How Bankruptcy Saved the Tidemark

How Bankruptcy Saved the Tidemark

By Sean Roth

Real Estate Editor

Nick Easterling was about to go under and he knew it. He and his partners owed millions, and now Easterling was facing losing the Tidemark Lodge and Marina development to bankruptcy and ending up homeless and penniless.

The only chance he had of saving the development was to roll the dice and file for bankruptcy. It's looking like that long shot worked.

Easterling and his former partners have emerged from Chapter 11 bankruptcy and sold their interest in the Tidemark development to Stamford, Conn.-based Reliance Realty Partners for upfront capital and a small share of the operational income.

Easterling is back in much the same position he was before managing the development of the 40-unit condominium hotel and 62-boat slips for the new ownership group. The road is finally clear for construction of the project.

"I've been poor all my life," Easterling says, "but this was different. This was just such a special location and a special project. The value of the site was a lot more than the amount we owed. We just didn't have the cash flow."

Easterling is no a stranger to long shots. Like the man who put Orlando on the map, Easterling had plans to build a theme park there, but unlike Disney, Easterling's aviation-focused park never got off the ground. He followed that up with billion-dollar plan to run a magnetic high-speed train system through Orlando to a new office park. That failed as well when financiers ran into problems with the Walt Disney Co.

And so when the Tidemark development looked to be sunk Easterling wasn't ready to give up.

He says looking back that the financial problems for the development started much earlier than any of the partners realized.

"Two of our partners lost a lot of liquidity in the stock market crash in 2001," Easterling says. However, the land acquisition, permitting and pre-sales continued on unaffected.

The problems first surfaced when the original partnership, Tidemark Partners LLC, starting applying for construction loans in late 2002.

"We had 16 or 17 presales going into the construction," Easterling says. "But when we went for a construction loan there wasn't enough capital within the partnership. At that point the partners were reluctant to put in more cash. It was just dominoed from there."

This sent Easterling on a new search for additional investor capital.

"I was begging for whatever I could get," Easterling says. "All of these permits have time limits; we need the cash to keep these permits alive. I tried just about any kind of creative financing I could."

Sharks were circling

Easterling set up a deal for Dallas-based Parliament Group to acquire the property and development operations of the Tidemark. But a week prior to the closing, one of the members of the Parliament investment group died. According to a deposition in a related legal case, it took all of Parliament's investment capital to pay out the deceased members' share of the business to his family.

Following that piece of bad luck, Tidemark Partners defaulted on both its $1.7-million first mortgage with Regions Banks and its $2.2-million second mortgage with Brasota Mortgage Co.

"We were in the water and the sharks were circling," Easterling says. "Banks don't like to hold property, but when word got out that we were in trouble, developers came out of the wood work offering to buy the land from them after they foreclosed. It became painfully clear to everybody that they were going to foreclose on us."

Easterling had another problem closer to home. The operations end of Tidemark had run through all of its capital for salaries.

"I had five kids to feed and a mortgage," Easterling says. "I hadn't been paid for about a year. " Faced with the additional strain in August of 2003, his wife filed for divorce.

It was Easterling's attorney, Louis Amato of Fort Myers, who suggested the B-word. Amato recommended Tampa attorney Stephen Leslie and, on Jan. 1, 2004, Tidemark Partners filed for Chapter 11 bankruptcy protection. Tidemark Partners owed about $5 million.

"This was completely different from every other type of law I was familiar with," Easterling says. "The biggest thing this would give us is time."

After he filed for bankruptcy, Easterling was able to receive some financing from Naples' Cypress Lending Group Ltd., which gave Tidemark enough financing to keep the permits active and to pay a partial salaries to Easterling and a secretary.

Even with the financing, Easterling was forced to sell his house in April to keep it from being foreclosed on.

"Of course your family doesn't understand," he says. "They're like 'why don't you just get a job?' They don't understand at 50 you can't just get a job and put five kids through college. It's worth the risk to stick with it."

After hearing from several potential suitors in bankruptcy, Robert Grammen, president of Cypress Lending Group, introduced Easterling to the investment group SouthStar. After some negotiation, it looked like SouthStar would acquire the assets and operations of Tidemark Partners and pay off its debt. That fell through.

A deadline was approaching when the two mortgage holders would ask the bankruptcy judge to allow them to foreclose on the property. In a last ditch effort, Easterling called Larry Starr. Starr suggested a part partner of his, Ken Dardis of Reliance Realty Partners, who was in town to work on the condominium conversion of the Silver Sands Hotel on Longboat Key.

"There aren't a lot of people, who could do a multimillion-dollar deal in just a couple weeks, but I told him Ken and Reliance was one group who could," Starr says.

Nick's vision

Reliance Realty Partners owns 1.5 million square feet of existing or approved commercial development in Connecticut and New York. Dardis and Easterling met at the Tidemark site and over the next few days, a new reorganization plan was struck.

"I liked Nick's vision," Dardis says. "I thought [Nick] did a really excellent job on the layout. There had just been a series of unfortunate events. I don't think he did anything wrong. And really there was one missing element: a lack of capital."

A deal was struck, which called for Reliance Property Group to buy the property to cover a majority of Tidemark's debt. On the back end, Tidemark Partners would get 10% of the profit from the Tidemark development, up to $1.4 million, and Easterling himself would get 5% for operations.

But it wasn't going to be easy for Tidemark Partners to jump partners. SouthStar, using the corporate identity of SSHB LLC, filed a separate suit charging that the second agreement was invalid.

In November 2004, while the SouthStar case progressed, Reliance Property Group, going by the corporate identity of Reliance Tidemark LLC, purchased the Tidemark property for $5.6 million.

Ultimately, a judge dismissed the SouthStar case in May, and in August, Tidemark Partners emerged from bankruptcy.

"Morally, I felt more comfortable with the percentage going to Tidemark," Easterling says. "I felt with that I could sleep a lot better."

Now, Easterling is back where he was before the two-year bankruptcy.

"Everyone knew my goal upfront," he says. "My goal was to live and work here for the next 25 years. I feel pretty confident; we have no competition from another motel for nine miles."

Has his opinion of bankruptcy changed? Absolutely.

"When I first met Steve Leslie on our way to court, he says he went into this because he wanted to protect the little guy," Easterling says. "I thought that was absurd. But having gone through one, he's right. It protects the little guy from being eaten up by the big guy."

In September, Bank of America extended Reliance Tidemark a $21.5 million construction mortgage. The development is already 20 units pre-sold and work on the pilings started this week.

Reliance Realty Partners has since purchased the Beach Inn Hotel on Anna Maria to serve as a sister property to the Tidemark.

"Guests of either the Tidemark or the Beach Inn can have access to a private beach, a hotel conference center or a marina," Dardis says.

As for what he would have done differently, Easterling says he would have picked partners with deeper pockets. "I should have looked a lot deeper. I took investors wherever I could find them."

But Easterling has no regrets about bankruptcy.

"I have none," he says. "There was no alternative."

TIDEMARK CREDITORS

Secured

Brasota Mortgage Co., Bradenton $2.2 million

Regions Bank, Smyrna Beach $1.7 million

EFO Holdings/Cypress Lending, Naples $86,569.25

Unsecured

EFO Holdings/Cypress Lending $107,661.46

Wilbur Boyd $100,000

Brenda Boyd May, Bradenton $68,000

Oertel, Hoffman, Fernandez & Cole, Tallahassee $60,436.02

Sam Evens, Bradenton Beach $56,500

Mike Kelly, Treasure Island $55,520

Manatee County Tax Collector 52,598.75

Lance Spotts $50,000

Nick Easterling, Bradenton Beach $50,000

Greene & Schermer, Bradenton $43,039.82

Cypress Lending Group $40,085.84

D.L. Porter Constructors Inc. $35,643.58

Mike Carter Construction, Bradenton $30,943.96

John Cauthen, Fort Myers $30,000

Dr. Wait & Kristin Conlan, Winter Park $25,000

Stewart Engineering, Sarasota $21,713.30

Eatman & Smith, Bradenton Beach $18,410.30

Denise Wilkinson, Bradenton Beach $15,711

Banks Engineering, Fort Myers $14,127.50

Ben Swirsky of Swirsky Capital Corp., Toronto, ON, Canada $13,254

Ed Barber & Associates, Bradenton $11,033.83

Plymouth Park Tax Services LLC $10,093.67

William V LLC $8,704.88

Edward IV LLC $6,984.84

Trigg, Catlett & Associates, Tampa $6,841

Lea Jackson Interior Design, Sarasota $5,894.66

Gary's Hauling, Palmetto $5,791.94

Barretts Quality Electric, Venice $5,777

Scovanner & Whittaker, Bradenton $5,355.79

Coastal Living, Birmingham, Ala., $5,161.20

Kirk Pinkerton, Sarasota $4,221

Henry II LLC $3,684.21

Louis Wolfson $3,302.92

Verizon, Dallas, TX $3,081.96

House & Home, Bradenton $2,908

Foley & Lardner, Orlando $2,550

SRQ, Sarasota $2,323.98

Communications Engineer, Palmetto $1,163.40

United Rental, Bradenton $1,087.56

Jeffcoat Blueprinting, Bradenton $1,058.15

Fishman & Associates, $850

Sandpiper, Longboat Key $840

GTI, Bradenton Beach $829.43

Acton Mobile $766.80

Nextel, Carol Stream, IL $702.44

Volenec, Tampa $685

AT&T Wireless $590.15

Marcia Sedgwich $520

Tom Richardson $465

The Observer Group, Longboat Key $375.18

Waste Management, Bradenton $333.41

Larry Vershel, Winter Park $300

MCI, Louisville, KY $284.52

HideAway, Bradenton $281.45

Federal Express, Memphis, TN $248.75

DBA Site Services, Bradenton $239.63

Mar Vista-Weld, Anna Maria $207.95

Bright House, Bradenton $199.42

MCUCS, Tampa $187.39

Florida Hotel & Motel Association, Tallahassee $150.84

Computer Tutor, Bradenton Beach $125

McBee, Groton, MA $117.05

Water Boy, Bradenton $111.07

Army Corp. of Engineers, Tampa office $100

LePensee Plumbing $68.60

Source: A distribution schedule from the legal case.