HFZ Capital Group is free to pay $ 6 million to the planned operator of the Shore Club in South Beach, following litigation related to the companies’ failed deal.
HFZ Capital Group wanted to remodel the property at 1901 Collins Avenue in Miami Beach into a condo-hotel, and signed the Brazilian luxury hospitality brand Fasano to manage the revived project. In 2017, HFZ Capital canceled both its remodeling plan and the Fasano contract, in light of the sluggish condo market.
Fasano, through its affiliate HMI Holdco, sued HFZ affiliate Shore Club Property Owner LLC in 2019, alleging that HFZ Capital failed to meet conditions that would allow it to waive a termination fee.
The only way HFZ Capital could default was by failing to secure financing on reasonable and acceptable terms, only after working diligently to obtain a loan, according to court records.
Miami-Dade Judge Michael Hanzman ruled that HFZ Capital met these conditions.
Although its attempts to obtain a loan “were certainly not Herculean,” HFZ Capital made “commercially reasonable, though not” perfect, efforts, “Hanzman wrote in his final judgment of May 18. Hanzman pointed to South Florida condo market at that time it was “volatile”.
Shubin & Bass attorney John Shubin, who represents the Fasano affiliate, said the group appealed. He declined to comment further.
In the lawsuit, Fasano argued that HFZ Capital had not made its best efforts to obtain a loan for the project, as it obtained financing for some of its other projects at the time.
HFZ co-founder and director Ziel Feldman did not respond to a request for comment. HFZ’s attorney, James Gassenheimer of Berger Singerman, said the group of owners welcomed the result and reiterated that unless it could obtain financing, it had the right to terminate the management agreement.
The 309-key Shore Club has not reopened since it closed due to the pandemic. The plan was to make the beachfront property the first Fasano brand project in the US with 85 hotel rooms and 70 condos, called Fasano Hotel + Residences Shore Club Miami Beach.
Since then, Fasano has opened a residence-hotel on Fifth Avenue in New York City. The Shore Club has yet to reopen.
In December, HFZ put the Shore Club property in the market on sale.
Affiliate of The Clark Estates, the family of the late newspaper editor and businessman Stephen Carlton Clark, defendant the owner of the Shore Club in March to block its sale without the approval of Clark Estates. According to the complaint, the Clark Estates affiliate is half-owner of Shore Club JV LLC, which in turn owns the hotel through Shore Club Property Owner.
Gassenheimer said the hotel is not currently on the market.
HFZ Capital’s victory is something of an anomaly for the New York-based developer who has been embroiled in legal and financial troubles.
In New York earlier this year, HFZ Capital lost control of four condo conversion projects, after a lender foreclosed the junior mezzanine positions tied to the properties.