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Date of Issue: September 21, 2006

Villa Rosa scores court victory - maybe

gsr trailer move pic
Not so rosy ending
Work crews last week removed the former sales trailer of GSR Development LLC at the Villa Rosa subdivision site on South Bay Boulevard in Anna Maria. Islander Photo: Rick Catlin

U.S. Federal Bankruptcy Court Judge K. Robert May might have given financially troubled GSR Development LLC of Anna Maria Island a helping hand last week when he approved a proposed sale of the company's Villa Rosa property in Anna Maria to Gaspar Properties Inc. of Tampa and extended the deadline for completion of the sale.

The original deadline was Sept. 11, but May granted GSR and Gaspar until Oct. 15 to close the deal, which May must still approve.

May also ordered GSR to come up with $100,000 by Dec. 15 to pay Bon Eau Enterprises LLC of Sarasota for the "option" to extend its mortgage with Bon Eau on the Villa Rosa property. If GSR fails to make the deadline, May said all of GSR's "interest and claims to any of the unsold lots comprising Villa Rosa shall be terminated and deemed null and void." In that event, Bon Eau would likely end up owning the property.

May said the sale of Villa Rosa to Gaspar is in the "best interests" of the GSR estate.

Some creditors say, however, that selling Villa Rosa to Gaspar is not in their best interests and the deal has no chance of completion. None of the estimated $2 million in net proceeds to GSR in the proposed sale would go to creditors.

One creditor, who asked not to be identified, said a creditor's meeting was held Sept. 17 and the creditors are expected to file a motion in federal court this week asking May to put all GSR properties up for sale to the highest bidder.

"GSR doesn't have $100,000 to pay Bon Eau," said one creditor. "I'd be very surprised if this deal ever goes through," the creditor added.

In his Sept. 14 order, May overruled objections to the sale by the Florida Department of Revenue, creditor Merritt Fineout and Bon Eau Enterprises LLC.

The DOR had objected because, according to Florida bankruptcy laws, the sale of any property by a company in bankruptcy is exempt from paying document stamps. DOR attorneys argued — apparently unsuccessfully — that the exemption applies only after a company in bankruptcy has filed a reorganization plan, which GSR has not. GSR's reorganization plan is not due in court until Nov. 13.

May did say that GSR shall "escrow" sufficient funds to pay any tax claim to the DOR relating to the property.

In addition, May said, for the property to be sold to Gaspar, GSR minority partner Ed Furfey must dismiss his lawsuit against GSR majority partners Robert Byrne and Steve Noriega and Bon Eau Enterprises.

Furfey had sued his partners and Bon Eau earlier this year after Byrne and Noriega sold a portion of Villa Rosa to Bon Eau. Furfey claimed that he had first right of refusal in any Villa Rosa sale, and that the "sale" to Bon Eau was actually a loan at usurious rates.

GSR's emergency petition to the court in late August said it could sell Villa Rosa to Gaspar Properties and company president Hamilton Jones for $11.5 million. After all liens and mortgages against Villa Rosa are paid off, GSR would net about $2 million, which the company claims is much-needed operating capital.

However, distribution of any money realized by GSR in the sale would be controlled by the court and the sale would not pay off any of the estimated $3 million in unsecured claims against GSR.