Fifty-eight investors who paid deposits on condos in the luxury resort Palmyra are to be refunded, but will likely have to take a haircut, the size of which will be determined by negotiations under way between the parties lawyers.
The deposits made on incomplete units in the resort development, which was placed in receivership in 2011 by its bankers, comes with the successful disposal of the property last year to entities managed by Sagicor Group Jamaica, after several attempts at a sale by its receiver, Ken Tomlinson.
Sagicor is yet to disclose how much it paid for Palmyra, which is located along the hotel row at Rose Hall in Montego Bay, but sources have placed it in the US$50 million range.
The proceeds, less expenses, are to be shared between debtors - inclusive of the depositors, National Commercial Bank and RBC Royal Bank, as well as bondholders. CEO of the Real Estate Board, Sandra Watson, said negotiations on the apportionment of the funds to debtor groups are ongoing.
Watson would not say how much the 58 depositors were owed in total, but one investor, who alerted the Financial Gleaner to the negotiations, said he had paid down US$750,000 on two units and was unsure how much of that he would end up losing.
The banks placed Palmyra Resort & Spa in receivership after claiming the original developer, Robert Trotta, had defaulted on US$110 million of loans. Trotta denies being in debt to the banks and is fighting the takeover in court.
Sagicor bought Palmyra, which had two complete and one incomplete tower, for less than half the value of the loans. The debt to depositors is ranked equally with the banks, based on a court decision in 2014 sought by the Real Estate Board.
Depreciated in value
Watson said the challenge was that the property sat on the market for so long that it depreciated in value.
"It had no less than at least five or six offers that just fell through. When this final offer came, the board and the receiver had already signed in court an agreement that both parties were willing to sell the property," Watson told the Financial Gleaner.
When the condo complex was first placed in receivership, around 140 depositors were given the option to make closing payments and await delivery of their units, or take a refund of their deposits.
Eighty-two of them opted for the units. However, 58 failed to meet the deadline to make a decision and are to be refunded.
"At the time, they did not express any interest in closing the sale. Some of them changed their minds subsequently, but by that time, things had gone too far. From the very outset, some purchasers were given the option to close the sale prior to the receivership," Watson said.
"Part of the settlement of that case was that there was an agreement that [Palmyra] would be sold because the original purchasers could not get their property since some of the units weren't built, and those that had built units did not want them," Watson said.
Sagicor's managed funds have effectively acquired 217 of 277 residential units.
Watson says it is still unclear how much money will be available for distribution to depositors.
"We're still in the middle of closing out and the matter is before my attorneys. We can't give any details until the matters are resolved. Because the parties are in negotiations, there are certain things that we can't explain at this time," said the REB head.
A court has deemed Resort Properties Limited (RPL), parent company of Palmyra Resort and Spa to be a squatter at The Palmyra, a condominium resort in Rose Hall, St James, and has ordered it to vacate the premises by June 7.
Resident Magistrate Natalie Hart-Hines also warned that if it fails to give up possession, a warrant will be issued requiring a bailiff to give possession to National Commercial Bank (NCB) and RBC Royal Bank, which asked the court to grant an order evicting Resort Properties on the basis of its continued trespass. The matter was last heard on April 25.
The action was brought after receiver and manager of The Palmyra, Kenneth Tomlinson, and the banks discovered that in February 2011, in breach of covenant in its mortgage to the banks, The Palmyra leased five strata lots for a term of 10 years, to RPL, its parent company, without the agreement and written consent of the banks.
The court heard that the development of the Palmyra Resort was financed in part by a US$88-million syndicated loan from NCB and RBC Royal Bank, which was secured by a mortgage of the land where the resort is built and a collateral debenture.
As the development took form and a strata plan was approved, the mortgaged land was splintered and titles were issued for the various lots that made up the plan, according to the facts of the case outlined by the resident magistrate.
The new strata lots were all subject to the mortgage and it was agreed that the loan would be repaid through proceeds of the sale of the strata lots.
However, over time, construc-tion and completion of the resort was delayed and the sale of units fell below target, and Palmyra became unable to meet the repayment terms stipulated in the mortgage and the debenture. The banks said that the last payment they received was in or about December 2010.
The banks further contended that up to May 2011 Palmyra Resort failed to negotiate terms to restructure its debt, and so on July 23, 2011 they appointed Tomlinson as receiver and manager of the business.
The banks asserted that the leases created after the mortgage and without their consent were invalid and that Resort Properties had no legitimate interest in the units, which included the Palmyra Clubhouse.
On September 1, 2011, Resort Properties was served with notice to quit and deliver up possession of the five units, but it failed to do so within the time stipulated and "is now trespassing on these lots," the banks said.
According to the document outlining the reasons for the judgment, the resident magistrate went on to note that Resort Properties sought to legitimise its tenancies with the banks by paying rental for its occupation of the Clubhouse, but the receiver refused to accept payment.
The defendant, Resort Properties, denied that it was a trespasser. Its director, Robert Trotta, who is also a director of Palmyra, contended that the banks must be taken to have impliedly consented to the leases.
Resident Magistrate Hart-Hines found that there was some doubt as to whether the purported tenancy agreements were genuine agreements creating a tenancy. "It seems to be an afterthought, signed only in February 2011, notwithstanding occupation of the property since 2009," she said.
In addition, Hart-Hines said Trotta, under cross-examination, admitted that he never mentioned the tenancies to the banks. "The court finds this quite odd," she said.
Hart-Hines also held that Resort Properties could have adduced more evidence to confirm that moneys were in fact paid over to the receiver as rent, in order to substantiate the position that there was an existing tenancy arrangement between the banks and itself.
As to whether the banks took notice of Resort Properties' occupancy from late 2009 to early February 2011, "the court finds that the banks' representatives did not seem to appreciate what was happening on the ground and did not appreciate RPL's occupation of units as residences for staff."
Hart-Hines said that even if the banks' representatives saw the RPL staff members on site, they may have thought it incidental to the carrying out of their marketing functions. However, she said there was no evidence to suggest that the banks' representatives would have had personal knowledge that four of the five units, the subject of the legal action, were being used by RPL for residential purposes.
The magistrate found that the receiver/manager's refusal to accept rental cheques from RPL "is sufficient to indicate that there was no agreement or acquiescence of the defendant's continued occupation of the premises after February 2011."
Hart-Hines ruled that RPL "is not afforded any protection under the Rent Restriction Act and would, indeed, be regarded as a squatter on the premises. It is accepted that some of the functions carried out by RPL have ceased and it is clear that the plaintiffs (the banks) did not accept RPL as a tenant and it should be regarded as a squatter."
The magistrate said that "although the court is not required to consider hardship, because RPL is a squatter and hardship is a consideration where the Rent Restriction Act applies (and it does not apply in this case), the court finds that hardship would in fact lie with (the) plaintiffs since the mortgage has not been serviced for the last two years."
On these bases, she ordered RPL to vacate the premises on or before Friday, June 7.
THE Supreme Court last Thursday ordered the winding up of Intertrade Finance Corporation (IFC), offering a glimmer of hope to investors trying to recover billions lost in the failed government-approved securities dealer.
The court also approved the appointment of a provisional liquidator in Kenneth Tomlinson, CEO of the Business Recovery Services.
The order was granted as a result of a winding-up petition brought by regulatory body, the Financial Services Commission (FSC), which last year August took over management of Intertrade after it started operating outside the scope of its licence and failed to meet investors' obligation.
With the approval of the winding-up the liquidator will now set about identifying Intertrade's assets in an effort to make good to the approximately 300 investors. The court also ordered a stay of all legal proceedings against Intertrade, outside of the FSC's.
The investors immediately hailed the court order.
"We are pleased about the winding up and the appointment of Kenneth Tomlinson as the provisional receiver," said Trevor Lawrence, head of the Intertrade Investors Association. "We are looking forward to assisting him as much as we can to recover our funds," he told the Jamaica Observer.
Lawrence, echoing the concerns of the investors, lashed the FSC for allegedly failing in its policing duties, saying: "We think the FSC fell down badly..."
Last year May the FSC issued cease and desist order on securities dealer, and Intertrade Investments Limited (IIL), stating that the firm has misrepresented its business and held back clients funds. It said in a release then that the IFC had been "misrepresenting to clients the nature of the securities in which their funds were invested".
The regulatory body further stated that documents submitted by IFC to the FSC "may have misrepresented the total funds under management..." and there were also concerns for IFC's liquidity position, cash flow, capital, and the safety and soundness of its operations and financial conditions as well as the protection of its clients.
Intertrade executive Joan Powell, who is on the run, is wanted on fraud charges in relation to the company's operations.
The securities dealer is said to owe creditors and investors some $4 billion.