One of the previous developers of the oft-delayed, oft-troubled Conrad Fort Lauderdale Beach condo-hotel project lost between $55 million to $85 million when it sold its stake to Quebec, Canada-based Heafey Group seven months ago, according to a lawsuit recently filed in Miami-Dade Circuit Court.
As a result, the former developer, Doral-based Conrad FLB Management is unable to pay back a $1 million promissory note plus accrued unpaid interest it obtained from Diego Investments Ltd. in 2013, the lawsuit states. Diego Investments is suing Conrad FLB for allegedly defaulting on the loan and unjust enrichment.
On Dec. 30, 2016, an affiliate of Conrad FLB — CFLB Partnership LLC, which is managed by Jose and Joseph Cabanas — sold 232 units plus commercial and common space to Heafey affiliated companies in four separate transactions totaling $100 million. The Heafey affiliates also assumed a $236.5 million mortgage from Ladder Capital Finance. The Cabanas and their representatives, Sergio Pagliery and Candido Viyella, could not be reached for comment.
The Cabanas were part of an investment group led by hotel developer Orchestra Hotels + Resorts that bought the project in 2013 for $115 million. Their plan was to spend $40 million to complete and renovate the unfinished building at 551 North Fort Lauderdale Beach Boulevard into a 290-unit tower with 109 condos and 181 condo-hotel units. The budget ballooned by at least $70 million and the completion date has been pushed back several times.
According to the lawsuit, the principals and promoters for the project secured the $1 million note from Diego Investments on October 28, 2013. Jason Giller, Diego Investments’ attorney, said the Cabanas and Orchestra touted their past developments and guaranteed success.
However, on the third anniversary of the loan, Diego Investments exercised an option for full payment of the note, plus accrued unpaid interest, the lawsuit claims. Unbeknownst to Diego Investments, Conrad FLB’s affiliate sold its stake to Heafey at a “material loss” and “the borrower is now in an inferior financial position” than at the time the note was issued, according to the suit.
“When the note was called, they were nowhere to be found,” Giller said. “And it was only during our investigation did we learn that the project was surreptitiously sold, without notice, consent or substitution.”
Giller also said Conrad FLB closed a bad deal despite the strong luxury condo submarket in Fort Lauderdale. “These shocking events are not only unfortunate, but bewildering,” Giller said.
The Conrad originally launched in 2004 as the Trump International Hotel & Tower. Developer Roy Stillman’s SB Hotel Associates had obtained a licensing agreement with the Trump Organization, but litigation between buyers and SB resulted in the builder running out of money. The project ultimately failed.