Work stops at $100M Banyan Cay resort: A pause or a problem?

/Work stops at $100M Banyan Cay resort: A pause or a problem?

Work stops at $100M Banyan Cay resort: A pause or a problem?

|2019-05-24T06:11:59-04:00May 16th, 2019|

May 17– May 17–Work has stopped at Banyan Cay Resort & Golf Club, the biggest redevelopment project in West Palm Beach since CityPlace.

The 150-room hotel is a concrete shell, without a roof or windows. For the past three weeks, there have been no construction workers on site. But there are plenty of liens, including $7.7 million in liens from the general contractor for unpaid bills on the hotel and club house.

The site of the planned $100 million resort is just east of Interstate 95, off of Congress Avenue and north of Palm Beach Lakes Boulevard. The 250-acre property formerly was the President Country Club, but the club fell into financial trouble and was sold to an investor group for $11 million in 2011. That investor group then flipped the property to Banyan Cay Dev LLC for $26 million in 2015.

Gatto sketched out a vision that led to Banyan Cay, featuring a hotel managed by boutique Noble House Hotels & Resorts, and a golf course redone by golf great Jack Nicklaus. Plans were to open the hotel by the fall of 2018.

Four years later, the golf course is finished. So is the club house, although it still has to complete several punch-list items to satisfy the city.

But the resort hotel is barely built, even though by now it was supposed to be a lushly landscaped enclave featuring a fitness center, pool, cabanas, tennis center, tiki hut and spa, plus meeting space.

Things may look like a mess, but it's by design, said Domenic Gatto, Banyan Cay's owner.

With 14 months left of construction, Gatto said he made a "business decision" to stop work on the project for a few months. Gatto said he doesn't want Banyan Cay to open at the start at summer 2020, when tourism is slow. Instead, he'd rather have a soft opening by August or September 2020.

"I can understand, from the outside looking in, that a pause of construction doesn't look good," Gatto said. "But from a business decision, to run a 150-employee business through the dead of summer isn't in our best interest financially or in the best interest of the community."

"We want to deliver the absolute best product," Gatto said. "I believe this is going to be the Doral of Palm Beach, a true destination landmark." He expects construction will start up again in July.

Gatto said Noble House was on board with the construction delay "for this to be a successful, profitable hotel." Sean Mullen, a top Noble House executive who has touted Banyan Cay, did not return a phone call seeking comment.

But real estate experts, as well as the city of West Palm Beach, disagreed that stopping construction is a good move.

"I've never heard that before," said Rick Greene, West Palm Beach's development services director. "You never want to slow down."

Greene said he met on Wednesday with Banyan Cay's public relations executive, Elliot Cohen, but Greene said he's still not sure what's going on. "They need funding or they're in a dispute with their contractor, or a combination of both," Greene said.

Gatto denied he had any money problems. In fact, he said he's well-funded and can finish the project.

In addition to the more than than $40 million poured into the project by Gatto and his investors, Banyan Cay obtained a $62 million loan from Calmwater Capital last year.

As for the construction liens, they are "internal business that will get cleaned up fairly quickly," he said. "There's nothing to discuss." He added that he maintains good relations with Jacob Companies, the general contractor.

Donald Perry, president of West Palm Beach-based Jacob Companies, did not return a phone call seeking comment.

Gatto also denied suggestions that Noble House and Banyan Cay have parted ways, or may soon do so.

But Gatto said some of Banyan Cay's investors think a hotel brand bigger than Noble House might be a good fit, "maybe a Ritz, maybe a true, five-star luxury resort," Gatto said. "That's just talk."

Regardless, Gatto's delayed construction timetable strategy isn't reassuring to the city.

There are safety issues with an unfinished work site, Greene said. Some residents in the adjacent Lands of the Presidents community overlook the Banyan Cay site, and a half-built hotel isn't a plus for property values, either, Greene said.

Greene also wants Banyan Cay to wrap up construction on the club house so it can move from a temporary certificate of occupancy to a final one. One of Jacob Companies' liens against Banyan Cay is for $713,694 still owed on the club house.

In addition, SobelCo., a Boca Raton-based home builder, bought part of the project and is building 94 single-family homes with the Banyan Cay resort as a lure.

SobelCo. sales executive Victory Coyne said homes in the Residences of Banyan Cay come with a three-year social membership in the resort. Since the home sites broke ground in the fall, sales have been brisk, with about four homes sold each month, Coyne said. Prices range from $535,000 to $700,000 for the three- and four-bedroom homes.

Greene said the city would like to see the Banyan Cay hotel completed as soon as possible. However, "we can't force somebody to build," he said.

Neil Merin, chairman of NAI/Merin Hunter Codman brokerage, said leaving a building half-built is unwise.

"No, you don't stop construction at that point," Merin said. "Without the building being roofed and watertight, all the current construction is subject to wasting. If a hurricane doesn't knock it down, they may have to demolish it and start over if left to the elements for so long."

Merin added that opening during the slow summer months is good for hospitality venues such as hotels and restaurants. The quieter time give the staff time to work out kinks in service, or adjust element such as furnishings and staffing, he said.

Even though the hotel isn't built, the golf course and club have attracted attention. Gatto said the private club has more than 180 members, half of whom are seasonal. Many are residents of Palm Beach, he said.

In addition, Banyan Cay's golf course recently hosted the U.S. Open qualifier for the PGA of America and a qualifier for the Honda Classic. "For a new course to be awarded those types of tournaments, I'm very flattered," Gatto said.

Down the line, there could be additional sources of money for Banyan Cay.

Banyan Cay is part of an EB-5 program run by David Finkelstein, who helped build Jupiter's Harbourside Place, another EB-5 project. The EB-5 program allows foreign investors to obtain a U.S. visa by investing in a business that will benefit the U.S. economy and create jobs.

In an interview, Finkelstein confirmed his company, American Immigration Group of New York, is actively offering Banyan Cay to foreign investors. Finkelstein declined to name the number of investors involved or the amount of money raised.

When asked about the hotel's stopped construction, Finkelstein said: "I have no reason to believe this project is not going forward."

Gatto said there is no EB-5 money in Banyan Cay right now because the investment pool needs to reach a certain size.

In addition, Banyan Cay in January received city approval to create a Community Development District. A CDD would allow Banyan Cay to issue tax-free bonds to finance the project's infrastructure.

Gatto acknowledged that a CDD typically is done before a project starts construction, not mid-way. He said the bonds, which he hopes will be issued later this year pending state approval, will reimburse him on money he's spent up front.

Wendy Link, the interim Palm Beach County supervisor of elections, ushered the CDD through the city. For a time, the West Palm Beach lawyer was a CDD voting member. But she said she's not involved in Banyan Cay anymore due to her new role.

Gatto said he's never built a resort before, but he's growing "more and more comfortable" with the hotel business.

"I've been living in this community for 18 years, and nothing of this magnitude been built," Gatto said. "To be a part of it has been a dream, and to complete it is a legacy. I'm committed to taking it to the end."

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