The Real Deal Miami

Carillon Miami Beach’s Central Tower condo owners file suit against Z Capital

Suit cites damages of more than $100M related to a decline in property values and lost profits

May 04, 2016 06:15PM
By Ina Cordle

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The Carillon Miami Beach

The Carillon Miami Beach

More litigation is swirling at the Carillon Miami Beach.

Condo owners at the Central Tower are suing Z Capital, alleging that the private equity firm is artificially driving down property values to acquire units at below-market prices, and is assessing maintenance fees while denying unit owners access to building amenities and failing to allow them to see records.

The Central Carillon Beach Condominium Association filed suit Tuesday in Miami-Dade Circuit Court against Z Capital Florida Resort LLC, Carillon Hotel and Spa Master Association, as well as its neighbors, the North Carillon Beach Condominium Association and South Carillon Beach Condominium Association.

The suit cites damages in excess of $100 million related to a decline in property values and lost profits.

A message left at Z Capital’s headquarters in Lake Forest, Illinois, was not returned on Wednesday.

In late March, the South Carillon Beach Condominium Association, made up of condo owners at the South Tower of the Carillon, also sued Z Capital, demanding access to financial records tied to millions of dollars in assessments.

Z  Capital bought the property at 6801 Collins Avenue, formerly called Canyon Ranch, out of bankruptcy court, in January 2015. The project’s condominium associations had originally opposed the bankruptcy auction results and had filed a lawsuit against the bankruptcy debtor.

Z Capital paid $21.6 million for the Carillon Resort & Spa and said it would immediately installed new management — a joint venture led by Z Capital’s Thomas Wicky, who previously managed The Breakers in Palm Beach, as well as Adrian Zecha, founder of Amanresorts and GHM Hotels, and Jonathan Breene, developer and creator of the Setai South Beach.

The Carillon, whose original hotel dates back to 1958, now includes two condo towers completed in 2008: the South Tower and North Tower, as well as the Central Tower, which has both residential units and hotel suites. Z Capital owns nearly all the project’s amenities and common areas.

In the latest suit, the Central unit owners allege that instead of providing the Central Association’s unit owners an ownership share and management of the “shared components,” including the Beach Club, spa and parking garage, they are all owned, managed and controlled by Z Capital.

Yet, according to the suit, the Central condo owners are required to pay all of the operating costs of the shared components, including real estate taxes, insurance, maintenance and repairs.

The Central unit owners “bear and excessive, inequitable and unconscionable amount of expenses and liabilities associated with [Z Capital], while at the same time [Z Capital] reaps an excessive, inequitable and unconscionable profit at the expense of the Central Association and its unit owner members,” the suit says.

The suit also alleges that Z Capital has “concocted a scheme to manipulate and force the decline of property values at the Central Tower,” due to the fees it imposes on the unit owners and rules regarding use of the gym, spa and rentals. Rentals, for example, require 10 days notice to Z Capital, which the suit says prevents owners from competing with Z Capital in renting units and compels them to place their units in Z Capital’s rental program.

The suit further alleges that Z Capital has used the scheme so that it can buy units “at a substantially reduced value.” According to the suit, Z Capital has purchased an average of three units per month at the Central Tower between January 2015 and March 2016.

Z Capital has also failed to allow the South Tower condo association to inspect and/or copy financial records, the suit alleges.

In addition to monetary damages, the suit seeks a judge’s determination regarding the unit owners’ rights.