Developers of troubled West Palm resort project facing $61M foreclosure

Delays and other troubles have dogged development of Banyan Cay Resort & Golf Club

Domenic Gatto and Banyan Cay Resort and Club (Linkedin, Banyan Cay, Illustration by The Real Deal with Getty)
Domenic Gatto and Banyan Cay Resort and Club (Linkedin, Banyan Cay, Illustration by The Real Deal with Getty)

The Banyan Cay Resort & Golf Club development is in deeper trouble, as a lender seeks to foreclose on the property after the alleged nonpayment of a $61 million construction loan.

Dogged by four years of construction delays, the 150-room luxury hotel development’s partners allegedly failed to repay the loan by its July 1 maturity date, according to a July 16 lawsuit filed in Palm Beach Circuit Court by U.S. Real Estate Credit Holdings III-A.

The lender is suing the development entity, Banyan Cay Resort & Golf, two other Banyan Cay affiliates and development partners Domenic Gatto Sr., Domenic Gatto Jr. and Kim Pilar, all of whom guaranteed the loan, the complaint states. In 2015, the Gatto partnership paid $26 million for the property formerly known as The President Country Club at 2020 Banyan Resort Way in West Palm Beach.

Attorneys for the lender and the developers did not respond to emails and phone messages seeking comment.

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In addition to the hotel project, the foreclosure action is also targeting a nearby golf course designed by legendary golfer Jack Nicklaus, and a residential villas project on the 240-acre site. Banyan Cay Resort’s owners obtained the $61 million loan in 2018 to build the hotel, which has not opened. Since then, the developers have been hit with other lawsuits by project contractors alleging nonpayment, court records show. Last year, Gatto Jr. was indicted by the federal government for his alleged role in a $65 million national health care fraud scheme. The criminal case is still pending, court records show.

The same lender also provided a $19 million construction loan to build 22 villas, which was increased to $33 million in January, the lender’s lawsuit states. The two mortgages were structured so that both loans are in default if the developers failed to pay either one, the complaint states.

In addition, the lender alleges Banyan Cay’s principals failed to obtain a certificate of occupancy for the hotel so it could open to the general public by April 30. To finish construction, the developers need about another $13 million, the lawsuit alleges.

In a motion opposing the lender’s request for a court-appointed receiver, Banyan Cay states its principals are currently marketing the project for sale with a goal of finding a buyer and closing a deal by the end of September. The developers have received five bids, including four that exceed $100 million, the motion states.

Banyan Cay accuses the lender of filing its lawsuit on the eve of the submission of bids as a pressure tactic that risks the sale of the property, the motion states.