Bankruptcy court approves purchase of stalled Las Olas hotel project
Magna Hospitality Group will acquire the Las Olas Ocean Resort in Fort Lauderdale through bankruptcy.
Rhode Island-based Magna Hospitality Group obtained court approval to acquire the stalled Las Olas Ocean Resort project in Fort Lauderdale beach and plans to resume construction.
U.S. Bankruptcy Judge Raymond B. Ray approved the $39.1 million sale to MHF Properties VI LLC, an affiliate of Magna Hospitality, on Friday. Attorneys Paul J. Battista and Glenn D. Moses, who represented debtor 550 Seabreeze Development in the bankruptcy case, said the real estate deal should close within a week.
Magna Hospitality has agreed to recommence construction of the hotel using Straticon, the general contractor that started the project with the prior owner. Straticon had filed a $5.8 million construction lien against the debtor after halting construction on the project.
Orlando attorney R. Scott Shuker, who represents the bidder, didn’t immediately respond to a request for comment. The hotel will be owned through a $250 million investment fund that Magna Hospitality closed in December 2017.
The 34,299-square-foot lot at 550 Seabreeze Blvd./525 S. Fort Lauderdale Beach Blvd. and the 18,372-square-foot parking lot across the street at 515 Seabreeze Blvd. were put up for grabs after 550 Seabreeze Development filed Chapter 11 reorganization in February. The 136-room, 12-story hotel project was about 70 percent completed, but construction had halted and the Bancorp Bank (NYSE: TBBK) filed a $37.4 million foreclosure lawsuit against the developer.
The debtor listed $50.6 million in liabilities. That means the $39.1 million purchase price will mostly satisfy the bank loan, but it will resultinmany other creditors accepting partial payments.
The property was originally slated for bankruptcy auction, but Magna Hospitality was the sole qualifying bid, Moses said.
The developer raised $30 million for the project from 60 EB-5 investors from China. They were hoping to secure U.S. immigration visas in exchange for creating jobs at the new hotel.
Battista and Moses said Magna agreed to comply with the reporting guidelines of the EB-5 program to help the investors obtain their visas. For each $500,000 investment, they were required to create 10 jobs to earn a visa.
A group of 21 EB-5 investors from China have a complaint of fraud and civil conspiracy pending in bankruptcy court against Raymond Parello, Ken Bernstein, Jack Kessler and Eugene Kessler – the four managing members of the developer – and Bancorp Bank. Debtor 550 Seabreeze Development was not named in the complaint.
"These are small, but nice, movements in the right direction, but we need the bank and the principals to live up to the promises that they made, and on which my clients relied,” said attorney Jeffrey C. Schneider, who represents the EB-5 investors in the lawsuit.
Meanwhile, 550 Seabreeze filed a motion arguing that the EB-5 investors should not be considered creditors in the case.
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