City Proceeds With Suit Against Dixie Walesbilt LLC

Following the collapse of negotiations Lake Wales Community Redevelopment Agency is proceeding with a lawsuit against the Dixie Walesbilt LLC. That action is expected to filed by Monday. The 96-year-old building has been the subject of an ambitious redevelopment proposal that would bring a luxury hotel chain to the building while redeveloping the adjacent properties.

Negotiations have taken place during the past three weeks, but failed to reach an agreement which would provide a "novation," or renewal of the expiring ten-year limit on the "Statute of Repose." With the clock running out on Tuesday, the City Commission considered that they had no other option but to file the suit, a complex document which includes multiple claims of evidence of default. It is expected to lead to a lengthy legal battle.

The lawsuit is an attempt to re-claim the title to the structure based upon claims of breach of the original contract.

The building is currently controlled by Ray Brown, president of Dixie Walesbilt. Brown's legal team maintains that the granting of title after the initial two years of performance was an admission that he had in fact performed under those terms, That question will now be decided by the courts.

Negotiations made progress, according to both sides, but developers cited a city requirement that they place the title in escrow as part of the deal, a clause which would allow the city to reclaim the building in the case of a default. A representative of the development team said that such a default could be triggered by the city itself simply by denying a building permit, placing a "poison pill," in the negotiations.

Daniel Greenberg, a Senior Vice-President with Blue Chip Capital, called the city demand "overreaching, when they weren't putting any cash into the deal." Hotel owner Brown's Dixie Walesbilt currently has clear title to the structure.

Other requests by the developers had been reduced to a few points, including

• Return of the tax increment generated by the project for 20 years, a financing mechanism which would reassure investors. Those monies would be generated by the project itself, and will not exist unless the project succeeds;

• Return to the project of the parking lots lying south of Stuart Avenue, which were a part of the property the city obtained from former hotel owner Anders Nyquist in a prior foreclosure action. Those lots were severed from the hotel when it was granted to Brown;

• City support of a grant application for Federal infrastructure funds to build a parking garage;

• A reduction or return of a portion of the building permit fees after completion of the project.

The city "could make this happen without putting in any hard cash," Greenberg said, "and Ray's trying to do the right thing. We're willing to move forward, but we're just not willing to do anything stupid," he said, referring to putting the title in escrow. That clause, if utilized by the city, would also apparently put any capital already invested, including any new money arranged by Greenberg, at risk of loss.

"We negotiated in good faith," Greenberg told the LakeWalesNews.Net, "and I like the people, but it felt like they had directives" that prevented them moving past the demand to put the title into escrow. After the last City Commission meeting, Greenberg said, the city maintained "radio silence."

Should the city ultimately be successful in the courts they would become sole owners of the property, and free to try to attract a deal similar to that proposed. The economic climate prevailing at that time could be a determining factor as to the outcome. If the city lawsuit fails, Dixie Walesbilt LLC will be released from any city recourse and free to attempt to negotiate a new deal with financiers and the city, without the demand for title escrow.