|By Douglas Hanks, The Miami
HeraldMcClatchy-Tribune Regional News
May 31, 2007 - Nearly three years ago, a New York bank launched a failed foreclosure attempt against South Beach's Royal Palm hotel. Now the bank says that was a mistake.
Writing Royal Palm owner R. Donahue Peebles, North Fork Bank said it "should not have commenced a foreclosure and collection case against the Hotel" because "there was not a default under the loan documents."
The three-paragraph statement offers a delayed victory for Peebles in a foreclosure fight that once threatened to derail his sale of the Royal Palm for a then-record $128 million in February 2005. North Fork issued the letter as part of a settlement in a defamation case Peebles brought against North Fork's partner in the Royal Palm loan.
Eight months before the sale, New York hotelier William Achenbaum bought the $54 million mortgage on the Royal Palm and tried to foreclose on it, assigning the loan to North Fork Bank. Peebles blasted the move as an attempt to "steal" the hotel from him, insisting the loan was never in default. He fended off the foreclosure and then sold a majority stake in the 417-room hotel, paying off the loan with the proceeds.
After the deal closed, Peebles sued Achenbaum for defamation, saying the foreclosure attempt damaged Peebles' reputation. The Royal Palm drama attracted significant attention because it was built on city-owned oceanfront in an effort to bring an African-American developer to Miami Beach.
At the time Achenbaum, who is developing the Gansevoort hotel on Miami Beach, said he wanted to take over the Royal Palm and run it as a pricey boutique hotel. In its foreclosure suit, North Fork cited liens against the hotel -- one linked to an $18 million judgment a court allowed Peebles to pay after the closing, and another tied to a $6,000 fine for a lapsed elevator permit.
Achenbaum's son and business partner, Michael, said the parties had reached an "amicable settlement." Executives with North Fork and its parent company, Capital One, did not respond.
In the settlement, Peebles also received undisclosed penalty interest he was forced to pay on the mortgage and legal fees, according to the May 7 letter.
"This settlement is a vindication and validation of our position," Peebles said in an e-mailed statement.
Though this kind of dispute isn't unusual, lenders generally don't declare themselves wrong retroactively, said Michael Ehrenstein, who specializes in real estate litigation in Miami.
'Having a lender turn around and [say]: 'Oops, I shouldn't have done that' is rare," he said.
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