Longboat Key resident alike.