In August, Z Capital won a bid for the Canyon Ranch, a hotel property located in Miami, Florida that was put into Chapter 11 bankruptcy in June by Lehman Brothers Holdings to ease the sale.
Now, according to court documents obtained by PEI, parties involved in the deal have filed four separate court challenges to the sale agreement in an attempt to give the property over to another bidder.
The potential bidder is an entity known as 6801 Collins, which wasn’t even in the top potential bidders for Canyon Ranch. At the time, the second highest bidder was a group called North Beach Development.
Lehman Brothers affiliates FL 6801 Spirits LLC, FL 6801 Collins North LLC, FL 6801 Collins South LLC and FL 6801 Collins Central LLC were all of the parties included in the bankruptcy filing. Albert Togut is the lawyer for the debtors, which claimed assets of $12 million and liabilities of $17.3 million. The largest claims came from the hotel condo associations and hotel manager Canyon Ranch.
In the sale agreement, the group of debtors recognized Z Capital as having the highest and best bid and the plan was for Z to move forward on a work out for the property. Canyon Ranch was built in 2009 but has been operating at a loss each year, and could no longer cover its loans.
According to the court challenges on the sale, condo associations affiliated with the property have been working to effectively re-open the sale process in an effort to turn the property over to 6801 Collins. It is unclear what background relationship the associations have with 6801 Collins, but either way it appears they have limited if any standing in court to challenge the sale. Despite that, they’ve filed four challenges including one that attempts to cast Z Capital as a predatory hedge fund.
Attempts to reach out to 6801 Collins and the associations were unreturned at press time.
Z Capital, a Chicago-based private equity firm, has filed its own document with the court rebuffing the challenge attempts and pointing out that both the debtors and the bankruptcy court itself approved the sale and it was already moving forward. Sources familiar with matter say that Z Capital will be exploring all of its options in terms of responding to the challenge. The firm has also asked that if the court re-opens any part of the process that they be given the full weight of available information in order to be able to respond appropriately. No additional court date is scheduled at this time.
The filings were made in the United States Bankruptcy Court in the Southern District of New York.