Court grants Palmyra depositors priority status
Avia Collinder, Business Reporter
Jamaica's Supreme Court has handed a victory to investors who paid deposits on condo units in the unfinished Palmyra development, with a consent order that essentially ranks them as top-tier creditors.
Justice Brian Sykes has ruled that the depositors should be repaid at the same rate as Palmyra's bankers and debenture holders, National Commercial Bank Jamaica and RBC Royal Bank.
As a condition of that concession, the Real Estate Board, which filed suit on behalf of the depositors against Palmyra Resort and Spa Limited and Palmyra Properties Limited - both in receivership and under the control of Ken Tomlinson - has agreed not to block the sale of the condominium development by withdrawing caveats previously lodged against the property.
The parties will return to court on September 25 for another case management conference aimed at determining a formula for the payout of proceeds from Palmyra's eventual sale.
If they cannot agree, the issue will go to trial, said attorney Nadine Amos from the law firm Samuda & Johnson, which represents the receiver.
The amount of the deposits were not confirmed, but different sources have said it ranges anywhere from US$2.4 million to US$12 million.
Based on an agreement ironed out by the parties in May, the court has ruled that once Palmyra is sold and the receiver's expenses are deducted, the net proceeds are to be deposited in an escrow account, from which the depositors and debenture holders will be paid. The account will be held jointly in the name of the Real Estate Board and the receiver.
The agreement with the receiver states that claims of depositors should be treated as a priority, ranking pari passu or equal with that of the banks that placed Palmyra in receivership for debts owed.
Attorney Amos said Tuesday that the first charge due for payment will be the expenses of the sale, followed by the receiver's costs and then in third place, side by side, are the mortgage holders and the depositors.
The September meeting in chambers will look at several unresolved issues, she said, which include the "quantum" or amount of the receivers costs and also the formula by which the remaining funds would be split between the mortgage holders and depositors.
"If there is no agreement on these matters, it will go to trial," Amos said.
The fight between the receiver and the Real Estate Board dates back to 2012 when Tomlinson is reported to have found no evidence of the legally required trust fund, which should have been established to deposit more than US$2.4 million collected by the developers from condo purchasers.
The board took the matter to court, seeking to protect purchasers' deposits under prepayment contracts either by way of a refund, or if the scheme is going ahead, to ensure that contracts are completed.
The Real Estate Board's general manager, Sandra Watson, said the amount of the receiver's costs will be pivotal to the agreement. If the charge is too high and depositors "stand to lose too much", then the board will ask the court to decide, Watson said.
The receiver's costs may vary, she said, depending on what he has already been paid by the banks, which engaged his services.
The Real Estate Board is being represented Dr Lloyd Barnett and Gillian Burgess, while the Palmyra companies are represented by Amos and Kwame Gordon.
The Palmyra Resort & Spa resort complex sits on 16 acres at Rose Hall in Montego Bay, encompassing three towers, two of which were completed. The development was placed in receivership in 2011.
The owners of the project are alleged to have fallen into arrears on US$110 million of principal loans, US$22 million of which was financed by RBC Royal Bank Jamaica, while the other US$88 million by National Commercial Bank Jamaica and its investment arm, NCB Capital Markets, as well as bondholders. Robert Trotta, who started the resort project and has a major stake in it, is fighting the takeover.
Several attempts to offload the property since 2012 have failed, including the last from New York-based Philangco Corp, which quietly withdrew its bid in July. The offer made was reportedly US$60 million as purchase price and US$60 million for phase one development.
Palmyra currently has 103 owners of individual condos, with 97 units remaining for sale on the completed blocks, known as the Sabal Tower and Silver Tower.
The shell of a high-rise hotel, designed for 88 studio suites called Sentry Tower and 11 three-bedroom villas, are at varying stages of completion.