Earlier this summer, Chicago-based Z Capital was named the top bidder in a bankruptcy related auction for one of the remaining parts of the Lehman portfolio – Canyon Ranch in Miami, Florida. The property is a combination luxury hotel/condo which went into foreclosure in 2009. As PEI first reported, Z was deemed the successful bidder in that process, and has a plan to turn the property into a luxury hotel flagship with developers of two of Miami’s most exclusive resorts. Throughout the process, however, Z has been battling court challenges from the homeowners associations in the condo towers which want to turn the property over to a different hotel operator backed by two of the condo owners.
Now, new court documents show that the debtors may be entertaining a restructuring plan that would give the homeowners favored candidate 6801 Collins, the property. 6801 Collins is an entity backed by two financiers and Canyon Ranch homeowners – Scott Prince and Steven Roth. Roth is the founder of Vornado Realty Trust and Prince is with Apollo Commercial Real Estate Finance, an indirect subsidiary of Apollo Global Management. The entity plans to turn over the operations of the property to Capella hotels and Auriga Spa.
During the two months since the auction closed, the 6801 Collins group has changed its bid and plan for the property multiple times in an effort to push through a restructuring deal that would leave final control with them. Additionally, homeowners have brought a variety of litigation against Lehman which still operates the property in bankruptcy. 6801 Collins has attempted to persuade the court and Lehman that if they prevail, that litigation would go away.
If the bidding process is re-opened, Z said in its motion that it would consider upping the purchase price which was already more than 20 percent higher than 6801 Collins. It would also drop the favorable resolution pre-condition which would mean assuming the risk of state court litigation. Sources familiar with the deal say the firm is keeping its options open if it is forced to re-open its bid this late in the game.
Most notable about the difference in bids from both entities is the significant financial gap. 6801 Collins dropped out of the original auction process at $19 million, and later required an additional $2 million credit, resulting in an end bid around $17 million. Z Capital’s bid is just under $25 million. The full scope of the relationship between the associations, 6801 Collins and Lehman is unknown, but the fact that that Lehman may seek to re-open or restructure the process with that big of a gap raises questions. US District Court Judge Shelley Chapman, who is overseeing the case has urged all parties to resolve any pending litigation, which could be driving the decision by Lehman to continue entertaining offers from 6801 this late in the process.
Both sides are to go before the court in a status meeting. The next phase will be a final hearing unless the Court grants a restructure. Attempts to reach 6801 Collins went unreturned by press time.