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Real Estate Developer Joseph Chetrit May or May Not Buy
 the Bankrupt Roney Palace Hotel and Condominiums
 for $153.5-million
The Miami Herald
Knight Ridder/Tribune Business News

June 10, 2004 - A real estate investor with a stake in Chicago's Sears Tower has won permission to buy the Roney Palace hotel and condominiums out of bankruptcy, but he has objected to the $153.5-million price for the Miami Beach complex, lawyers for the sellers said Wednesday.

The venture headed by Joseph Chetrit, whose $840-million deal in April for the Sears Tower set a new high-water mark for Chicago real estate, signed a $153.5-million contract to purchase the oceanfront property. But a lawyer for the New York real estate mogul last week suggested Chetrit wants the price lowered by as much as $30 million to cover legal claims, fees and other potential problems with the property.

The objection could derail a deal signed after Chetrit's group outbid other suitors for the Roney, a U-shaped hotel and residential complex that fell victim to disputes among its owners, some of whom wanted the 585-room hotel converted to a time share resort, a lawyer in the case said. Facing large mortgage payments and unable to agree on a future for the property, the partnership filed for Chapter 11 bankruptcy protection in February.

The bankruptcy marked a low point for a South Florida landmark in the midst of its latest evolution. The first Roney hotel opened in 1925 as a ritzy retreat, then was converted to barracks during World War II. A decline followed, and in 1968, the original Roney was demolished to make way for the current 1,100-unit complex.

About half of the units have been converted to condominiums since the late 1990s, and the current owners say the hotel's profits remain healthy.

Chetrit attorney Abraham Backenroth did not return a phone call Wednesday seeking comment, and Chetrit could not be reached. Chetrit has a reputation for keeping a low public profile. MetLife still declines to reveal his name in connection with its April sale of the iconic Sears Tower to his investment group, and he did not speak to Chicago media when the deal closed.

Chetrit's offer for the Roney would be enough to pay off all of the more than $140 million the property lists as debts and still leave some money for the owners, said Paul Singerman, a bankruptcy lawyer representing the Roney partnership.

But at a June 2 bankruptcy hearing in Miami, Backenroth asked that as much as $30 million of the price be set aside to cover costs he claimed were the sellers' responsibility.

Backenroth questioned whether the sellers had accurately represented the property in the deal, telling Chief Judge Robert Mark that "we believe that what was represented is not what we're getting," according to a transcript of the hearing.

He did not elaborate on that statement in court, but lawyers for the sellers said in interviews that Chetrit's group maintains the Roney overstated the amount of commercial space in the ground floors of the hotel.

In court, Backenroth also raised concerns about disputes with condominium residents over the ownership of a pool in the complex, fees Miami Beach might pursue from the hotel, and other disputes he said could loom over the property.

Lawyers for the owners rejected many of the claims as unfounded.

They also maintained the signed contract offers Chetrit no leverage to negotiate a lower price, and that his group had the opportunity to inspect the property and address legal concerns before submitting its bid.

"We believe we have a contract with no contingencies," said Allen Glaser, an attorney for one of the two main ownership groups that make up the Roney partnership Roney Associates.

Chetrit's group could back out of the contract and sacrifice its $2.5 million deposit, the lawyers said. Chetrit has already paid $1 million to extend the closing date from June 15 to July 15.

Judge Mark approved the contract at the June 2 hearing but said he would decide the $30-million dispute later if the two sides can't settle the issue.

Francis Carter, a bankruptcy lawyer representing the other main ownership group, said he doubted the dispute would scuttle the deal.

"I can't believe Chetrit came down here just to stir up dust," he said.

By Douglas Hanks III and Ina Paiva Cordle

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