A troubled developer in the Four Corners area near Walt Disney World, sued by British investors after the vacation homes for which they paid thousands weren’t built, has now sought protection from its creditors in bankruptcy court.
Tierra del Sol Resort Inc. filed a Chapter 11 petition this week in U.S. Bankruptcy Court in Orlando, seeking a chance to restructure so it can resume construction and pay off its debts. The company owes creditors a total of $184 million.
“The goal is to restart construction,” said bankruptcy lawyer Scott Shuker, who filed the petition for the Orlando-based resort company.
Construction ceased last summer at Tierra del Sol, a development that was supposed to total nearly 1,000 condominium units and town homes off U.S. Highway 27, just west of the ChampionsGate resort. The developer ran out of money.
Tierra del Sol officials last year blamed the cash shortfall on the housing slump, an expansion of the resort’s water park, and the costs of filing plan modifications with Polk County government.
Once construction restarts, Shuker said, the company would finish building the units and sell them to repay creditors. If it can secure a loan, the company intends to build the 100,000-square-foot clubhouse, with restaurants and shops, featured in its original plans. Shuker said the resort would be fully built in three to four years.
So far, only 96 town houses have been completed and prepared for occupancy. Of the 972 units planned for the site, 370 have purchase contracts but haven’t gone to closings.
The project’s first phase — five Mediterranean-style buildings with six floors and 1,200- to 1,500-square-foot condos — was initially to be ready by the summer of 2006. When it missed that deadline, Tierra del Sol started to send buyers letters asking for contract extensions — and more money to finish the construction.
“They started calling and trying to get me to sign another contract and pay double the price,” said Tom DeNapoli, who said he paid a $27,000 deposit for a four-bedroom town house supposed to be completed in 2005. He asked for his deposit back but never got it.
“It certainly negated any other investment opportunity I might have had,” said DeNapoli, 46, who lives in Easton, Mass.
If the project doesn’t get back on its feet, Shuker said, those who paid deposits will not get their money back.
David and Sandra Clayton of the Netherlands are among the would-be owners who reached a settlement with the company late last year after filing a lawsuit. They have received about $100,000 so far of $330,000 they’re owed, said their lawyer, Matt Firestone.
“It’s not good for my clients,” Firestone said of the bankruptcy filing. “As unsecured creditors, they stand to obtain little if any of these funds from the bankruptcy.”
The Chapter 11 filing protects the company for now from current and future lawsuits. Affiliated companies that are part of the bankruptcy filing include TDS Amenities Inc., TDS Clubhouse Inc., Tierra del Sol Owners Association Inc., Costa Blanca I Real Estate LLC, Costa Blanca II Real Estate LLC and Costa Blanca III Real Estate LLC.
If the homes eventually are built and sold at their listed prices, Tierra del Sol’s assets would total $188 million, Shuker said. The company’s largest creditors include banks, investment groups and numerous home buyers, many of whom paid deposits of more than $100,000. Many of those disappointed buyers are from the United Kingdom, where the company had heavily advertised the resort. The development also drew buyers from throughout the U.S. and Latin America, including Colombia and Venezuela.
Kennedy Funding of New York and Stanford Fund of California are owed $28 million each. Tierra del Sol Resort’s parent company, American Leisure Group, reportedly received loans from R.Allen Stanford, a Texas financier accused of an $8 billion fraud by federal regulators.
Tierra del Sol is actually a subsidiary of American Leisure Holdings Inc., which is owned by American Leisure Real Estate Group.