Created on Monday, 02 November 2009 10:24
Written by Jaime Elliott
With more than a dozen liens against Pond Bay Club developers, work won’t be resuming at the luxury fractional ownership resort’s construction site any time soon.
First American Development Group, the developer behind the Estate Chocolate Hole waterfront project, is in a legal battle with the German bank which holds their $62 million mortgage, and is threatening foreclosure proceedings.
The details of their legal wrangling were aired in front of about 25 people who came out to a St. John Coastal Zone Management Committee decision meeting on Friday afternoon, October 30.
The mortgage holder, West LB AG, had requested the CZM committee to pledge First American’s permit to them.
While St. John CZM Committee members voted unanimously to table their decision until they get more information, several facts emerged from the meeting.
First American owes more than $5 million to more than a dozen local contractors who rendered work and were not compensated. The general contractor, Wharton Smith, which also has a lien against the developers, has left the project and environmental monitoring at the site has ceased.
“The permittee is in default in many, many ways,” said West LB AG legal counsel Attorney Henry Feuerzeig. “They owe West LB AG $62 million and we have a list here of more than a dozen liens against First American Development which total more than $5 million. Reviewing the liens, there are dozens of local contractors who have not been paid by First American Development Group.”
“No one is being paid one dime and there is no indication First American Development is prepared to pay any of these individuals a dime,” said Feuerzeig.
First American’s $62 million mortgage has been spent and it will take about an additional $62 million to wrap up the project, which is roughly 65 percent complete, according to Feuerzeig.
“First American Development today is incapable of continuing the project, let along completing this development,” said the attorney. “The $62 million mortgage has been spent by First American and the only way now to prevent the site from becoming a blight on St. John is to consent to the pledge request.”
“In October, the bank paid $500,000 to a number of contractors to prevent additional liens,” Feuerzeig said. “Without the pledge, West LB AG is not in any position to spend another dollar on this project,”
With news stories in hand from “international media,” First American partner Bob Emmett alleged that West LB AG is in serious financial trouble.
“What is really happening here is the bank wants the pledge so they can go to court and sell it to the highest bidder,” said Emmett. “West LB AG is a German regional bank that is in serious solvency trouble with the German government. They have been mandated to sell 50 percent of their portfolio.”
“The German government stepped in to keep the bank solvent and demanded they sell off part of their portfolio,” Emmett said.
First American is currently negotiating with “very strong investors” in order to inject the needed funds to finish the project, Emmett explained.
“We’re going to finish this project and finish it the right way,” he said. “We’re not going to walk away from this project. But we can’t go forward until this matter is settled.”
First American plans to pay all their bills in full, Emmett added.
“When we resolve this issue, we’ll devise a new financial plan and paying off the liens will be at the top of the list,” he said.
In the best case scenario for the developers — if First American successfully wins its expected court battle with West LB AG — the project won’t be finished until summer, Emmett explained.
“If we get all of this wrapped up in four weeks, we’re looking at late June to July to be operating and have heads in beds,” he said.
If West LB AG prevails, the bank would take over the property and either sell it or find a new developer, the time line of which can’t be predicted.