Banyan Cay Resort files for second bankruptcy, could head to auction
Court motion seeks to hire Keen-Summit Capital Partners to market the still-under-construction golf resort and adjacent dev sites
Domenic Gatto Jr., the embattled developer of the Banyan Cay Resort in West Palm Beach, is waving the white flag.
On Wednesday, Gatto’s development entity for the hotel-anchored mixed-use project filed for Chapter 11 reorganization, with a plan to sell the 200-acre property to pay off debtors. Fort Myers-based forensic accountant Gerard A. McHale is the proposed chief restructuring officer, according to the development entity’s petition in West Palm Beach’s U.S. Bankruptcy Court.
McHale is seeking the bankruptcy court’s permission to hire Keen-Summit Capital Partners to market the property.
Miami-based attorney Joseph A. Pack, who represents the development entity Banyan Cay Resort & Golf LLC, did not immediately respond to an email request for comment.
The petition states Banyan Cay Resort & Golf has assets and liabilities of between $100 million and $500 million. The development entity has not yet filed its list of creditors.
Banyan Cay Resort & Golf consists of a Hyatt-branded hotel with 150 rooms that is under construction, and a 130-acre golf course designed by golf legend Jack Nicklaus. The development entity also owns adjacent development sites that are approved for 179 condo units, 28 single-family homes and 22 villas.
In 2015, Gatto purchased the property formerly known as The President Country Club for $26 million.
The bankruptcy petition noted the golf course has about 200 members, and has been in operation since 2017. However, the luxury hotel’s completion has been delayed by contentious litigation against the developer from contractors alleging nonpayment, and lenders seeking repayment of delinquent loans, court records show.
In addition, Gatto’s pending federal indictment for conspiracy to commit health care fraud in connection with an unrelated, alleged $65 million scheme complicated the project’s construction timeline.
Banyan Cay Resort & Golf’s parent company also filed for bankruptcy protection last month. The bankruptcy petitions halted the potential sale of the property tied to foreclosure actions against the development entity.
The same day the parent company filed for bankruptcy, an affiliate of California-based Calmwater Capital won a $95.1 million judgment against Banyan Cay Resort & Golf and Gatto for defaulting on a $61 million construction loan. The foreclosure sale was set for April 13.
A mezzanine lender made up of EB-5 visa program foreign investors had also sought to sell the Banyan Cay Resort site through a UCC foreclosure auction after the developer allegedly defaulted on a $5 million mortgage debt.
Banyan Cay Resort & Golf could obtain a temporary certificate of occupancy within two months if the development entity is allowed to continue building the hotel, according to a declaration by McHale.
With “debtor-in-possession funding and the breathing room afforded to debtors under Chapter 11,” the development entity would be “in a prime position to engage in a robust sales process,” the declaration states.