Key Hospitality, Dead Deal?
I just received notice of this article. If you are trying to keep on top of what is happening with the Key Hospitality/Cay Clubs deal, you should read this news.
As of now I have not confirmed this story, I will be working on that today.
Please check back and I will have more updates on this.
October 17th, 2007 at 3:46 pm
It is now official. The merger of Cay Clubs with Keys Hospitality Acquisition Corp has been terminated.SOPURCE (http://www.keywestchronicle.blogspot.com/)
Recent newspaper articles about Cay Clubs financial woes and the “leaseback” payments it owes, reveals that 140 Cay Clubs condominium owners are owed leaseback payments in the amount of $10.5 million. These newspaper articles are linked below.
Housing Ills Imperil Condo Deals http://www.miamiherald.com/569/story/193315.html
Developer Active in Florida has a Cash Crunch http://www.miamiherald.com/569/story/194465.html
Cay Clubs Scrambles to Right its Finances http://www.miamiherald.com/548/story/196123.html
SOURCE - http://www.beltlawfirm.com/cay-clubs.html
“Belt Law Firm, P.C. currently represents numerous individuals who purchased condominiums in Las Vegas, Nevada and Orlando, Florida from Cay Clubs International. These individuals were not paid any, or only paid a portion, of the leaseback money owed to them by Cay Clubs.”
October 18th, 2007 at 9:29 am
Richard-
Thanks for all of your helpful info!
All of your links to the Miami Herald are not working at this time. Can you check on them to see if there are updated links.
Thanks,
Tim
October 27th, 2007 at 11:03 am
October 26 Key West Citizen
“Cay Clubs faces 2nd investor lawsuit
BY ANNE-MARGARET SOBOTA
Citizen Staff
When Jeffrey Slayter of California purchased three units at the Clearwater Cay Club in 2006, he was promised a “world class resort” that would include a high-end galleria shopping center, an expensive spa and fitness center, gondola-traveled canals and a newly constructed water park.
He was assured his nearly $2.5 million investment would appreciate once the property’s construction and conversion were complete, and in the meantime he would have his mortgage covered by lease-back payments generated from renting out his units.
But more than two years after Clearwater-based Cay Clubs LLC announced its plans for a grand renovation and began selling units, Slayter and 22 other investors say the company hasn’t delivered on any of its promises. They have filed a lawsuit in federal court alleging that Cay Clubs, which owns and operates several resorts and marinas in the Florida Keys, misled them on how much money they stood to make and has not honored its agreements.
The lawsuit describes the Clearwater Cay Club as “a virtual ghost town with no amenities, very few renters, little income being generated and apartment style units now worth one-half what plaintiffs paid for them.”
The claims mirror a lawsuit filed in August by investors at Sombrero Cay Club in Marathon, who allege fraud by Cay Clubs.
Cay Clubs spokesman Chris Brown said the company had not yet been officially served with the Clearwater lawsuit and was still reviewing a copy of the filing. He said the company wants to do a more thorough review before commenting further.
Like the Sombrero Cay lawsuit, the Clearwater suit alleges that Cay Clubs violated securities laws when representatives told buyers that buying units was purely an investment, and that the arrangement was essentially a way for Cay Clubs to use the funds to start construction immediately while the buyers stood to make large profits once construction was complete and they sold their units.
“Our position is, we don’t sell securities, so we couldn’t have committed securities fraud,” Brown said. “We sell real estate.”
In the filing, the buyers claim they were told they would be purchasing their units at a “wholesale” pricing level for at least $100 a square foot below the “retail” value prior to sales opening to the general public, and that they stood to make anywhere from 48 percent to more than 300 percent profit on their investment.
According to the suit, some buyers also said they were told their unit would include $30,000 worth of upgrades, including granite countertops, a plasma TV, crown molding and luxury furniture. But upon inspection, the units’ renovation included a coat of paint and furniture valued at between $5,000 and $7,000, with no new countertops or appliances.
The buyers also are upset at Cay Clubs’ claim that their mortgages would be covered for two years under the lease-back program, which turned out not to be the case because either payments stopped before the two years were up or did not cover the full cost of their mortgage. Also, despite promises to the contrary, the resort was never zoned for short-term rentals, and legally only was allowed to accommodate long-term rentals, meaning those beyond 30 days, according to the lawsuit.
In other cases, the buyers were forced to pay their unit’s utilities despite terms in the lease-back agreement stating that rental tenants “shall pay all costs for electric, water, sewer and gas for the term of the lease.”
Cay Clubs has had several setbacks in the past few months, including two rounds of employee layoffs and the closing of restaurants it operates in the Middle and Upper Keys. Earlier this month, a nearly $50 million merger deal with Key Hospitality Acquisition Corp. — which would have infused the company with much-needed capital — fell through.
In September, the company learned that local developer Pritam Singh decided to take back managerial control of three Marathon area resorts. Tranquility Bay, Coral Lagoon and Indigo Reef were all built by The Singh Co., but had been managed by Cay Clubs.
Cay Clubs representatives would not comment on whether the company had returned managerial control of three more of its properties — Sombrero Cay in Marathon, Orlando Cay Club and Sarasota Cay Club — to its equity partner Sunvest Communities, a real estate development company that specializes in condo conversions. Sunvest also did not return calls for comment.
Cay Clubs also has projects in Bradenton, Las Vegas and Colorado. It operates Clearwater-based Cristal Clear Watersports, which offers dive charters and boat rentals at Cay Clubs resorts.
amsobota@keysnews.com
May 12th, 2008 at 3:10 pm
Can you give me more information about the lawsuit agains Clearwater Cay Clubs. I am also an owner caught up in the scam. I’d like to join the bandwagon.
September 14th, 2008 at 8:06 pm
You don’t know the half of it. This is only a small piece of what I found out about these sleazebags in 2004 when the first showed up.