Sun | Oct 22, 2017

Palmyra debtors carving up sale proceeds, depositors fear big haircut

Published:Friday | January 6, 2017 | 12:00 AMNeville Graham
An artist's impression of the Sabal Silver Palm Clubhouse at Palmyra, in Rose Hall, Montego Bay, depicting the resort project as it was first conceptualised.
Sandra Watson, general manager of the Real Estate Board of Jamaica.
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Fifty-eight investors who paid deposits on condos in the luxury resort Palmyra are to be refunded, but will likely have to take a haircut, the size of which will be determined by negotiations under way between the parties lawyers.

The deposits made on incomplete units in the resort development, which was placed in receivership in 2011 by its bankers, comes with the successful disposal of the property last year to entities managed by Sagicor Group Jamaica, after several attempts at a sale by its receiver, Ken Tomlinson.

Sagicor is yet to disclose how much it paid for Palmyra, which is located along the hotel row at Rose Hall in Montego Bay, but sources have placed it in the US$50 million range.

The proceeds, less expenses, are to be shared between debtors - inclusive of the depositors, National Commercial Bank and RBC Royal Bank, as well as bondholders. CEO of the Real Estate Board, Sandra Watson, said negotiations on the apportionment of the funds to debtor groups are ongoing.

Watson would not say how much the 58 depositors were owed in total, but one investor, who alerted the Financial Gleaner to the negotiations, said he had paid down US$750,000 on two units and was unsure how much of that he would end up losing.

The banks placed Palmyra Resort & Spa in receivership after claiming the original developer, Robert Trotta, had defaulted on US$110 million of loans. Trotta denies being in debt to the banks and is fighting the takeover in court.

Sagicor bought Palmyra, which had two complete and one incomplete tower, for less than half the value of the loans. The debt to depositors is ranked equally with the banks, based on a court decision in 2014 sought by the Real Estate Board.

Depreciated in value

Watson said the challenge was that the property sat on the market for so long that it depreciated in value.

"It had no less than at least five or six offers that just fell through. When this final offer came, the board and the receiver had already signed in court an agreement that both parties were willing to sell the property," Watson told the Financial Gleaner.

When the condo complex was first placed in receivership, around 140 depositors were given the option to make closing payments and await delivery of their units, or take a refund of their deposits.

Eighty-two of them opted for the units. However, 58 failed to meet the deadline to make a decision and are to be refunded.

"At the time, they did not express any interest in closing the sale. Some of them changed their minds subsequently, but by that time, things had gone too far. From the very outset, some purchasers were given the option to close the sale prior to the receivership," Watson said.

"Part of the settlement of that case was that there was an agreement that [Palmyra] would be sold because the original purchasers could not get their property since some of the units weren't built, and those that had built units did not want them," Watson said.

Sagicor's managed funds have effectively acquired 217 of 277 residential units.

Watson says it is still unclear how much money will be available for distribution to depositors.

"We're still in the middle of closing out and the matter is before my attorneys. We can't give any details until the matters are resolved. Because the parties are in negotiations, there are certain things that we can't explain at this time," said the REB head.

neville.graham@gleanerjm.com