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Lender Forecloses Three Years After Ceebraid-Signal Paid $98.2 million for the Florida Keys'
 Holiday Isle Resort;  Condo-conversion Project Never Got Off the Ground

By Cammy Clark, The Miami HeraldMcClatchy-Tribune Regional News

February 10, 2009 --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."

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Copyright (c) 2009, The Miami Herald

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