A local contractor has placed a lien against the Sanctuary, a residential complex being developed by Bay Communities in Palm Coast, Fla.
Palm Coast, Fla. – When it comes to Bay Communities, there appears to be a bit of trouble in paradise these days.
Already embroiled in a legal quagmire with the U.S. Attorney’s Office in Boston over who the true owner of the company is, the real estate development firm also is engaged in a number of environmental and payment battles in the Flagler County area of Florida. Not only has one residential project been held up for endangering a local bird species, sources in the area claim Bay Communities also has run afoul of several construction and service firms for allegedly not paying their bills on time.
“They can’t get any contractor to work for them unless they’re paid up front,” said one Palm Coast source familiar with the activity at such Bay Communities projects as Matanzas Shores, the Surf Club II and the Sanctuary. “People are tired of chasing after them” for payment.
At least one local firm, A&D Contracting, has placed a lien against the Sanctuary development, a gated community being constructed along the Intracoastal Waterway. The source, who requested anonymity, claimed that several other local firms are owed money as well, but efforts to contact the companies named were unsuccessful by Banker & Tradesman’s press deadline.
In another matter, Bay Communities supposedly forged ahead in clearing oceanfront property for its planned Surf Club II condominium project, but has since been cited for improperly beginning work without the necessary environmental permits. The source said the Bay Communities site is home to a rare bird known as the scrub jay, adding it is unclear when the proposed 190-unit development will be allowed to move ahead.
If Bay Communities is indeed having such difficulties, it would seem to lend credence to the notion that the firm is actually controlled by real estate felon William W. Lilly, a former Massachusetts developer convicted of real estate fraud in the early 1990s. Although Lilly’s longtime girlfriend, Valerie E. Kaan, is promoted as the owner of Bay Communities, the federal government has charged that she is merely acting as a straw for the paroled convict.
Lilly, who built thousands of condominiums in the Bay State prior to spending five years in federal prison, was notorious for cutting legal corners on permitting and refusing to pay hired help. Over the years, a long line of painters, carpetlayers, carpenters and other construction professionals were left holding worthless invoices in the wake of dealings with Lilly, who during his development heyday dubbed himself the “Condo King.”
“He stiffs everybody,” said one former law enforcement official familiar with Lilly’s practices. “It’s the way he has always done business.”
Certainly Bay Communities has potential cash flow issues these days, with the U.S. Attorney’s Justice Enforcement Team nearing the end of a protracted effort to force Lilly’s repayment of $5.1 million in restitution owed to the Federal Deposit Insurance Corp. Although JET officials continue to remain silent on the matter, Kaan reportedly will secure payment of the restitution, which Lilly owes for his role in causing the collapse of two banks during the real estate crash of the late 1980s. The details of the repayment, such as the timetable or the prospect of interest charges, have not been released to date.
Kaan’s attorney, Thomas E. Dwyer Jr., declined comment last week on any matters related to Bay Communities and its business practices. He did, however, maintain that the year-old restitution case is coming to a conclusion.
“The matter, I think, will be settled in its entirety within 45 days,” said Dwyer, who dismissed questions of whether a criminal investigation might follow on the heels of the civil issue. In a complaint filed last autumn, JET charged that Kaan and three former Lilly cohorts conspired to conceal Lilly’s assets from the government. According to the charges, Lilly rebuilt his real estate empire from Allenwood Prison Camp in Pennsylvania by engaging Kaan, attorney Robert G. Kline, contractor John Thompson and developer William F. Harkins to seek out and acquire properties on his behalf.
While Kline continues to operate in Massachusetts, Harkins has been in Florida overseeing the various Bay Communities projects underway. At present, the firm is working on a number of different ventures up and down the east coast of Florida, including conversion of a St. Augustine building into condos, the subdivision of a property in Ponce Inlet into 167 house lots, and construction of a 34-unit high-rise in tony Highland Beach.
The latter project, also along the Intracoastal Waterway, is located a few miles from Kaan’s and Lilly’s home, a $3.6 million mansion in Boca Raton. But while the previous focus has been on Palm Coast in North-Central Florida, Bay Communities appears to be starting various projects farther south. According to one source, the firm is currently pursuing a 684-unit development in West Palm Beach, as well as another project in Miami.
Harkins, who has not returned B&T phone calls and rejected a recent request at his Palm Coast office for a face-to-face interview, is regarded by most spoken with in the area as the owner of Bay Communities. Other sources familiar with the company structure say that, at best, Harkins retains a minority position in the firm, although he does not appear to be suffering financially. Along with a luxury condominium purchased recently in Palm Coast, Harkins owns an airplane that he often uses to shuttle between his home and the Boca Raton abode of Kaan and Lilly.
