The Plaza Resort & Spa
I am guilty of dragging with writing about the Plaza Resort & Spa for so long. Every time I think I need to write, and I don’t do it right away, something changes. I get a call from an owner, and they tell me something that raises eyebrows, or new information is coming… and I am trying to figure things out.
I am not the Plaza owner. When the owners call me with questions, they may not understand that they know something what I do not know. I have a lot of owners, who I helped to buy units in the Plaza, and I always ask them to forward me everything they get, and they do, but soon they forget. If you feel that I do not know something important, you might be right, so do not hesitate, write a comment, straighten me up.
I am sure you all know that there are new owners of NCL (non-condominium lot) AKA Master Association. The sale included “The controlling stake includes ownership of the hotel lobby, 40,000 square feet of meeting space, a spa, the hotel’s 1888 restaurant and 100 guest rooms. The buyer would gain the right to manage the hotel and control of both the property’s master association and condo unit owners association.” (Clayton Park, News Journal, February 26, 2020.)
Where these 100 units come from? These are the units that have never been sold to the public. Bray & Gillespie sold 223 units in 2005/2006, made enough money to pay for massive renovations and a little fat on top, and they stopped selling. They wanted 100 units for 2 reasons. They were getting all rental income from these unit, as they did not have to split with owners, and this was giving them control over the Association. Beautiful arrangement.
A glimpse at the Board
And this is how it went. A 3-member Board. 2 Board members from Bray & Gillespie, and 1 real unit owner. When the judge in the bankruptcy case gave the resort to the Lender, then Arbor Capital had 2 their directors and 1 director from the owners. I have been on quite a few Board meetings under different Boards, and to be honest, the condo representative on the Board were some very clueless people.
Now, the Board is no longer a 3 member Board, but when I asked Jonathan at the meeting on August 13 how many units they own, to my huge surprise he responded that with 100 units which came with the purchase, the units in Escrow they have more than half of all unit in the Resort, which means that you can have as many people on the Board as you want, but you have no voting power whatsoever. Not a huge loss, as the owners never had it to begin with…
This was brought up at the Board Meeting on August 13. This was the first time I was at the meeting under new NCL ownership. Jonathan is such a nice person, ready to jump out of his pants for the benefit of the property, of the owners. And things are better now, rentals in the last couple of months are excellent…
And you want to mellow… And start kissing and hugging people…
But being an old cynical fellow that I am, and with a very short fuse (and for that, Jonathan, I apologize), it started bothering me more and more. Something is not right here.
Business as Usual or a Hostile Takeover?
More than half of all units are now or in a couple of weeks will be in the hands of the NCL owner. They bought 100. The total number is 323 and they already own at least 162 or more and counting. Jonathan is nice, shy and modest. Any real estate brokerage would be bragging if they could sell 62 units in a distressed condo-hotel like The Plaza in less than one year (they bought The Plaza August 20, 2020).
But there is more to that. They did not start buying units in the fall of 2020. They started buying them in March 2021, and in 2 months, March and April, they bought a lot of units. They bought a whole bunch of units on March 17, closed in one day.
And look at the prices. 1 for $25K (direct oceanfront unit #431), and then nearly two dozen for $30K and very low $30s. They actually bought only one unit in the low $40s. You get to sale in the $40s and these are regular sales. And in the $50s – also regular sales.
So, why are we surprised that everything over $30K is overpriced for Jonathan?
Make no mistake, they are fighting for the cheap way to take over the property.
What is next? Maybe they are just smart and nice businessmen, that create the value, will have way more money from rentals, but other than that it is going to be fair and beneficial to the owners?
What about this?:
Jonathan & Co are just a few units short of 60%, and then they can announce at the Board meeting that they decided to terminate the condominium.
What happens then?
Then they will have to buy out every remaining owner. For that they would bring their appraiser, and therefore they needed so many $30K sales. To set the basis for the appraisals to be crazy low. If you fight, they will have to bring 3 independent appraisers.
But appraisers are trained to use the same data, so 3 appraisers will be looking at the same sales in the $30s. You do not like it?
Let’s look at this Special Assessment, or better at the timing of it.
Market started shifting, and they need to get sales in the $30s back. How? Oh, a huge Special assessment will work wonders for that. Now you can go to owners and offer to buy their units in the $30s promising that they will not have to pay the Special Assessment.
How soon bad things will start unfolding?
Probably, very soon because appraisers use sales in the last 6 months. So, it is right around the corner.
Why I am so cynical? Jonathan is such a nice guy… you want to hug him. But this Special Assessment is bothering me. The condition of the building is not the news. You just need your eyes to see it. So, yes, something needs to be done.
But when Jonathan said that Arbor Capital did not have money in the reserve, it sounds strange. First, because in the News Journal they said there was $1 Mil. Second, when you buy, why didn’t they demand that the Reserves are funded? Also, 1st Service Residential is managing this property for quite a few years, how come there was no Reserve Study ever? They could not just conveniently forget to do it; this is what they are paid for. But SunDay did not correct Jonathan at the meeting, and he repeated it more than once… Things simply do not sum up here.
At the meeting shocked owners were asking Jonathan whether there was the financing in place to help some owners to deal with the huge assessment, and he was telling them that they were looking for the way for the association to get the loan for that… and this is BS.
The Association can’t get a loan to pay the Special Assessment for a very simple reason. The only real way for the Association to get financed is by the Lender creating a Collateral account into which the Association starts paying money, which are considered the collateral.
Lenders can’t use owner’s units as collateral because of the shared component. So, to do it, you need to set the Special Assessment to pay … Special assessment. This is nonsense but how come that Jonathan does not know that? And yes, there is a way to do it, but, again, Jonathan does not seem to know how. (Jonathan, you can call me 386-405-4408, I can explain it to you)
The payment is due in June 2022. Why such a rush to levy the Special Assessment now? When NCL owner does not know how to help owners? These things, the timing, and a crazy real estate activity of the NCL owner prompts me that things are not kosher.
I will not be surprised if Jonathan will respond and tell you that this is all wrong. I will be glad to hear that. Especially, if the owners will demand the NCL owner to put it in writing.
Until it happens, I tend to consider it a hostile takeover, the kind of we have never seen here before.
P.S. Why would they do all that? What is in it for them?
The Plaza Resort & Spa, if not a condominium, but a hotel, is a prized piece of real estate. Exceptional piece. With an approximate market value between $50 Mil and $65Mil. Considering that they paid $8 Mil for it a year ago, there is potentially a huge profit. This could be a deal of a century by Daytona standards.
P.P.S. It took me too long to write it, and I am exhausted. I wanted to give you the comparable sales in a few other condo-hotels, so that you see how devalued The Plaza is.
I will only throw one example. Unit 920 in the Plaza is for sale for $42K. It is $112.9 per sq foot (PSF). Units with no view of the water in Daytona Beach Resort and Conference Center are for:
$94,900; $97,500; $112,500; $112,900; $112,900; $126,500
Which means the PSF is from $308.12 – $373.16.
But I promise to write about it. If you want me to email it to you, text me your name and email to 386-405-4408.