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Date of Issue: October 11, 2007

GSR auction sale draws scant interest

Not so rosy sale
Times are tough for GSR and its Island properties. After an advertised auction sale of the company's Rosa del Mar beachfront property in Bradenton Beach failed to attract even a minimum offer of $9.2 million, Bradenton Beach slapped a code violation notice on this sign. Islander Photo: Rick Catlin

Island real estate agents are finding out that trying to sell any property associated with the now bankrupt GSR Development LLC is like trying to sell beachfront property to a Siberian goat herder.

Since the company declared bankruptcy in July 2006 and efforts began to sell off GSR’s considerable real estate assets, not a single GSR property has sold for the asking price.

The latest failed effort was by Barry Gould of Island Vacation Properties, who tried to market GSR’s beachfront property in Bradenton Beach.

Gould had listed the 250-foot-long beachfront location for $9.2 million and advertised an auction sale for Sept. 7.

But no buyer submitted an acceptable bid, according to Rosa del Mar’s Web site, and the Manatee County Clerk of the Circuit Court awarded mortgage holder Horizon Bank title to the property. The Web site said that “negotiations are now under way with several potential buyers that chose not to participate in the sealed-bid process.”

Efforts to reach Gould to determine if any new offer has been made on the property were unsuccessful.

Bradenton Beach approved a condominium development at Rosa del Mar several years ago, an approval that still stands available for any new buyer to pursue, although building permits on the site have long expired. New condominiums, however, are apparently no longer in vogue in the current Island real estate market.

The St. Joe Company has suspended sales of its SevenShores condominium project on Perico Island because of slow sales, while the Tidemark condominium project — approved more than six years ago — still has not submitted any building plans to Holmes Beach officials.

In the present condo market, the average price of an Island condo has fallen from more than $500,000 two years ago to about $333,000 at the present time. Those are figures that aren’t likely to appeal to condo developers.

It would appear that Rosa del Mar is like every other GSR property that real estate agents have tried to sell the past year: over-mortgaged and over-priced, said real estate agent Paul Gallizzi, himself a GSR creditor. And the past year has seen Island real estate prices plummet to the prices of pre-boom sales.

Gallizzi explained that when GSR and principals Robert Byrne and Steve Noriega bought a number of Island properties between 2002 and 2005, they would immediately have them reappraised.

Under the “hot” real estate market of the times, the appraisals invariably came back for an amount considerably higher than what GSR had paid for the property.

Byrne and Noriega would then “refinance” the mortgage for the higher appraised value, pay off the old mortgage, and have a hefty chunk of change left over to pursue other interests, presumably in real estate. It does not appear from the bankruptcy record that any of the money went back into development of GSR properties.

The bubble collapsed in July 2006, when GSR filed for bankruptcy, claiming liabilities of $32 million.

But Byrne and Noriega weren’t just playing with their own money or the mortgage holder’s funding. A number of Island and west Bradenton residents invested heavily in GSR in hopes of cashing in on the then booming real estate market.

Backed by a “personal guaranty” from either Byrne or Noriega, investors readily turned over their life savings, retirement accounts, IRAs and other assets to GSR.

What could go wrong?

After all, Byrne reportedly produced a financial statement that he was personally worth more than $30 million, while Noriega followed with a statement claiming he had a net worth of about $24 million.

In addition, the two men drove expensive cars, ate in the best restaurants, dressed fashionably, lavished expensive gifts on girlfriends, flew their private plane to the Bahamas, Fort Lauderdale, the Dominican Republic and other exotic locations for vacations and seemed to live the “Island” lifestyle to the fullest for two up-and-coming real estate developers.

Unfortunately, not a single GSR development ever finalized until after the company abandoned all its Island properties, including GSR’s $2.5 million model home at its Villa Rosa project in Anna Maria.

NBA basketball player Theo Ratliff put down a $175,000 deposit on that house, but construction was never completed. Galizzi said the house needs another $800,000 in work before it’s ready for a certificate of occupancy.

Meantime, the unsecured creditors, including Galizzi, have been left with $4.6 million in claims against GSR. The only creditor ever paid by Byrne and Noriega was a food server on Anna Maria Island, who invested her son’s college education fund of $25,000 in GSR.

Interestingly, when GSR held its initial hearing at the federal bankruptcy court in Tampa, attorneys for the court indicated they could not account for about $4 million. Byrne and Noriega both gave assurances they could account for the money.

But apparently not all the money has been accounted for, as Byrne and Noriega claimed.

Judge K. Rodney May of the federal bankruptcy court has set a court date of Jan. 10, 2008, to hear charges brought by GSR’s unsecured creditors committee against Byrne, Noriega and other “targets” who were involved in several suspect GSR financial transactions (see separate story).

With nothing but over-mortgaged and under-priced properties, the unsecured creditors are not likely to get anything back, unless the “adversarial proceedings” produce a judgment against Byrne, Noriega and the other parties involved.

That could take some time, said Gallizzi.

While the unsecured creditors are sitting around waiting for pay day, the mortgage holders of the various GSR properties will eventually just sell the holdings for what they can get in a down real estate market and take a loss, Gallizzi predicted. The unsecured creditors will get nothing from any sale.

That’s a claim Island businessman Kent Davis made last year, when he declared he had no faith in the bankruptcy court and that the unsecured creditors would never get any money out of GSR.

Davis had both a secured and unsecured loan with GSR, but because of a personal guarantee by Byrne that Davis recorded with the circuit court, he was able to regain a large portion of his $600,000 investment from properties Byrne owned in Palm Beach County.

What Byrne and Noriega will get out of the bankruptcy is unclear.

Byrne has reportedly moved to Chicago where he is planning to remarry, according to a blog on the Internet, while Noriega has not been seen on Anna Maria Island for some time. He was reportedly involved in an east Manatee County housing project as an adviser to the developer.

Efforts to reach Byrne and Noriega for comment were unsuccessful.