(MIAMI, FL)—Bank of America has lost the first round in one of the most controversial condominium developer-versus-lender lawsuits seen in South Florida in recent years.
U.S. Bankruptcy
Judge Laurel Isicoff (top right photo) has thrown out the Charlotte, NC-based bank’s petition to dismiss a lawsuit filed by Cabi Downtown LLC, a company owned by Mexican investors and based in Aventura, FL.
The judge found Bank of America lawyers falsified their Sept. 15, 2009 filing to dismiss the Cabi suit. That suit alleged the bank had lied in affidavits attached to its countersuit.
When Cabi filed for Chapter 11 protection, the bank alleged Cabi owed a balance of $209 million on a $256 million first mortgage loan.
Isicoff said she may also order the bank’s lawyers to pay all legal and other related costs that Cabi incurred in coming to the Feb. 4 hearing.
Cabi filed for Chapter 11 protection Aug. 18, 2009.
At that time, the developers’ petition stated it was seeking the court’s protection because slow condo sales were preventing them from meeting scheduled repayments on a $256 million first mortgage for the $300 million, 849-unit, 49-story
Everglades on the Bay project. (middle left photo)
The property is at 250 Biscayne Blvd., the site of the former Everglades Hotel in Miami’s central business district.
According to a transcript of the Feb. 4 bankruptcy hearing reported by South Florida Business Journal, the judge said to the Bank of America lawyers:
“I don’t know what you all were thinking. I don’t know what else to say.
“I am going to issue an order to show cause why Bank of America and its counsel should not be sanctioned for the cost of all attorneys appearing at this hearing today for filing this motion and the affidavit.”
Another round of hearings in the case is scheduled for Feb. 11.
In an e-mailed statement to Real Estate Channel,
Andrew Glenn (middle right photo) of New York City-based Kasowitz, Benson, Torres & Friedman, one of Cabi’s bankruptcy lawyers, says:
"The debtor is gratified that the judge denied Bank of America's motions to dismiss the bankruptcy and to enjoin the Debtors' Deferred Purchase Program.
“We intend to pursue our plan of reorganization to maximize value for all stakeholders.
“However, the debtor remains very troubled that Bank of America made false statements that have damaged the reputations of the owners, management and residents of Everglades on the Bay and is evaluating its options to redress this substantial harm."
Cabi filed its bankruptcy petition after the bank refused to allow write-downs of sales prices.
The bank argued Cabi was violating guidelines that were agreed upon before the developer started a new lease-to-own program.
The bank alleged that Cabi’s leasing program “has damaged the value” of Everglades on the Bay, which “amounts to waste.”
In response, Cabi attorneys told South Florida Business Journal the bank’s accusations range from “outright falsehoods to gross mischaracterizations of the facts.”
Bank of America filed the allegations about the leasing program as an emergency motion. But the judge said during the Feb. 4 hearing the motion clearly was not an emergency.
“Having heard the evidence … I find that the debtors do have a legitimate intent to reorganize, and that the debtor did not file this case for the sole purpose of frustrating Bank of America's exercise of its rights as a secured creditor and, therefore, I find that the case was not filed in bad faith,” Isicoff said.
She added that the developer still must prove it can make the financial numbers work for a reorganization.
While many condo developers have similar rent-to-own programs, this one is somewhat novel because it is being played out in federal bankruptcy court, South Florida Business Journal reports.
When it entered bankruptcy, the 849-unit building had sold 739 units, but only closed on 122. There are now 249 units in the deferred purchase program. Both of the towers are being rented.
(Biscayne Bay Miami skyline middle left photo)
At the time of the bankruptcy filing, the $300 million project still owed $209 million on its BofA-led mortgage.
A January 2009 appraisal of the twin towers on Biscayne Boulevard, ordered by the bank, stated the project is worth $205 million. The latest appraisal, in October, stated a value of $184.5 million.
Cabi, owned by Mexican developers from the Cababie family, had proposed a new loan of $215 million in secured senior notes on which the lenders would get LIBOR (the London Interbank Offer Rate) plus 1 percent.
The developers later increased that number to LIBOR plus 2.5 percent – about 3.35 percent based on a recent rate of 0.85 percent for one-year LIBOR.
Cabi Downtown LLC is owned by GICSA, which says it is the largest and most profitable real-estate developer in Mexico. GICSA chairman
Elias Cababie (bottom right photo) assumed a leadership role in Cabi after Cabi CEO Jacobo Cababie died Jan. 26, 2008. #
Media contact: Dave Satterfield,
Dave_Satterfield@sitrick.com
