February 6, 2009 - Holiday Isle Resort & Marina - planned Ocanos Resort, Islamorada FL

Foreclosure notice served on Holiday Isle

Holiday Isle Resort and Marina, a major hotel resort in Islamorada, is in foreclosure after lenders filed to recover $77 million loaned on an aborted condominium hotel conversion - Ocanos.

Foreclosure notice served on Holiday Isle

Holiday Isle Resort and Marina, a major hotel resort in Islamorada, is in foreclosure after lenders filed to recover $77 million loaned on an aborted condotel conversion.

VII Holiday Isle Funding LLC, a subsidiary of Connecticut-based Starwood Capital Group, filed against several companies affiliated with West Palm Beach developer Adam Schlesinger, and his company, Ceebraid Signal.

It's unclear how the filing will impact operations at the property, located at mile marker 84.5. But news of the legal action brought reaction from Islamorada's Mayor Cathi Hill.

"In conjunction with the events at Cheeca, this could not have come at a worse time," Hill said.

A New Year's eve fire closed down Cheeca Resort and Islamorada officials and business leaders are still are unsure when the tony oceanfront resort will reopen.

Holiday Isle is also well-know for its charter boat row, where deep sea fishing boats line up for guests drawn from Holiday Isle and other resort properties throughout the Upper Keys.

Charter captains, already on edge over an uncertain future for the resort and marina, talked Friday about their concerns with a weak economy and fewer people willing to shell out hundreds of dollars for a day of fishing.

"I don't know what our future is right now," said Capt. J.R. Rudzin of the Captain JR charter boat.

Ceebraid paid $98 million for Holiday Isle in 2006 with plans to raze the famous party spot and its numerous onsite bars and erect an ancient-Greek-themed, 151-unit ultra-luxury resort called Ocanos.

Starting prices were advertised at $1.2 million for a one-bedroom unit.

That was in March 2007 and within months of buying the oceanfront property at mile marker 84.5, Schlesinger issued a press release saying 25 percent of the units were under contract to be sold.

But under Florida law, buyers have 15 days to back out of pre-sale contracts, and that's exactly what most of Ocanos' initial investors did.

Schlesinger, who, along with other Holiday Isle representatives, did not return phone calls for this report, moved on to plan B. In April 2007, he announced plans to knock down Holiday Isle and replace it with a "five-star" hotel.

That never happened either and on Jan. 28 a company that lent money for Ocanos to Schlesinger, his partners and up to six limited-liability corporations filed the foreclosure notice.

VII Holiday Isle Funding, LLC, is the plaintiff in the foreclosure filing. It's a subsidiary of the global investment firm Starwood Capital. James Robinson, the plaintiff's attorney, said he isn't authorized by his client to comment on the case.

t's not clear how many people work at the Holiday Isle complex on Windley Key, but the resort's bars, restaurants and hotels form a major business hub in the village of Islamorada.

Capt. Rudzin has been renting a slip at the marina for 11 years. He pays about $875 a month, which he says is a good price, and a rate he's not sure he'll be offered if he has to move to another marina.

"I don't know where we turn from here," Rudzin said.

Mayor Hill said she remains optimistic someone else may come along when the economy gets better to not only preserve the resort, which is said to have originated the iconic Rum Runner cocktail, but also to improve it.

"Economic conditions are cyclical, and I have no doubt Holiday Isle and Cheeca will come back better than ever," Hill said.

When Schlesinger first announced his plans for Ocanos, condotels were the hot real estate investment. The concept was that resort hotels would sell condominium units, purchased by investors, and then rent those out to paying guests. The hotel management company and the investor owners would share the rental income.

In the Keys, many landmark properties were sold to deep-pocket developers who hoped to redevelop dated hotels and motels into condotels.

One of the most ambitious projects targeted Holiday Isle, and the $98 million paid set a record at the time.

The foreclosure notice lists VII Holiday Isle Funding as owed "$77 million in principal and other sums due, plus accrued interest, reasonable attorney fees, costs and other expenses."

Original Story - KeysNet

Update - February 11, 2009

Despite foreclosure, Holiday Isle fun continues

Less than three years after developers paid nearly $100 million for the Florida Keys' iconic Holiday Isle resort, the grand condo-conversion project went belly-up. But the rum runners still flow....for now.

Charter boat captains filleted mutton snappers and kingfish at the dock. Tourists from the frigid North danced up a sweat to reggae music and cooled off with frozen rum runners.

Sunday afternoon at the Holiday Isle Beach Resort and Marina, it was good times as usual. But for how much longer, nobody knows.

The Florida Keys' legendary destination -- which sold for $98.2 million three years ago and features the ''World Famous Tiki Bar'' -- is now in foreclosure.

Delaware-based VII Holiday Isle Funding filed the foreclosure action on Jan. 28 in Monroe County Circuit Court to recover $77 million loaned to West Palm Beach developers for a grandiose condo-hotel project that never got off the ground.

Soon after developer Adam Schlesinger and his company, Ceebraid-Signal, put together the eye-popping deal for Holiday Isle in April 2006, the skyrocketing real-estate market crashed. With nobody buying the million-dollar-plus units in advance, Schlesinger was forced to indefinitely delay construction of the Ancient Greece-themed, five-star luxury resort called Ocanos.

Aging but funky Holiday Isle -- a 12.5-acre, honky-tonk, mish-mash of hotel rooms, bars, shops, restaurants, gas station and docks along the Atlantic -- got a reprieve from the bulldozers.

Some patrons hope the news of foreclosure proceedings means Holiday Isle never will be converted to swanky condos.

''It's just perfect the way it is,'' said Ronni Byers, who traveled from a Chicago suburb last week with six family members for a sun-and-fun vacation. ``Everything is so accessible: the bars, JetSkis, restaurants. It's very laid-back and relaxing here.''

''Condos would ruin it,'' chimed in Byers' brother, Jake Byers.

'OPTIMISTIC'

But the uncertainty of the resort's fate, in conjunction with tough economic times, has led to sparse crowds and an exodus of several charter boats. Some shop owners who have been there for years are barely surviving.

''So many people think this place is going to close, but we're staying optimistic,'' said Kimberly Callis, who books fishing trips for the Sassy Lady that operates out of Holiday Isle's marina at mile marker 84.5 of U.S. 1.

Holiday Isle general manager Jack Miller declined to comment Sunday on the financial woes.

''All I can say is I'm going to run this property as business as usual,'' he said while giving a tour of the complex and showing rooms with spectacular ocean views.

''We're open. We're not closing,'' Miller said. ``The captains are here. The sunglasses shop is open. The hotels and restaurants are open. We've got beautiful beaches. Come on down to Holiday Isle and have a good time.''

WHAT NEXT?

Ceebraid-Signal declined to comment, and the company's lawyer did not respond to an interview request.

''I can't imagine it closing; it would make no economic sense,'' said the lender's Miami attorney, Bill Walker. ``But I don't know. I don't know if anybody has thought that far down the road.''

Ceebraid-Signal and several companies affiliated with the project have 20 days to present a defense. If successful, the case could go to trial. If not, the judge issues a summary judgment and the property could be put up for sale within months, Walker said.

BROADER TREND

The Holiday Isle debacle reflects a broader trend in the Keys, where luxury developers scooped up modest lodging properties at exorbitant costs in hopes of transforming them into pricey destinations. Those same developers slammed the brakes when real-estate values plunged and the condominium market froze.

''If it's possible, they are delaying or not doing anything,'' said Scott Brush, a lodging analyst in Miami.

As it became apparent the windfall was no longer possible, developers found they could not meet their financial obligations with profits from the existing property.

'The only thing they can do is go to the bank and say, `Hey, the $100 million mortgage you have on me, I'm not going to be able to make it,' '' Brush said. ' `How about we write it down to $60 million?' ''

BANKS SWAMPED

Holiday Isle announced in April 2007 that it changed its plans and would build a five-star hotel, but that never happened either. According to the lawsuit, the developers defaulted on the loan on Aug. 1, 2008, when they failed to make the principal and interest payments.

If the foreclosure action succeeds, Holiday Isle would be one of the first major South Florida hotels to end up in a lender's hands during this recession, analysts said.

Scott Berman, a hotel analyst with PricewaterhouseCoopers in Miami, said banks have been too swamped with other troubled real-estate holdings to swoop in and take over distressed hotels.

In past recessions, ''the banks have been quick to act,''' Berman said. ``In this cycle, there's this holding pattern.''

Update Story - Miami Herald