Saturday, Jul. 26, 2008

Atlantic Beach developer puts fault on lender

An N.C. developer said he still plans an upscale resort for his section of the Atlantic Beach waterfront, blaming last week's multimillion dollar foreclosure notice on the troubled South Florida lending group that handled the loan.

"I don't want people to think we're running out of money, broke, the land's getting foreclosed on and we're sailing away," Matt Gadams of N.C.-based Seventh Street Properties said in a telephone interview Thursday. "We're 100 percent behind this development. We're going to get it done."

The attorneys who filed the foreclosure complaint declined to discuss Gadams' contentions, citing the pending court case.

In 2006, Gadams obtained a mortgage to buy the Atlantic Beach land through an affiliate of The Berman Group in Coconut Grove, Fla., which channeled millions of dollars from hundreds of individual investors into various commercial real estate loans.

Many of those projects were never completed and the loans went unpaid, according to the Florida Office of Financial Regulation. In December, alleging that The Berman Group was mismanaging investors' money, that state agency gave control of the Berman holdings to a court-appointed attorney, Michael Goldberg of Fort Lauderdale.

Last week, a Greenville attorney representing The Berman Group and its investors filed notice of foreclosure proceedings against Gadams' companies.

On Thursday, Gadams said he has been repaying his loans, and that the issues surrounding The Berman Group are to blame for the filing.

"This is a legal disagreement that's going to be fought out in the courts," Gadams said. "We're going to file a counterclaim."

The foreclosure complaint, filed Wednesday in Horry County Court by Goldberg and Seann Tzouvelekas, the S.C. attorney, provides additional details on the allegations against Gadams.

His company, Seventh Street Properties, and Atlantic Beach Oceanfront, which is owned by his brother, Virginia developer Buddy Gadams, took out an initial mortgage of $9.6 million in March 2006, then added a $5 million modification in May to buy more properties. The mortgage is now accruing interest at a rate of nearly $10,000 per day and was worth $17 million as of July 14, the complaint states.

A luxury condo project in downtown Norfolk, Va., by Buddy Gadams' Marathon Development Group has also fallen on hard financial times. Site work on the $180 million Granby Tower began briefly, then halted in September, leading to lawsuits from contractors and refund requests from condo buyers.

In a court filing last week, Buddy Gadams said Marathon never had financing on the project and, according to a clause in their contract, therefore they do not owe contractors any money.

Although Buddy Gadams is involved with the Atlantic Beach project, Matt Gadams said Marathon is not. The issues in Virginia are completely unrelated to the project in Atlantic Beach, Matt Gadams said.

Projects along the Atlantic Beach waterfront have been plagued with problems, but the town welcomed the Gadams group in 2005, when it first announced plans for the undeveloped beach. Like other developers, the Gadams have yet to assemble all the parcels on a complete block - a necessity for any large-scale development - but Matt Gadams still professes confidence in the site.

The company has performed a number of engineer studies and is closely watching the possibility of tax-financing with the town, Gadams said.

Without providing specifics, he said the resort will be aimed at upscale tourists and will incorporate the town's cultural heritage in its design.

"It's the most developable property in all of South Carolina," Gadams said. "Myrtle Beach only has one four-star hotel for its 14 million visitors."