One of Doral’s largest tracts of land is headed back to market with a new owner after a bankruptcy judge issued a favorable ruling for bondholders in a sharply contested reorganization case.
BTI Partners owns the nearly 120 acres — once planned for a mixed-use project during the boom years — and owns the tract’s community development district bonds.
Weeks after winning control of the site through a bankruptcy auction, Hollywood-based BTI said it wants to break up the site of the failed Landmark at Doral project, later renamed Town Center at Doral. The breakup is to make it more attractive to potential buyers representing various real estate sectors.
BTI plans to market the northern portion of the site for residential use, said Noah Breakstone, a BTI principal. The parcel, northeast of Northwest 107th Avenue and 58th Street, comes on the market at a time when developers are targeting Doral for some of the region’s newest residential communities.
The southern part of the tract would be marketed for commercial and multifamily use. The eastern portion would be targeted for light industrial and flex space use. For now, BTI plans to use in-house marketing efforts to seek buyers.
“The three different tracts are going to be offered independently,” Breakstone said. He added the company has not established asking prices and will let the market determine values.
The proposed Landmark at Doral was to include 1,109 homes, 230,000 square feet of light industrial space and 188,000 square feet of retail and office space. Its developer, the late Elie Berdugo, secured site plan approval for the project before he died in 2008, the same year the real estate and financial markets collapsed. The project never materialized, the site was mostly abandoned, and nearly $71 million in CDD bonds issued in 2006 went unpaid. The CCD bonds were to help pay for the project’s infrastructure.
The Landmark at Doral Community Development District sued Berdugo’s Town Center and its affiliates in Miami-Dade Circuit Court to take title to the land in 2008. But the foreclosure case was put on hold in September 2011 after Town Center filed for bankruptcy protection.
Hoping to get the property at a discounted price, Miami developer Pedro Martin agreed to give Town Center up to $20 million to fund its reorganization plan in exchange for the land. Breakstone’s company, which owns the Landmark at Doral CDD bonds, opposed Martin’s plan and came up with an alternative reorganization plan. Breakstone’s plan called for the bankruptcy auction.
Martin’s Terra World Investments ended up in a legal standoff with the CDD, which also wanted the land. The CDD — whose secured claim had priority over other creditors — was owed $30.3 million from A bonds, excluding interest, and $41.18 million from B bonds.
On June 22, U.S. Bankruptcy Judge Robert Mark confirmed BTI’s plan and the auction. At the public sale, the district and BTI jointly acted as the stalking-horse bidder with a bid starting at $67.5 million and a maximum credit bid of $79 million. The district and BTI won as the sole bidder. The land sale closed June 29.
By gaining control of the land, BTI recovered part of the debt and extinguished the B bonds, Breakstone said. Still, the A bonds could stay in place after the three parcels are sold, he added. “We will decide on each individual tract whether the bonds remain or not as we take it to market,” he said.
Whether Terra will look to buy one of the development sites is unclear.
“We recognize the value and interest in developing homes in Doral and feel Landmark could be an opportunity if planned correctly consistent with the city’s overall vision,” Terra’s principal David Martin recently told the DBR. Terra is one of the most active residential developers in the city west of Miami International Airport.
‘A Good Win’
The fact that the judge sided with the district and BTI, rather than Berdugo’s Town Center, sent a strong message to the bond market, said Miami attorney Phillip M. Hudson III, who represented BTI.
“It was a good win for bondholders to protect their rights,” he said.
Hudson, a partner with Arnstein & Lehr, said there is little bankruptcy case law involving CDDs so the case “clarifies the law in a very positive way” for bondholders.
“We were facing a situation where a third-party developer [Terra] was trying to come in and get the land at a discount and cram the bonds down,” said Hudson’s co-counsel Betty M. Shumener. “Bonds are not like ordinary debt. It would have been pretty devastating public policy issue had they succeeded doing it.”
Shumener, a partner with Shumener, Odson & Oh in Los Angeles, said a ruling in favor of the third-party developer could have chilled the bond market by sending a message that bond debt can be restructured in bankruptcy like any ordinary debt.
“It would have created a very bad precedent had it not gone the way it went,” she said.
Source: Paola Iuspa-Abbott, DBR