Hillsboro Beach Resort Faces Foreclosure Auction

A South Florida beach resort once operated by defunct short-term rental startup Sonder is headed to foreclosure auction next month over a $40 million debt.

A Broward judge entered a final foreclosure judgment in April against the ownership entities of Hillsboro Beach Resort, which are controlled by BH3 Management principals Daniel Lebensohn and Gregory Freedman, after they defaulted on a $26 million loan from an Emerald Creek Capital affiliate, according to court records and Vizzda. Emerald Creek filed the foreclosure lawsuit in February.

The judgment includes accrued interest and fees, with the foreclosure sale for the oceanfront property at 1159 Hillsboro Mile scheduled for July 16.

The resort, completed in 2021, has 81 rooms in a six-story, 70,800-square-foot building on just under an acre. Amenities include an outdoor pool, fitness center, beach access and a restaurant.

Emerald Creek provided the $26 million loan in 2022, according to the lawsuit. The lender alleges the landlord defaulted in March 2024 by failing to pay real estate taxes, forcing Emerald Creek to advance about $731,000 and later another $2.2 million to cover the tax bills.

The loan wasn’t repaid when it matured in August, the lawsuit alleges. A forbearance agreement expired January 1 without repayment, bringing the debt to roughly $321,000 per key.

Lebensohn and Freedman developed the resort through ownership entities affiliated with BH3 Management, though BH3 itself is not a defendant in the foreclosure case.

A spokesperson for the owners previously told the South Florida Business Journal that rising interest rates and Sonder’s November bankruptcy made refinancing more difficult. At the time, the spokesperson said the owners were still working with the lender to reach a resolution.

A representative from BH3 confirmed the foreclosure agreement but said the terms are confidential. Sonder’s bankruptcy trustee’s attorneys did not immediately respond to The Real Deal’s requests for comment.

Sonder’s collapse rippled across multiple hospitality markets. New Orleans was the hit hardest, with 32 affected properties, according to TRD Data. Miami, Orlando, Palm Springs and Boca Raton also were among the startup’s markets. Sonder’s fallout allegedly caused “chaos” at its hotels in Manhattan and left Los Angeles short-term rental owners in a bind.

The company filed for Chapter 7 bankruptcy liquidation after a series of financial struggles and a short-lived partnership with Marriott.

BH3’s other South Florida projects include an 844-unit, two-tower apartment development in Fort Lauderdale’s Flagler Village and a 250-unit Hallandale Beach condo conversion with Ari Pearl’s PPG Development.

The Hillsboro Beach Resort isn’t the only South Florida hotel in a coastal city hit with a foreclosure lawsuit this year.

In Miami-Dade, a judge entered a $204.7 million final foreclosure judgment in May against The Goodtime Hotel in South Beach after lender CIM Group and borrower Washington Squared Owner, led by Imperial Companies’ Eric Birnbaum and Michael Fascitelli, jointly requested the ruling. The suit was filed in March.

The judgment includes $149.3 million in principal and $32.4 million in interest and sets a July 1 foreclosure auction unless the debt is repaid. The developers paid $36 million in 2015 for the development site at 601 Washington Avenue in Miami Beach, completing the seven-story, 266-room hotel in 2021.

Both the Hillsboro Beach Resort and The Goodtime Hotel remain open.