The unsold units at the Costa Hollywood Beach Resort were slated for a bankruptcy auction and met with great interest, but no qualified bidders, more than likely because the coronavirus pandemic was taking the hospitality industry into a historic nosedive.
777 N. Ocean Drive LLC, the project's lender, which sought to foreclose the development team after stopping payment, is ready to purchase the unsold units as part of its $ 43 million stalking horse offering. The lender, a subsidiary of New York-based private equity firm Madison Realty Capital, made an offer of credit that will count towards the overdue loan.
The US bankruptcy judge A. Jay Cristol of the southern district of Florida has scheduled a final sale hearing on August 26, a loan offer of $ 43 million. It's a lot of money, ”said the debtor's attorney, James Moon.
Moon, a partner at Meland Budwick in Miami, said he didn't know if the pandemic was to blame but suspects that is the reason for the absence of bidders. Over 180 groups showed interest and signed confidentiality agreements with broker Cushman & Wakefield, but none qualified.
"The fact is, we did not receive any qualified offers even though some people signed," he said. "It is difficult for someone to make a qualified bid knowing they have to match the secured lender." The 326-unit hotel in Costa Hollywood, just steps from the beach at 777 N. Ocean Dr. removed, was in distress prior to the coronavirus pandemic. The lender, who issued $ 70 million in project finance in 2016, filed for foreclosure against the Costa Hollywood Property Owner LLC development group in April 2019 at Broward Circuit Court. It is led by developer Moses Bensusan, CEO of real estate company Liberty Grande LLC.
Costa Hollywood, which owns 43 unsold residential units, nine commercial units and the communal area, filed for a Chapter 11 restructuring last September. Qualifying bids were due last Thursday, but no auction scheduled for Monday took place without a bidder.
Cristol has already approved the stalking horse bidder's purchase and sale agreement.
The remaining 274 condos have either been sold to individuals or companies that own their units or participate in the hotel rental management agreement for a percentage of rental income.
Broward County ordered hotels to close in late March and allowed them to reopen in late May, but Costa Hollywood stayed closed.
It's difficult to reopen in the middle of summer, South Florida's slow season, with no reservations in the pipeline and amid fears of a second wave of coronavirus, Moon said.
"Once you close a hotel, it's not that easy to turn the lights back on," he added.
The lender paid for budget shortages and sellers after the hotel closed. The company could technically increase its loan offering to nearly $ 50 million, reflecting its full debt on the property.
In a recession, a shuttered property depreciates in value and buyers look for good deals on distressed properties, Moon said.
"We were already a desperate property," he added. "COVID just knocked us out."