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By Matthew Haggman
December 09, 2004
Struggling Miami Beach condo Bentley Bay is poised to emerge from bankruptcy following a settlement with creditors, according to its attorney.
The twin-tower Bentley Bay condominium project on South Beach is set to emerge from bankruptcy after a settlement between the developer and its biggest creditors, clearing the way for the troubled development to be completed and ending months of contentious litigation.
The condo project that overlooks Biscayne Bay filed for Chapter 11 bankruptcy protection from creditors in March. Construction on the 169-unit development at 520 and 540 West Ave. in Miami Beach began in early 2001 was to be completed by January 2003.
But the project, headed by developer Ricardo Olivieri, has been plagued by cost overruns and delays, eventually resulting in it seeking bankruptcy protection.
Papers are expected to be filed within the next two weeks in U.S. Bankruptcy Court in Miami outlining the agreement between the developer, Florida Development Associates, and its two main creditors, Alabama-based Colonial Bank and Fidelity Investments in Boston.
”We announced to the court that we have a consensual settlement plan with Colonial Bank and Fidelity,” said Peter D. Russin, the developer’s attorney. “It will pave the way for us to have a confirmed plan and get out of the bankruptcy case.”
U.S. Bankruptcy Judge A. Jay Cristol must rule that the plan treats creditors fairly and equitably or the majority of creditors must accept the plan. There are more than 400 secured and unsecured creditors in the case, from condo purchasers and real estate brokers to architects and the two main lenders.
Russin, a partner with Meland Russin & Budwick in Miami, expressed confidence the plan will be approved.
”The debtor believes that if the claims remain at the levels they are now, that the creditors will get 100 cents on the dollar,” Russin said.
Fidelity Investments attorney John W. Kozyak of Kozyak Tropin & Throckmorton in Coral Gables, declined comment. Miami attorney Frank P. Terzo of Katz Barron Squitero Faust, who is representing Colonial, did not return calls.
Lawyers told Judge Cristol last week that a deal has been reached.
Colonial provided the construction loan for the project and Fidelity provided mezzanine financing.
Russin said the Bentley Bay North Tower is expected to get its temporary certificate of occupancy in a matter of days. The South Tower will probably be ready by June, he said.
Meanwhile, Russin said the condo project should emerge from bankruptcy in the first quarter of next year.
”Depending on the court calendar,” Russin said, “we are looking at February or early March as the confirmation time.”
The developer has been criticized since entering bankruptcy by requiring buyers who signed preconstruction purchase agreements to either pay more for their units or have their contracts canceled and deposits refunded. Irate buyers have called the move unfair, but U.S. bankruptcy law allows such a maneuver.
”The bottom line is that we will get screwed,” said New York developer Sheldon Blittner, whose son Morgan purchased a unit. “Unfortunately, the court does not work to the benefit of us, the consumer.”
Making matters worse for some buyers is that they purchased the unit from so-called ”flippers” — buyers who purchase preconstruction units and then sell the rights to someone else. When this happens, in bankruptcy court the final purchaser is only refunded the original amount paid to the developer, not the amount paid by the end-user to the condo “flipper.”
Morgan Blittner, for instance, purchased an 840-square-foot unit from a condo flipper for $312,000. But the original price, said Sheldon Blittner, was $267,000. To keep the unit Blittner must either meet the developer’s new price of $393,000 or accept a refund on $267,000.
”We are looking into how reasonable the initial deal between the investor and purchaser was, if there were any improprieties so we could hold the developer or assignor liable,” said Blittner’s attorney, Joel L. Tabas of Tabas Freedman Soloff & Miller in Miami.
Out of approximately 120 units that were sold prior to the bankruptcy, Russin said that 50 preconstruction buyers had agreed to pay an increased price. Some 30 buyers have terminated their contracts and Russin said they are awaiting word from the roughly 40 other buyers.
”We understand there will be people who aren’t happy, that they want what they contracted to get,” Russin said. “But the world is not a perfect place.’