Owners at Resort at Singer Island sue over high fees

By Jane Musgrave
Palm Beach Post Staff Writer

Posted: 6:46 p.m. Tuesday, March 16, 2010
 

— Beleaguered owners of hotel units at the Resort at Singer Island are fighting back.

In a lawsuit filed in Palm Beach County Circuit Court, the association that represents those who own the 239 hotel units claim the chain that owns the oceanfront high-rise is soaking them for fees. Further, it claims it should have a far greater say in how the fees are set and other policies that have driven many owners into foreclosure.

According to condominium documents, the only part of the resort the association controls is a small fourth-floor conference room, said attorney Daniel Rosenbaum. Unlike boards that oversee regular condominiums or even other condotels like the resort, the Singer Island board doesn't oversee the grounds, the pool, the utilities or any other parts of the building that are typically considered common property.

That means Urgo Hotels, which bought the $210 million resort when WCI Properties was emerging from bankruptcy, has near complete control over the building and the owners have almost none, Rosenbaum said.

The arrangement, he claims, is contrary to Florida law. No one from the Bethesda, Md.-based chain returned a phone call for comment.

The lopsided arrangement allows the chain to set fees that owners can't contest. Rosenbaum said it has refused to explain the justification for fees. Many overlap, he said. For instance, in addition to paying utility bills, owners pay special utility assessments. The combination means owners are charged 266 percent of the actual bill Urgo is paying, he claims.

Unit owners who bought the condo hotel units as an investment told The Palm Beach Post in January that the fees have cost them tens of thousands of dollars. At the same time, rental rates have declined and the value of the units have tanked.

There are also 66 regular condominium units in the building. Those are not part of the lawsuit.

 


                               

Singer Island Resort’s drained investors claim deceit  They say they’re victims of unforeseen fees and false promises of profit.

 
By Jane Musgrave
Palm Beach Post Staff Writer

Updated: 11:34 p.m. Sunday, Jan. 17, 2010
Posted: 9:34 p.m. Sunday, Jan. 17, 2010

— Rising more than 200 feet above the white sands of Singer Island, the marble- and onyx-appointed Resort at Singer Island opened to rave reviews in 2007, attracting the likes of then-presidential candidate Barack Obama and tennis star Jennifer Capriati.

 
 Court records show nearly 60 units at the Resort at Singer Island are in foreclosure and at least $1.5 million in assessments hasn’t been paid. And those numbers are expected to increase.  

“It’s heaven on Earth,” cooed Riviera Beach Mayor Thomas Masters, a Baptist preacher.

Celebrity-watching and biblical references aside, the resort has become a living hell for many who thought they could make money by buying one of its 239 units.

“It’s just been a devastating thing,” said Sam Lasorda, owner of a Pennsylvania pest control company. “It’s been a financial disaster.”

Court records show nearly 60 units are in foreclosure. At least $1.5 million in assessments hasn’t been paid. And those numbers are expected to increase.

“I have no intention of paying any more of those fees,” said George Melillo, a retired pharmaceutical company executive who lives in Naples. “At the first of the year I decided to take my $300,000 loss and go on my way.”

Real estate experts aren’t surprised that the luxury hotel is in trouble.

Conceived at the height of the sizzling real estate boom, the resort is a condo-hotel. Owners said they plunked down hundreds of thousands of dollars with the promise that they would make money when the units were rented for as much as $600 a night.

Of course, the big returns never came, said Jack McCabe, CEO of McCabe Research and Consulting in Deerfield Beach.

“It was a failed business model from the get-go,” he said of the concept that was used to finance hotels in tourist meccas nationwide. “None of them is yielding any positive income for owners.”

Like other condotel owners, those at the resort were hit hard by the recession. But owners of the Singer Island condotel were uniquely affected.

A year after developer WCI Communities completed the project, its then-chairman, billionaire financier Carl Icahn, announced it was filing for bankruptcy. As part of its reorganization, it sold the $210 million resort to Bethesda, Md.-based Urgo Hotels for $7.1 million. Instead of being run by the upscale Starwood brand, it is part of the more pedestrian Marriott chain, which doesn’t fetch the promised sky-high rates.

“It was like the perfect storm,” said Lasorda, whose $750,000 two-bedroom unit is now appraised at $240,000. But the economic storm isn’t what hurt the owners. They say they were victims of false promises.

Owners said they were told the investment was a sure moneymaker. “They said it would be a 75-25, possibly a 65-35, split in our favor,” said Melillo, who paid $995,000 for his unit.

What they weren’t told was that various charges would eat into their profits. Owners are charged for housekeeping, reservation expenses, agent commissions, marketing, maintenance and insurance.

After all the expenses had been paid, the $50,402 one owner made in 2008 was reduced to $21,790. But that didn’t include the $2,650 monthly assessments, $8,300 in annual property taxes, $1,000 for yearly insurance or $40,000-a-year mortgage, plus other expenses. They turned the $21,290 profit into a nearly $60,000 loss.

For Jupiter resident Ray Johnson, it became too much.

“I stopped paying,” he said. “I’ve never done anything like it in my life. It’s a personal hell for me, but it was a matter of survival.”

His $750,000 unit is now in foreclosure. He received an offer for $150,000.

Kevin Urgo, a senior vice president for the hotel chain, said he understands the frustration of the unit owners in the renamed Palm Beach Marriott Singer Island Resort & Spa. Since taking over two months ago, the company has worked to reduce costs and increase revenue, he said.

When it bought the hotel, it also assumed ownership of 14 of the hotel units and four of the 66 residential condominiums, one of which tennis champ Capriati owns. It means the company has a big stake in keeping the costs under control, Urgo said.

“You’re going to see a turnaround in fairly short order,” he said.

Owners suspect it will cost them. The lobby is being renovated to reflect Marriott’s signature “Great Room” concept. The chain said reserve accounts will be tapped to pay for the renovation. Owners expect to be asked to beef up depleted accounts.

The frustration is that they don’t know if they can stop it. Urgo said he isn’t sure what approvals would be needed.

McCabe has this advice for owners: “Dump it and get out as soon as you can. The longer you stay in it, the more money you’re going to lose.”

Many said they plan to heed that advice.

“It’s sad. It’s such a beautiful property,” Johnson said. “It could have been such a gem for Singer Island.”
 


18 COMMENTS


lol thats funny

GrowSmart
 

 

Does anyone REALLY feel sorry for these people??

I work on Singer Island and when I heard the business plan for this property I couldn't stop laughing. Yet these people were dumb enough to fall for it. I guess they are right a fool is born every minute.

Three months after it opened I knew out of towners who rented units for $100/night in shoulder season and $150/night in peak season. Now those same people don't even want to rent there.
Amazing
 

 

Why dont these people look in the mirror? They made the "investment" in this place. If they didn't do the due diligence then they should never have bought the place.

Crap like this has become common place in this world. When things go wrong everyone wants to start blaming others. Just say it, I made a bad investment. I did not do my homework. I am not a developer or hotel owner for a reason. Take some responsibility and quit trying to blame everyone else.
Look In The Mirror
 
 
Several years ago, during the height of the "bubble", I looked at a Condo-hotel in Sunny Isles. They were having a "pre-construction" offer. I visited the site and got the numbers. Things did not seem quite right even then. Got home and ran the numbers and came up with the bottom line. I would have to rent the unit for 51.5 days a month to break even.

Needless to say, my suspicions were true - it was a SCAM.

I have no pity for anyone that invests this way. Do your homework!
Chuck
 
 
I agree w/ Chuck. The new Seagate Hotel in Delray was originally supposed to be a condo hotel.The hotel was sending me all this literature to invest. I'm not a financial genius, but the business model just didn't seem right to me - especially with the high taxes and insurance we pay in FL, not to mention the maintenance fees on a building like that. AND, what about the summer season down here when EVERYTHING is basically empty or much cheaper?
Fabumari
 
 
We just finished recalling our condo board, it was surprising how easy it was, see the website MyFlorida and follow the prompts to Florida State Statutes.
There are tools on the site, that enable an owner to effect change. The internet changed the dynamic in favor of owners, absentee owners are able to become a virtual community.
samuel adams
 


We just finished recalling our condo board, it was surprising how easy it was, see the website MyFlorida and follow the prompts to Florida State Statutes.

@ samuel adams
 

This is so far beyond recalling the condo board, it's even too late for brain transplants for the investors. This was a result of a 'get rich quick' feeding frenzy.

Remember the snazzy ******** parties where whole developments were sold out in one evening, well this is the 'hangover'.

Cents Less
 
The problem with all of these buildings is that they cost a fortune to run, not to mention the taxes. If the fees and taxes alone are $1,500 a month, what is someone willing to pay for the unit? Not much.
bob
 
It takes a special kind of stupid to "invest" in something like this. Why on earth would you want to own a hotel ROOM anyway? The only (and I mean ONLY) reason the hotel would sell you a room is if they feel the price you're paying for it is SO grossly overvalued that the downside (losing a room) is made up for by the stupidity of the buyer. If you want to play craps, go to the casino, STOP doing it in the S. FL RE market! CondoTels were only for the paint chip eaters..
Overtaxed
 
 
GREED
beyond bondo
 

SOME PEOPLE GOT MORE MONEY THAN BRAINS.SINCE THE PRICE DROPPED GEE NOW IT'S NOT FAIR

 AND THEY WANT THERE MONEY BACK,AND WHO WOULD HAVE KNOWN.I BET IF THE PRICE

 DOUBLED THERE WOULD BE NO CRYBABIES,,LOL,GOOD YOU LOST LOL.

GREED,WILL BIT YOU EVERY TIME.JUST LIKE ALL YOU MADOFF INVESTORS,,LOL
 
HOTSWEATYVIOLENTSOUTHFLORIDAH
 

I am sure the government entity that approved this fiasco also had dollar signs in their eyes looking at

 the huge increase in the

 tax base. Greed is the word, at all levels.

 

JT

 
Ummmm...paint chips....

Me
 


 
Reganomics at it's worst.


Free market economics without regulation, tax breaks to the wealthiest 1%, and this is the result.


The restaurant there was also a rip-off.

 

mm
 

 
Lasorda is not a sucker, he also bought a unit in Marina Grande the other disaster in Riviera Beach. He

 was going to strike it rich in FLARADUH real estate! Both units are in foreclosure. Amazing when a

 guy puts down 100K on a 600K unit and suddenly he is Donald Trump, real estate tycoon.....


Riviera/Singer Island is some of the worst waterfront property in PBC. Shrinking beaches and lots of

 natives is a bad combo. Check out that townhouse project next to Walmart, 250K new, asking 59K

 now

 

bad investment
 

 
no sympathy for any of these idiots. the condo speculators were the ones that drove this development

 engine right into the ground... trying to make big bucks in a small amount of time using borrowed

 money and creating false demand all over the state.... you can all starve as far as I am concerned.

turk ferguson

 


 
what a shame.... the mortgage fraud across the usa was responsible for all these over valued/over priced

 houses/condos/apt. the banking employees that signed on all those bogus loans are to blame. just in

 coroda del mar/california, there was a wealthy crook that had loans in excess of 22 million dollars.... he

 sold a house to his gardner for 650,000 dollars then helped him get a loan on that property etc etc.

 economic terrorism?????? we need to put all these people in jail!!!!!!

 

anthony