The Real Deal Miami

Fisher Island legal drama nears conclusion, paving way for condo construction

Hearing on last-ditch appeal from cousin of late Georgian billionaire set for January

November 06, 2014 09:45AM
By Alexei Barrionuevo

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Fisher Island (Inset: the late Arkady Patarkatsishvili)

Fisher Island (Inset: the late Arkady Patarkatsishvili)

The interfamily legal battle over ownership of residential land on Fisher Island is nearing a conclusion, with the current developers moving closer to removing the litigious cloud hanging over future construction on the island, lawyers involved in the dispute told The Real Deal.

An appeal hearing from a group representing Joseph Kay, a cousin and former business associate of the late Arkady “Badri” Patarkatsishvili, a billionaire from the Republic of Georgia who died in 2008, is scheduled for Jan. 12 in the U.S. Court of Appeals in Miami. If the court denies the appeal, Kay’s group will be essentially out of options in its three-year global quest to wrest real estate assets, including Fisher Island, away from Patarkatsishvili’s heirs, who control Fisher Island Investments through a trust.

If they lose the appeal, Kay’s group could file a last-ditch petition to the U.S. Supreme Court to hear the case. The group has already unsuccessfully tried to win ownership of Fisher Island in more than a half-dozen courts around the world, including in Gibraltar, the United Kingdom, the Republic of Georgia, Lichtenstein, New York and Florida.

“It doesn’t have an issue that the Supreme Court would hear,” said John O’Sullivan, a lawyer with Hogan Lovells, who represents Fisher Island Investments. “So I think that is going to be the end of it.”

Lawyers representing Kay’s group, including Emanuel Zeltser, did not return e-mails and calls seeking comment.

Kay and Zeltser have claimed Patarkatsishvili granted Kay control of the land through a trust in which Kay alleges he and his family were the beneficiaries. Patarkatsishvili’s family countered that Kay was acting on the late billionaire’s behalf and that Patarkatsishvili was the beneficiary. To date, the different courts have ruled the claims from Kay’s group relied on fraudulent documents.

Until this year, the 23 acres of land at the center of the ownership battle had been sitting undeveloped — other than some initial foundation work on Palazzo del Sol — while Miami’s high-end real estate market roared back to life.

In February, U.S. Bankruptcy Judge A. Jay Cristol approved a consent order separating the ownership fight from the development. It cleared the way for the developer, Fisher Island Holdings, which is owned by Fisher Island Investments, to obtain title insurance and build two new 10-story towers, Palazzo del Sol and Palazzo della Luna.

The developers already obtained signed contracts for more than a third of Palazzo del Sol’s 47 units, priced from $5 million to just under $33 million, according to listing agent Dora Puig. The sales center will officially open by the end of November.

Construction of Palazzo del Sol could be completed by January 2016. Heinrich von Hanau, CEO of Fisher Island Holdings, said he plans to begin foundation work on Palazzo della Luna sometime next year and finish the building in early 2018.

Bankruptcy court records make it clear that one of the developers’ biggest concerns was preventing the foreclosure of mortgages related to two loans totaling $172 million from AIG and UBS. The consent order allowed restatement of the loans and indefinitely postponed a foreclosure sale on the AIG loan.

Whatever the ultimate outcome of the ownership battle, the current developers say the consent order, which was agreed to by all parties, insulates the two condo towers from any legal machinations that would stop their development and imperil buyers’ 40 percent deposits.

“There is no imaginable circumstance in which that would ever happen,” said Mark Hauf, a director of Fisher Island Holdings. “There is none.”

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