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Will they save the Colony?

  • By Matt Walsh
  • | 7:31 p.m. March 18, 2010
  • | 2 Free Articles Remaining!
  • Strategies
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Developer/entrepreneur Randy Langley and businessman/lawyer David Siegal have a plan that more than $1 million in judges, lawyers and mediators have been unable to resolve in three years: how to restore the famed Colony Beach & Tennis Resort to its historic luster and make it a happy place where its owner and visionary, Dr. Murray “Murf” Klauber, and the Colony's 232 unit owners exist in harmony.

“If everyone is reasonable, everyone can benefit,” says Siegal, punctuating the word “reasonable.”

Langley, owner of Longboat Key's Cedars Tennis & Fitness Club Inc., and Siegal, a Longboat resident, emerged as new key players in the Colony saga. On Feb. 26, they purchased from Bank of America a mortgage on key pieces of Klauber-owned property at the resort — the tennis courts, the Colony restaurant, the swimming pool and Klauber's penthouse office.

Katie Klauber Moulton, president and general manager of the Colony, said she has heard Langley and Siegel paid about $4.5 million on what amounts to about a $10 million note owed by the Colony and Klauber. Langley and Siegal declined to disclose the purchase price.

“We paid a sum we cannot disclose,” Siegal says.

Cannot or will not?

“It's an understanding we have with the bank,” Siegal says.

Langley, 43, and Siegal, 59, under the corporate name of Colony Lender LLC, say they personally invested most of the equity to buy the loan, with an undisclosed amount also coming from family money. They say they're the main partners.

Why they're in it
Why get involved?

“Eighteen-and-a-half pristine acres,” Langley says. “It's just beautiful.”

There are other motivations. “It (The Colony resort) needs to be brought back,” Langley says. Untold Longboaters started their lives at the Colony. “Everybody knows the Colony,” he says. “It's an incubator for homebuyers.”

But Langley is also pragmatic: “I'm not a Joan of Arc. I expect to make a profit.”

Langley began thinking about the Colony last fall, after he met Klauber at a Longboat Key Town Commission meeting. They unsuccessfully argued against the town funding the construction of a $745,000 public tennis center check-in and clubhouse facility.

Afterward, Langley met with Klauber for lunch at the Colony's Monkey Room and learned about the years-long dispute between Klauber and the board of directors of the Colony unit owners over who should pay what to renovate the deteriorating resort — a dispute that has failed in mediation and now is in federal bankruptcy court in Tampa.
Langley went home, thinking: “Wow, this is really a messed-up situation.”

But having had about 12 years of experience as a residential developer who set up homeowners associations, Langley felt an allure — to the property and the challenge. In November, he gave Siegal, a Cedars Tennis member and one of Langley's lawyers, a business plan to rescue the Colony.

Siegal, who describes himself as a businessman who practices law, read the plan on one of his weekly plane rides back to his law practice in Albany, N.Y., his hometown. That Tuesday, he told Langley: “I'm in, brother.”

The first step of the plan required them to get a seat at the negotiating table, and the best, easiest way was to buy Klauber's loan from Bank of America.

That would give them credibility with all of the parties. Having invested $4 million or more of their money to buy the loan, they would have, as Siegal says, “skin in the game.”

“Through the investment we made, it's not just conversation,” he says. They, like Klauber and the unit owners, have money and wealth at risk as well.

Unlike Bank of America, however, Siegal and Langley do not have time constraints on getting Klauber to satisfy his mortgage. As a public company operating under federal banking regulations, Bank of America was becoming increasingly pressured to complete foreclosure proceedings on Klauber's overdue note. According to Siegal, a payment on the note hasn't been made since December 2007.

Will they foreclose?
Likewise, Langley and Siegal could follow through on foreclosure also. A federal judge has put a hiatus on any foreclosure proceedings until May 11, but, even then, Langley and Siegal say forcing a foreclosure is not their first choice.

“We don't want to roll over anybody,” Langley says. “That's destructive. We don't want that for anyone.”

With time to negotiate, Langley and Siegal have met at least three times with Klauber and Moulton.

Last Saturday, March 13, they met with Colony Association President Jay Yablon and two other members of the association board. “It was a good introductory meeting,” said Yablon, who declined to discuss details.

Langley and Siegal say their strategy is to find out what everyone wants, what's the least each side would accept and figure out how to give them more.
Asked to reveal the details of how they see their plan resolving the dispute, predictably, Langley and Siegal decline. They don't want to show their hand before it's played. Langley, however, says his business plan was “structured all the way down to the nail.”

Moulton is hoping to see it before the Colony is to file an amended reorganization plan March 25 with the bankruptcy court.

Possible outcomes
For the next 56 days, Langley and Siegal likely will be conducting shuttle diplomacy. They have no idea whether they'll be successful. But they've thought through some of the possible outcomes:

1. Satisfy the mortgage.
As a first step, Klauber could pay off the $10 million mortgage. Moulton says she and her father have been talking to three other well-qualified groups with cash in hand and similar desires of Langley and Siegal's to see the Colony restored. In that event, Langley and Siegal could walk away more than doubling their investment.

2. Proceed with foreclosure.
This could trigger several possible outcomes.

• If Langley and Siegal proceed to a courthouse foreclosure sale, they could sell the mortgage to another party just as Bank of America sold to them. If, say, a bidder offered $6 million for the $10 million note, Langley and Siegal could take the profit and walk away. Or they could reject it and retain the note.

• They also could hold out until a bidder pays the face value of the note. If, say, a bidder came in with the entire $10 million, Langley and Siegal would face the decision of either accepting the amount and walking away or bidding slightly higher to satisfy the mortgage and become owners of Klauber's properties.
In the case of the latter, Langley and Siegal would need to come up with an estimated $6 million more.

3. Convert debt to equity.
Another option is to negotiate with Klauber and convert some or all of Klauber's debt into partial or complete ownership of Klauber's properties.

Asked if they want to be part owners with Klauber, Siegal says: “We have to be flexible on where the money comes out.

“We have a secure investment,” Siegal says. “We're not worried about that at all. We're hoping to accommodate the possibility of resolving everything plus rehabilitating the Colony.”


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