HFZ Capital Group has failed to pay $ 6 million to the planned operator of the Shore Club in South Beach, following litigation over the companies’ failed deal.
HFZ Capital Group wanted to redevelop the property at 1901 Collins Avenue in Miami Beach into a condo hotel and signed Brazilian luxury hotel brand Fasano to handle the relaunched project. In 2017, HFZ Capital canceled both its redevelopment plan and the Fasano contract, given the slowdown in the condominium market.
Fasano, through its subsidiary HMI Holdco, sued HFZ subsidiary Shore Club Property Owner LLC in 2019, claiming that HFZ Capital did not qualify for waiving termination fees.
According to court records, the only way for HFZ Capital to skip the payment was by not obtaining financing on reasonable and acceptable terms, only after working diligently to secure a loan.
Miami-Dade judge Michael Hanzman ruled that HFZ Capital meets these conditions.
While its attempts to secure a loan were “admittedly not Herculean,” HFZ Capital made “commercially reasonable efforts – though not” perfect “-” Hanzman wrote in his May 18 final judgment. Hanzman noted that the South Florida condo market at the time was “volatile.”
Shubin & Bass attorney John Shubin, who represents the Fasano subsidiary, said the group has appealed. He declined to comment further.
In the complaint, Fasano argued that HFZ Capital had not done its best to secure a loan for the project, given that at the time it had secured funding for some of its other projects.
HFZ co-founder and principal Ziel Feldman did not return a request for comment. HFZ attorney James Gassenheimer of Berger Singerman said the ownership group welcomed the outcome and reiterated that unless they were able to secure funding, they had the right to terminate to the management agreement.
The 309 Key Shore Club has not reopened since it closed due to the pandemic. The plan called for the waterfront property to be converted into the first Fasano-branded project in the United States with 85 hotel rooms and 70 condos, named Fasano Hotel + Residences Shore Club Miami Beach.
Since then, Fasano has opened an apartment hotel on Fifth Avenue in New York City. The Shore Club has yet to reopen.
In December, HFZ put the Shore Club property up for sale.
A subsidiary of The Clark Estates, the family of late newspaper publisher and businessman Stephen Carlton Clark, sued the Shore Club owner in March to block its sale without Clark Estates approval. According to the complaint, the Clark Estates subsidiary 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 issues.
In New York City earlier this year, HFZ Capital lost control of four condo conversion projects, after a lender seized the junior mezzanine positions linked to the properties.