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Nearly six hours of legal arguments on Monday failed to determine whether the developer of the Naples Bay Resort will be forced into Chapter 7 bankruptcy.
Lawyers representing three partners in the development group, Basil Street Partners, argued in a Fort Myers federal courthouse that the four-star resort can continue to operate under the guidance of a court-appointed receiver.
Lawyers for creditors, including a fourth member of Basil Street Partners, Jack Antaramian, argued that federal bankruptcy would enable a court-appointed trustee to obtain financing that would keep the resort from closing before the busy winter season arrives.
"We're asking to stabilize the situation and assure the resort's guests and employees that issues will be dealt with methodically," said Daniel DeMarco, representing Antaramian. "This property, this debtor, needs a firm source of funding so it can operate through the end of the year."
The creditors filed an involuntary petition for bankruptcy against Basil Street Partners during a hearing before U.S. District Court Judge Jeffery Hopkins on Oct. 20.
An interim trustee, Diane Jensen, was appointed on Oct. 24. In addition to determining whether the bankruptcy will proceed, Hopkins will determine whether Jensen is appointed as trustee on a permanent basis.
A state court appointed Gerard McHale, a forensic accountant based in Fort Myers, to operate the resort last year. McHale would continue to operate the resort but report to Jensen as well as the state court if the bankruptcy proceeds.
Lawyers representing Jensen and Benchmark Property Management, which manages the resort, also argued for the involuntary bankruptcy during the hearing.
Alan Perlman, an attorney representing Basil Street Partners, said the group had found alternate financing that would enable McHale to operate the resort through the end of the year without bankruptcy.
"The receiver has been doing this for 13 months, the receiver can continue to do this, and I have a commitment from a lender," said Perlman.
Basil Street Partners includes Fred Pezeshkan, president and CEO of Manhattan Construction (Florida), a general contractor in Naples. Foreign investors Iraj Zand and Raymond Sehayek are the other partners.
Stephen Leslie, who represented Jensen at the hearing, said the proposed alternate financing, to be provided by a group known as Gulfwater Investments, was inadequate. Gulfwater Investments would provide $350,000 for resort operation and $150,000 in reserve, at 7.5 percent interest.
"The amount, the timing, the structure are all problematic," Leslie said. "It's not workable in the economics or in the process."
McHale said that he could not keep the resort open through the rest of the year without additional financing and that $350,000 wouldn't be enough.
"If more funding does not occur, I think I will be faced with a slow wind down," he said. "We can make it on the backs of the creditors to Nov. 30, then we'd start to shut the operation down."
Perlman argued that McHale's estimates on the amount needed to operate the resort are too high.
The resort currently employs 110 workers. During the winter season, that number rises to between 130 and 150.
Arguments will continue Tuesday morning at 9 a.m. in the federal courthouse in downtown Fort Myers.