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September 2, 2010 |
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| December 15, 2008 |
By: Polyana da Costa |
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eveloper Homero Meruelo’s plans for a $300 million condo project officially ended Monday with a lender’s $100 bid during a foreclosure auction at the Palm Beach County courthouse.
The Merco Group’s principal had been fighting a foreclosure lawsuit by Eastern Financial Florida Credit Union on a 4.5-acre West Palm Beach site where he planned to build Palladio Terrace for more than a year.
Meruelo had managed to win postponements of several previously scheduled auctions. But Monday, he wasn’t even aware an auction had taken place, he confirmed in a phone interview.
“No one bid on it?” he asked after learning the site went back to the lender for $100, the minimum Eastern Financial had to bid in order to retrieve the property.
During the auction, the attorney for Eastern Financial said the lender was willing to bid up to $30 million. No bidder came forward with a counteroffer to the $100.
Robert A. Vale, Eastern Financial’s in-house counsel, and Ian Kukoff of the Miami-based law firm Blaxberg Grayson Kukoff & Strauss declined comment after the auction.
Meruelo purchased the waterfront site at 2200 N. Flagler Drive in 2004 for $30 million. He planned to start construction in 2006, but the residential market slowed and he never pre-sold enough units to secure financing. His debt with Eastern Financial grew to nearly $40 million, including the accrued interest.
Meruelo said he has been trying to negotiate with Eastern Financial since the foreclosure was filed. Even after Eastern Financial won its lawsuit in May, Meruelo avoided several auctions by asking the 4th District Court of Appeal to postpone the sales.
But he acknowledged the sale did not come as a surprise.
“We are where we are,” he said. “This [economic] crisis is going to continue, and we need to wait and see what happens. We were in constant negotiation with the lender but based on today’s financial crisis we couldn’t work anything out.”
The auction is not the end of Meruelo’s problems. He is still dealing with lawsuits from angry buyers who say they’re owed millions of dollars in deposits on Palladio units.
Meruelo said the majority of buyers have received “part” of their deposits back and the rest “are being settled as we speak.”
West Palm Beach attorney Gregory Coleman, who represents about 17 buyers trying to recover deposits, said Meruelo has not offered to settle with any of his clients.
“That is an outright fabrication,” Coleman said. “The only money that these folks got back was the first 10 percent from Gunster & Yoakley.”
The law firm held the 20 percent deposit money in an escrow account. When the project was canceled, Gunster returned half of the 20 percent deposit — or 10 percent of the purchase price — to the buyers.
The firm said it had released the other half of the 20 percent deposit to Meruelo for construction purposes. Florida law allows deposit money to be used to fund construction, Coleman said.
“But the problem is, they didn’t build anything,” Coleman said.
Some of the buyers have filed a separate lawsuit against Gunster. Coleman is not involved.
But he said he is obtaining Meruelo’s bank records and is looking at “whether there was improper distribution” of the deposit money made to the principals of Merco Group of the Palm Beaches, which included Meruelo’s parents.
“If we find it, we plan to turn that into authorities and file criminal charges,” he said. “It is very hard to collect money from the Meruelos, even when you have a judgment against them.”
Calling Coleman’s allegations “baseless,” Meruelo said, “We have delivered to the appropriate people a complete set of audited financial disbursements with respect to all construction activity showing where all the money was spent.
“They were all utilized for construction purposes only — architectural costs, permits, impact fees.”
Meruelo said his parents were the developers of Palladio and he is only a minority shareholder. Meruelo’s father died last August.
Meruelo is also involved in a dispute with the previous owner of the Palladio site. Greenberg Traurig attorney Mark Bideau represents Loretta Gardener, who sold the site to Meruelo in 2004. Gardener had an agreement that called for Meruelo to pay her an additional $5 million if he obtained approval to build more than a specified amount of space, Bideau said.
Meruelo received that approval but refused to pay the $5 million to Gardener, according to Bideau. Gardener sued and won a judgment that now totals about $7 million including interest and attorney fees.
Meruelo is appealing the case and Gardener has been able to collect “very little” from what she is owed, Bideau said.
Polyana da Costa can be reached at (561) 820-2065. |
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