HFZ Capital off the hook for $6M in failed Shore Club South Beach deal
The win is an anomaly for the financially and legally embattled New York developer
HFZ Capital Group is off the hook from paying $6 million to the planned operator of the Shore Club in South Beach, following litigation tied to the companies’ failed deal.
HFZ Capital Group wanted to redevelop the property at 1901 Collins Avenue in Miami Beach into a condo-hotel, and signed luxury Brazilian hospitality brand Fasano to manage the revived project. In 2017, HFZ Capital canceled both its redevelopment plan and Fasano’s contract, in light of the slow condo market.
Fasano, through its affiliate HMI Holdco, sued HFZ’s affiliate, Shore Club Property Owner LLC, in 2019, claiming HFZ Capital did not meet the conditions that would allow it to forego a termination fee.
The only way HFZ Capital could skip payment was for failure to secure financing on reasonable and acceptable terms, only after working diligently to obtain a loan, according to court records.
Miami-Dade Judge Michael Hanzman decided HFZ Capital met these conditions.
Although its attempts to score a loan were “admittedly not Herculean,” HFZ Capital made “commercially reasonable – albeit not ‘perfect’ – efforts,” Hanzman wrote in his May 18 final judgment. Hanzman noted South Florida’s condo market at the time was “volatile.”
Shubin & Bass attorney John Shubin, who represents Fasano’s affiliate, said the group appealed. He declined further comment.
In the complaint, Fasano argued that HFZ Capital had not made its best efforts to secure a loan for the project, as at the time it scored financing for some of its other projects.
HFZ co-founder and principal Ziel Feldman did not return a request for comment. HFZ’s attorney, James Gassenheimer of Berger Singerman, said the ownership group welcomed the result and reiterated that unless it was able to obtain financing, it had the right to end the management agreement.
The 309-key Shore Club has not reopened since closing due to the pandemic. The plan was for the waterfront property to be converted into the first Fasano-branded project in the U.S. with 85 hotel rooms and 70 condos, named Fasano Hotel + Residences Shore Club Miami Beach.
Since then, Fasano opened a residence-hotel on Fifth Avenue in New York City. The Shore Club has yet to reopen.
In December, HFZ put the Shore Club property on the market for sale.
An affiliate of The Clark Estates, the family of the late newspaper publisher and businessman Stephen Carlton Clark, sued the Shore Club owner in March to block its sale without Clark Estates’ approval. According to the complaint, the Clark Estates affiliate is a half owner of Shore Club JV LLC, which in turn owns the hotel through Shore Club Property Owner.
Gassenheimer said the hotel is not currently on the market.
HFZ Capital’s win is an anomaly of sorts for the New York-based developer that has been embroiled in legal and financial woes.
In New York earlier this year, HFZ Capital lost control of four condo conversion projects, after a lender foreclosed on the junior mezzanine positions tied to the properties.