WEST PLAM BEACH, Florida — A new day could be dawning for the Banyan Cay Resort & Golf.
A federal bankruptcy judge has approved a $102.1 million bid by Westside Property Investment Co. Inc. to buy the long-delayed hotel complex. The sale is expected to close on July 25.
The property could have sold for more money were it not for a rising interest-rate environment that scared away other bidders and their bank lenders, said Banyan Cay lawyer Joseph Pack.
Nevertheless, the pending sale to Westside means construction of the unfinished hotel and resort could wrap up within the year, Pack said.
Banyan Cay is the saga of a resort property years in the making
Banyan Cay filed for Chapter 11 bankruptcy reorganization in April, marking the latest twist for the still unfinished hotel, which has been under construction, on and off, for years.
The hotel is mostly built, but several finishes still need completion, such as the outdoor pool deck.
“It’s a very good thing for the community,” Pack said of the pending sale. “We understand that Westside wants to come in and immediately finish the project as envisioned. The neighbors should be excited.”
The hotel’s woes have created uncertainty for nearby residents in the Lands of the President community, which overlooks the property. In addition, the foreclosure was a setback for residents in an adjacent new single-family community, the Residences at Banyan Cay, by SobelCo. These homebuyers were supposed to be able to use the hotel’s club as part of the purchase of their homes.
Adams Weaver and his wife, Bonnie, bought in Banyan Cay in August 2019. They like the community, which has increased in value with the migration of people to Palm Beach County during the pandemic.
But the Weavers are now in their fourth year of living at the Residences at Banyan Cay with no completed resort. “We’d love to have access to the club,” Weaver said.
A Westside attorney could not be reached for comment.
Banyan Cay Resort under construction on June 7, 2022, in West Palm Beach. (Meghan McCarthy/Palm Beach Post/USA Today Network)
Banyan Cay resort complex is on former country club property
The $100 million Banyan Cay complex is just east of Interstate 95, off Congress Avenue and north of Palm Beach Lakes Boulevard, near the Palm Beach Outlets shopping mall.
For more than a dozen years, investors have tried their hand at reworking the property into a viable redevelopment.
The 250-acre Banyan Cay property used to be the site of the President Country Club, which fell into financial trouble and was sold to an investor group for $11 million in 2011. That investor group then flipped the property to Banyan Cay Dev LLC, led by Domenic Gatto Jr., for $26 million in 2015.
Banyan Cay Resort was slated to be completed in the fall of 2022 after years of construction stoppages, a switch in hotel brands and legal woes for Gatto.
Banyan Cay complex was supposed to be completed in 2018
Banyan Cay first was slated to feature a hotel managed by boutique Noble House Hotels & Resorts, and a golf course redone by golf great Jack Nicklaus. Plans were to open the hotel by the fall of 2018.
The 18-hole, 130-acre Jack Nicklaus Signature golf course was completed in 2017 and is a popular destination for events, including charity tournaments and qualifiers for major PGA-sanctioned tournaments.
But the hotel’s construction was delayed. Work finally started on the hotel in 2019 but then stalled.
In 2022, as Banyan Cay was hoping to complete construction and open in the fall, the project’s lender filed a foreclosure lawsuit. In a July 16 complaint filed in Palm Beach County Circuit Court, U.S. Real Estate Credit Holdings III-A L.P., an affiliate of Los Angeles-based Calmwater Capital, alleged Banyan Cay missed deadlines to open the hotel by April 30.
Calmwater Capital also sought repayment of two loans. One was a $61 million construction loan to build the Banyan Cay hotel. The other was a $24 million loan for construction of nearly two dozen unbuilt villas on the property.
By February, Banyan Cay had lost the lawsuit, and a Palm Beach County Circuit Court judge issued two final judgments in favor of Calmwater Capital. The judgments totaled more than $95 million, an amount that includes the loans plus interest.
Banyan Cay’s owner halted the foreclosure with the Chapter 11 filing as it sought to lock down a buyer for the project.
The 150-room hotel and resort was expected to open as a Destination by Hyatt property, the first Florida location of this boutique, upscale Hyatt brand. With the property about to change hands, it’s unclear if Banyan Cay will remain a Hyatt brand, and a Hyatt spokeswoman said she had no update on the site.
Westside’s presence in the bankruptcy filing is no surprise.
Documents previously filed in the case showed that Westside’s bid set the floor for a price at auction, although another bidder could buy the property if the price surged at least $5 million more than the Westside bid.
In fact, 249 prospect groups executed a nondisclosure agreement to evaluate the property, with 16 of these groups participating in property tours, according to a bankruptcy court filing made by the company hired to market the property.
“We fully expected a very robust auction, and we did have indications we would, right up until the deadline, which was June 8,” Pack said.
But Pack acknowledged no other bidders ultimately made offers for the site. Rising interest rates made the cost of financing too expensive for other potential bidders, with the final blow taking place in May when the Federal Reserve hiked interest rates again.
Since the start of the year, Pack added, “the capital markets shifted in a major way, and that’s unfortunate, because it wasn’t about how much in demand the assets was. Banks wouldn’t underwrite (a sale) as interest rates went up.”
In addition to the hotel property, Banyan Cay land for single-family homes is set to be sold to Schickendanz Inc., a home builder.
The only hiccup in the sales process for both the hotel and homes could be if creditors squabble about how the $112.6 million sales proceeds are divvied up after the project’s lender is paid off, Pack said.
Weaver said he knows things still remain up in the air, but he’s hopeful the resort will be completed soon. If it does, he said, “we’ll have a Christmas party.”
Alexandra Clough is a business writer and columnist at the Palm Beach Post. You can reach her at aclough@pbpost.com. Twitter: @acloughpbp. Help support our journalism. Subscribe today.