Calmwater seeks takeover of West Palm’s Banyan Cay after $102M sale fails

The largest creditor in the Banyan Cay Resort & Golf Club’s bankruptcy case wants to seize control of the unfinished mixed-use development in West Palm Beach. 

Days after the $102.1 million sale for 200-acre Banyan Cay fell apart, an affiliate for Calmwater Capital is seeking to purchase the property at 200 Banyan Way through a credit bid, according to a motion filed Friday in West Palm Beach federal bankruptcy court. 

Los Angeles-based Calmwater’s affiliate has a pending $94.1 million foreclosure judgment in Palm Beach Circuit Court against Banyan Cay’s development entity. 

For the purchase, Calmwater wants to apply the amount of the judgment, plus another $2.4 million in accrued interest, as well as advances previously provided to the development entity. They were provided so that it could continue operations while the $102.1 million bankruptcy sale of Banyan Cay and all its assets was still pending. 

On July 31, Denver-based Westside Investment Partners backed out of its stalking horse bid to buy Banyan Cay, kicking in a clause in the bankruptcy court’s sale order that Calmwater is next in line to acquire the project, the motion states. No other offers were received. 

Banyan Cay consists of a Jack Nicklaus-designed golf course that was finished in 2017, a mostly completed 150-key hotel and vacant parcels for a proposed 179-unit condominium, and a planned residential community of 28 single-family homes and 22 villas.

Gerard McHale, Banyan Cay’s restructuring officer, and its attorney, Joseph Pack, did not immediately respond to requests for comment. But a recent court filing shows the development entity does not object to transferring the real estate assets to Calmwater. 

Banyan Cay’s development entity and other affiliates “now lack funding to insure, maintain and otherwise preserve the collateral, pay employees and fund operations,” the Calmwater motion states. 

In an emailed statement, Calmwater managing principal Larry Grantham said his firm anticipates Federal Bankruptcy Judge Erik Kimball issuing an order approving the credit bid sale later this week. “And we expect the debtors and [McHale] to help facilitate an orderly transition,” Grantham said. 

Calmwater is “fully prepared to take over and complete the Banyan Cay project, including reopening the golf course and clubhouse under new management, and allowing the resort to begin operations,” Grantham said. “We have seen the resiliency of West Palm Beach in both travel and hospitality, and we have the capital and team in place to execute on a unique product for this market.”

In the past six years, development of the Banyan Cay site hit obstacles involving lawsuits from unpaid vendors, construction delays and an unrelated pending federal indictment against the previous developer, Domenic Gatto Jr. Calmwater’s affiliate won the foreclosure judgment in February, a year after suing the development entity for allegedly defaulting on a $61 million construction loan. 

The same lender also provided a $19 million construction loan to build the villas, which was increased to $33 million, court documents show. The two mortgages were structured so that both loans are in default if Banyan Cay failed to pay either one. The Calmwater affiliate also alleged Banyan Cay was in default because Gatto failed to open the hotel by an April 30, 2022 deadline. 

Banyan Cay Resort Fund, a mezzanine lender made up of EB-5 visa program foreign investors, also separately sought a UCC foreclosure of the development site. The fund alleged that another Banyan Cay affiliate failed to pay back $6.3 million in principal and interest.