Inside the crisis: Up close with Filling Station’s foreclosure
The developer of the partially-built Filling Station Lofts may have surrendered to foreclosure, but its Philadelphia-based lender, Versa Capital, must still contend with dozens of subcontractors who placed liens on the project before it can seize, and sell, the property.
The tale of a development caught in the jaws of Florida’s housing crisis is all too familiar, but a closer look at one such case demonstrates how the collapse of boom-era projects has spawned an immense web of litigation that will take many years and millions of dollars to resolve.
Filling Station Lofts, a 17-story condominium project in Miami’s Wynwood neighborhood, once had 77 units on the market for prices ranging from $300,000 to $2.7 million. It was promoted as being “bullet proof” from the specter of a real estate bust by an edgy advertising quoted in an Aug. 25, 2005 Wall Street Journal article. “If the builders and flippers ever looked deeper than their wallets they’d see what everyone else sees: an ocean of cookie-cutter ‘get rich quick’ schemes that deserve a tumble,” the ad read. “Forget them. We’re building our own magic city.”
The project was primarily controlled by Daniel Holtz, former CEO of Capital Bancorp. He bought the land the project currently stands on in 2003 for $800,000. Holtz’s father, Abel, founded Capital Bancorp and was convicted in 1994 of lying to a grand jury investigating corruption in Miami Beach.
Holtz owned and managed developer and general contractor Filling Station Lofts LLC, which defaulted on a $26.9 million mortgage that was originally obtained from Ocean Bank in 2005 and sold to Versa Capital in March 2009.
On Aug. 10, 2009, Versa Capital moved to foreclose on the property.
Holtz’s attorney, Jeffrey Roth, declined to comment. Versa’s attorney, Frederick Charles Sake, said the developer opted not to contest the foreclosing. “The developer has basically said, ‘Yeah, you’re right,'” he said.
But aside from the developer, Versa also lists 48 companies as parties that placed as many as 50 liens on their project between July 20, 2007 and March 26, 2009. At this point, 25 of these lien holders have defaulted by not responding to summonses, Sake said.
However, at least six companies are contesting the foreclosure, insisting that the debt owed to them takes precedent over a lending institution that was not even the original mortgage granter.
“We never received any significant notice… that their bank was going to be foreclosing,” said Barry Taylor, an attorney for V.M. Ironworks and Structural Steel, a Stuart, Fla.-based company that is allegedly owed $461,299. “They let us invest a tremendous amount of time and money in the project.”
A legal response filed by Firepak, a fire sprinkler installation company claiming it’s owed $46,701, accuses Versa of having “unclean hands.”
Other subcontractors contesting the foreclosure include RC Aluminum Industries (allegedly owed $287,382.02), Biscayne Construction (which says it deserves $224,379.01), Bicon (a sanitation company that wants $7,766.97) and C&C Concrete Pumping (seeking $1,045).
Sake said he’s sympathetic to the contractors’ plight, but that the law is on the side of Versa, which holds the first foreclosure notice.
“What happens, unfortunately, is that many of them will be caught short and they will have to sue the developer and general contractor,” he said. There are already 19 active suits against Filling Station Lofts LLC, according to the Miami-Dade Clerk of Courts online database.
Taylor acknowledged that the court sides with the primary mortgage holder 99 percent of the time. But it remains within Judge Pedro Echarte’s power to rule that the lien holders’ interest is superior to Versa’s. “[Versa] shouldn’t be able to take advantage of services and labor that improved the property,” Taylor said, adding that his client may also file suit against the developer in the future.
Either way, Taylor said the foreclosure won’t be quick. “It will take a long time for this to sort out, maybe a couple of years,” he said. A motion by Versa to appoint a receiver was rejected “without prejudice” by Judge Echarte.