The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Beachfront land at Abaco’s Orchid Bay development was sold at more than seven times’ below market value to clear a lien, its former receiver describing the deal as a “breach of duty” as he bids to be reinstated.

Paul Gomez, Grant Thornton (Bahamas) managing partner, alleged that based on a September 2013 appraisal of Orchid Bay’s beach and canal front lots, property sold for $1.2 million to clear a debenture was actually worth $8.9 million.

And, to further back his case that the best price was not secured, Mr Gomez said the four sales at Orchid Bay prior to that deal generated a collective sum higher than the $1.2 million debenture deal - despite the latter featuring seven times’ as many lots.

Referring to the deal secured by Coastal Property Services (CPS), the debenture holder, Mr Gomez alleged: “CPS sold 30 interior lots and 16 acres on the beach for the sum of $1.2 million.”

The four Orchid Bay lot sales immediately prior to that deal, between August 12, 2009, and May 12, 2012, had fetched sums ranging from $300,000 to $500,000

“The conveyances above total the sum of $1.472 million, yet CPS contends that the best possible price for 30 similar lots in addition to 16 acres on the beach was only $1.2 million.”

Mr Gomez’s allegations were contained in a January 29, 2014, affidavit that forms a key part of his attempt to be reinstated as receiver at the troubled Great Guana Cay-based property.

He was appointed as receiver by a Freeport-based judge of the Supreme Court last year, only for one of their Nassau-based counterparts to remove him earlier this year.

Justice Stephen Isaacs took that action following an application by James and Melonie Albury, Orchid Bay’s managers, and their realtor son Chris, who owns the debenture holder, CPS. James Albury is the CPS-appointed receiver over the Orchid Bay assets secured under the debenture.

Tribune Business understands that both sides will be before Justice Isaacs tomorrow for a further hearing on the matter, when Mr Gomez and his attorney, Jacy Whittaker of ParrisWhittaker, will attempt to both have the receivership reinstated and the matter consolidated in Freeport with other actions involving Orchid Bay.

Mr Gomez, meanwhile, is alleging that James Albury and CPS had a duty to Orchid Bay’s parent company, Great Guana Cay (Abaco) Development Company, to obtain the best possible price in selling real estate to pay off the debenture.

“There was a duty to obtain a proper valuation of the property to be sold, and to market and advertise the property for sale, and a duty to act in good faith and for a proper purpose,” Mr Gomez alleged.

“It is Synovus’s position that these duties have been breached.”

Synovus is the US financial institution that applied to the Bahamian Supreme Court for a receiver to be appointed over Orchid Bay, as it seeks to enforce a $6 million judgment against the property’s owner, American businessman William B. Johnson and his companies.

To further back his claim that the debenture-clearing sale involved an artificially-low price, Mr Gomez drew on an appraisal report produced by TR Associates, the company established by Tex Turnquest, the former Lands and Surveys director, and Anton Rodrigues.

Referring to Chris Albury’s January 14, 2014, affidavit that was used to support the case for his removal, Mr Gomez noted the claim that he made “extensive efforts to find a purchaser for the property who would pay an acceptable price for the entire development”.

Chris Albury’s assertions were backed by four pages of a 73-page appraisal report, and the Grant Thornton accountant described as “interesting” the finding that a ‘forced bulk sale’ of Orchid Bay would fetch just $4.86 million.

The TR Associates report that he commissioned, Mr Gomez alleged, placed a $5.5 million value on Orchid Bay’s marina alone.

“Another report was also prepared on September 6, 2013, that dealt solely with the market value of beach front lots and canals,” Mr Gomez alleged. “That report stated that the market value for beach lots was approximately $561,983 per acre.

“Based on the recent sale by [CPS] for 16 acres of beach front lots, this would equate to a market value of approximately $8.9 million just for that parcel of land which was sold for $1.2 million.”

Mr Gomez also expressed concern that CPS and the Alburys were behaving as though the debenture was still in effect, and had “not provided us with proof” that the $1.2 million sales proceeds had been applied to the $1 million debenture to clear it.

However, the attorney acting for the Alburys and CPS gave a slightly different perspective on the debenture-related deal when he appeared before Justice Isaacs to successfully argue for Mr Gomez’s (at least temporary) removal last month.

Roy Sweeting, the Glinton, Sweeting and O’Brien partner, alleged that the beach front land involved in the deal was “boggy”, implying it had much less value than that ascribed to it by Mr Gomez and TR Associates.

And Mr Sweeting alleged that Mr Johnson, Orchid Bay’s former owner, “was in the habit of wildly inflating the values”, having told one of the US banks that sued him the Bahamian property was “worth hundreds of millions of dollars”.

“It was never worth anything remotely close to that,” the attorney told Justice Isaacs. “There is about $8 million worth of property right there. It’s not a big place.”

Chris Albury and CPS purchased the $1 million debenture from Royal Bank of Canada (RBC), with what Mr Sweeting described as money borrowed from a private lender in a deal arranged by an Orchid Bay home owner.

“We listed the property as a whole package and tried to sell for a year,” Mr Sweeting told the court. “So we never got any sensible offers, all we got was ridiculously low offers.

“One of the offers, we understood that it went away because they found out the paper date on the loan that Chris Albury was taking was approaching.”

Describing the ultimate $1.2 million deal, Mr Sweeting said of the real estate involved: “It’s beach front, but it’s -the land itself just back of the beach is boggy, low-lying land not good for building on.

“It has bene left as beach access for some of the home owners. Mr Johnson had a plan to develop this into a hotel. And eventually one of the home owners bought it in order to get the land, and also to prevent that from happening. None of the homeowners want a hotel built inside there.”