A Florida-based development group that negotiated a contract to buy the Belvedere Hotel has been ordered by a U.S. Bankruptcy Court judge to proceed with the acquisition -- even though the company indicated last month that it no longer planned to do so.
Judge James Schneider set Dec. 27 at 10 a.m. as the deadline for the Hertz Group of Miami Beach, Fla., to complete the acquisition, which previously was scheduled for Nov. 28. The firm's principal, Judah Hertz, planned to convert the rooms to condominiums but indicated just before the settlement date that he would not proceed with the purchase.
Judge Schneider's ruling came in response to a complaint by Kenneth Davies, trustee for One East Chase Street Associates, the group that owned the hotel and is now involved in bankruptcy court proceedings.
Mr. Davies had asked Judge Schneider to order the Hertz Group to pay $5.5 million for the hotel, as its contract called for it to do, or face the possibility of paying substantial damages for not proceeding with the purchase. As a result of the judge's ruling, Mr. Hertz could be held in contempt and fined if he disobeys the court order, Mr. Davies said.
After Mr. Hertz's group failed to settle on the building, the previous owner's lender, Meritor Bank of Philadelphia, decided to put it up for auction. That sale is still set for Thursday at 1 p.m. on the premises.
Mr. Hertz could not be reached for comment, but his attorney, David Fishman, said Mr. Hertz decided not to acquire the hotel because he was unable to obtain financing. Mr. Fishman said recent changes in the real estate market make it difficult for developers to get accurate appraisals for buildings and qualify for financing. He said recent real estate sales by the federal Resolution Trust Corp., in particular, have brought such low prices in some markets that the values of other properties in the same market are adversely affected.
Mr. Hertz was serious about wanting to buy the hotel, as shown by his deposit of $200,000, which he may forfeit, and the fact that he hired engineers, attorneys and an appraiser, Mr. Fishman said. But "the financial resources are not available to go ahead with this contract," he said.
Mr. Davies said the sales contract was not contingent on the Hertz Group's ability to secure financing and that even if it had been, the development team has not shown to the court that it doesn't have financing.