Bay Communities has not yet started construction of Surf Club II,
It appears Ocean Bank of Miami will have to wait a little longer to see the physical manifestation of its loan to Bay Communities.
More than six months after the Miami-based institution loaned a Bay Communities subsidiary $33.9 million to construct a 190-unit condominium complex in Palm Coast, Fla., the project has yet to move ahead, with the firm now predicting it will break ground in November. Company salespeople had previously claimed the development, known as Surf Club II, would be underway by Aug. 4.
“There’s absolutely nothing happening,” one source familiar with the project said last week. “They haven’t lifted a shovel.”
The loan with Ocean Bank is one of several that Bay Communities has received in Florida during the past two years, despite federal claims that the former Massachusetts company is actually being run by real estate felon and Bay State native William W. Lilly. A coalition of federal agencies, including the Federal Deposit Insurance Corp., claim Bay Communities founder Valerie E. Kaan is merely a straw for Lilly, who still owes the FDIC $5 million in restitution for real estate crimes committed in Massachusetts more than a decade ago.
Kaan’s live-in boyfriend and the father of two of her children, Lilly spent five years in federal prison for defrauding two banks of more than $10 million during his days as the self-proclaimed “Condo King,” when he converted thousands of condominium units in Massachusetts and New Hampshire during the mid- to late-1980s. The couple now resides in a $3.6 million mansion in Boca Raton, Fla, having relocated from Massachusetts two years ago.
The Ocean Bank deal is especially intriguing, given that bank officials had been informed by Banker & Tradesman of the federal complaint against the company and still opted to provide the loan. The federal charges were brought by the Justice Enforcement Team as part of its continuing involvement in the legal imbroglio surrounding Lilly’s restitution order..
JET, which operates out of the U.S. Attorney’s office in Boston, has filed a civil action seeking to recover the restitution. Along with Kaan, JET has charged Bay Communities principal William F. Harkins, Boston attorney Robert G. Kline and Swampscott contractor John Thompson with helping Lilly cover up his interest in Bay Communities in order to avoid repaying the restitution.
Ocean Bank officials have previously refused to discuss the matter, and calls to its president, Jose A. Concepcion, were not returned by B&T’s press deadline last Friday. But several bankers apprised of the circumstances have expressed surprise that Ocean would make the loan in the first place considering the ongoing civil action.
“It’s really amazing,” one Boston banking veteran reiterated last week. “It doesn’t make sense.”
Calls to Bay Communities were not returned by press deadline, but a salesperson answering the firm’s toll-free number acknowledged that the project will not break ground until early November. The salesperson blamed an environmental problem for the delay, with the developers ordered to relocate an endangered bird prior to beginning construction. The salesperson also said that 120 of the 190 units have already been committed to buyers.
‘Complex Case’
One question emanating from the delay is whether those who have put down the 10 percent deposit needed to secure a unit have any recourse now that the project has been put on hold. According to one former employee, at least some of those with deposits had a stipulation that they could withdraw if work had not commenced by Sept. 16.
Bay Communities has previously seen delays at other projects that have required it to return deposits. Dr. Victor Hochman, a Florida dentist who had planned to buy a unit at the developer’s Matanzas Shores complex, said last week that he and his wife tired of being held up for several months and demanded their down payment back. Hochman said he believes the project is still not completed.
“They manipulated us,” charged Hochman, whose office is a few doors down from the Bay Communities headquarters in Palm Coast.
With Surf Club II units advertised between $242,900 and $279,900, the deposits do amount to a substantial amount of money. Despite that, one buyer who has put down a deposit said last week that he is inclined to stay in the deal at least until November. “I think my investment is safe as long as they move ahead with construction,” said Donald Christ, who did acknowledge some trepidation given the JET charges against Bay Communities. Even with those concerns, Christ said he feels comfortable that he can recoup his money should the project be held up further.
Meanwhile, action on the civil case against Kaan, Lilly and their colleagues has been put on hold until November, with First District Court Judge William Young instructing the two sides to continue working toward a settlement of the restitution matter. Negotiations have been ongoing since last autumn but broke down in the spring, reportedly when federal officials would not agree to provide immunity against any criminal charges which might emanate from the case.
Kaan’s attorney, Thomas E. Dwyer Jr., declined to discuss the delays at the Surf Club II when contacted last week. He did, however, maintain that negotiations on the civil case are proceeding.
“I feel very confident that the matter will be resolved,” said Dwyer. “Like every complex case, it takes a sufficient amount of time, and that is what we are doing.”
Assistant U.S. Attorney Christopher Alberto also would not discuss specifics of the talks, beyond predicting that a deal looks promising.
“It appears that settlement is likely, and the courts stayed any procedures until November to effectuate that,” Alberto said.
