Banyan Cay lender retakes control: What plans does it have for the property now?
Calmwater Capital, the lender to the troubled Banyan Cay Resort & Club, took control of the West Palm Beach project late last month. The move followed a failed bid to sell the property to an outside buyer in Banyan Cay's Chapter 11 bankruptcy reorganization.
In a brief statement issued on Sept. 6, Calmwater Capital pledged to complete the unfinished hotel.
The Los Angeles-based lender said it has hired crews to complete the 150-room hotel and resort, which will feature three restaurants, a spa and fitness complex, wedding venue, meeting space as well as banquet facilities for up to 200 people. Calmwater said the resort also will include a resort-style pool and pickleball courts.
More: Why is Banyan Cay Resort & Club still unfinished? What to know
In addition to finishing the hotel, Calmwater Capital said the 18-hole, 130-acre Jack Nicklaus Signature golf course will reopen on Sept. 30. The course closed in August after a would-be suitor, Westside Capital of Denver, failed to follow through on a $102.1 million purchase of the hotel and golf course.
Westside's decision not to close on the purchase left Banyan Cay with no choice but to let the lender's $96.5 million credit bid stand. The amount reflects the debt extended to the hotel and golf club.
On Aug. 31, U.S. Bankruptcy Court Judge Erik Kimball approved the property's transfer to a Calmwater Capital affiliate, U.S. Real Estate Holdings III.
The hotel was supposed to open as a Destination by Hyatt property, the company's only Destination brand in Florida.
Now it's not certain the Hyatt brand will remain. In its statement, Calmwater said the brand and timeline for completion will be announced at a later date.
Beset by delays, hotel was almost ready to open last year
The ownership change marks the latest twist for the troubled resort and golf club, which is located just east of Interstate 95 off Congress Avenue and north of Palm Beach Lakes Boulevard.
The property previously was the site of 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, led by Domenic Gatto Jr., for $26 million in 2015.
Construction of a resort hotel was beset by delays, to the dismay of The Lands of the President community, which overlooks Banyan Cay. In addition, residents in an adjacent new single-family community, the Residences at Banyan Cay by SobelCo, were supposed to be able to use the hotel's club as part of the purchase of their homes.
Banyan Cay Resort was slated to be completed last fall after years of construction stoppages, a switch in hotel brands and legal woes for its developer, Gatto. In 2022, as Banyan Cay was hoping to finish construction and open in the fall, the project’s lender filed a foreclosure lawsuit.
In a July 16 complaint in Palm Beach County circuit court, U.S. Real Estate Credit Holdings III-A L.P., the Calmwater Capital affiliate, claimed Banyan Cay missed deadlines to open the hotel by April 30.
Calmwater Capital also sought repayment of two loans. One was a $61 million construction loan to build the Banyan Cay hotel. The other was a $24 million loan for construction of nearly two dozen unbuilt villas on the property.
Previously: Banyan Cay sale fails, future of West Palm Beach resort unclear
By February, Banyan Cay had lost the lawsuit, and a judge issued two final judgments in favor of Calmwater Capital. The judgments totaled more than $95 million, an amount that includes the loans plus interest.
Banyan Cay filed for Chapter 11 bankruptcy reorganization in March in hopes of finding a buyer willing to pay a premium above the loan amount for the large, rare site.
Banyan Cay estate to pursue Colorado developer for damages
Westside was the sole bidder at a bankruptcy auction and was scheduled to close on the West Palm Beach project before July 31. In June, an enthusiastic Westside official said the project needed about $5 million more to finish construction, including completion of exterior amenities such as the pool deck.
But Westside did not close the deal. At the last minute, it left Banyan Cay in the lurch and unable to pay its insurance, maintain the property or pay employees, according to a 130-page court filing submitted Aug. 9 by the lender.
Westside's failure to complete its $102.1 million acquisition means Banyan Cay lost millions when the property went back to its lender for the loan amount, said Joseph Pack, a Miami attorney representing Banyan Cay. Court documents indicate Banyan Cay believes Westside engaged in fraud and intentional misrepresentations.
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The Banyan Cay estate, now devoid of its prime property, intends to pursue Denver-based Westside Investment Partners for damages, said Pack, who also represents various Banyan Cay affiliated entities in the Chapter 11 bankruptcy reorganization.
These damages include $10.5 million for 28 single-family home lots that were set to be sold to a separate buyer, Schickendanz Inc. home builder. Calmwater now controls these lots, too.
Banyan Cay already asked Westside to produce a slew of documents, including financial details as of various dates in April and June, plus partners and funding sources.
Westside has asked a judge to block the move, saying it already met any obligations under the failed sales contract by giving up a $3 million deposit. "Westside has, at all times, acted in good faith," the company said in a Sept. 1 filing.
Alexandra Clough is a business writer and columnist at The Palm Beach Post. You can reach her at aclough@pbpost.com. Twitter: @acloughpbp. Help support our journalism. Subscribe today.
This article originally appeared on Palm Beach Post: Banyan Cay lender in control, pledges West Palm Beach hotel completion
