The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

A Berry Islands investor is alleging that his plan to offset The Bahamas’ high construction costs by building condominiums has been derailed by the non-disclosure of height restrictions.

Michael Stegawski and his Berry Islands 3-66-4 Trust, in legal documents obtained by Tribune Business, are claiming that the islands’ largest real estate owner and their Bahamian agents failed to reveal a “restrictive covenant” that limits building height to 35 feet or three storeys.

The papers identify the local “agents” for Marcus Fender and his companies, Bahamian Asset Trust and Southward Trust, as the E Dawson Roberts & Company law firm and Coldwell Banker Lightbourn Realty, which acted as their real estate agent, 

Neither Bahamian company is named as a defendant in the lawsuit, or accused of wrongdoing, by Mr Stegawski, a Miami-based attorney and investment banker who launched his own private equity/investment house, Convergent Capital Group.

The dispute centres on “one-half acre of prime real estate located in the Berry Islands”, namely Lot 3, Block 66, Unit 4 at Great Harbour Cay - the numbers that Mr Stegawski’s trust has incorporated into its name.

The land, said to be “located directly across” from Great Harbour Cay’s main beach within the 18-hole golf course, and close to the 65-slip marina and airport, caught Mr Stegawski’s eye when it was brought to his attention by Coldwell Banker agent, Lauren Higgs, on February 26, 2019.

Talks about acquiring the property appear to have progressed quickly with Lori Lowe, E. Dawson Roberts’ daughter and the alleged trustee for Mr Fender’s Bahamas’ assets. Documents seen by Tribune Business include a sales agreement dated just weeks later, March 12, 2019, with the $40,000 purchase price paid in two instalments by April 23.

However, Mr Stegawski claims he only learned of the three-storey height restriction on April 3 when he received draft documents relating to the closing of the acquisition. He alleges that Mr Fender and his agents have failed to deliver the property “without restriction” in accordance with the sales agreement’s terms. 

“Defendants are familiar with the island, its real estate, and its facilities. Directly and/or directly through their affiliated companies, Fender is believed to be the largest land owner of the island and owns the marina, golf course, and airport,” Mr Stegawski and his trust claimed.

“Despite extensive familiarity with the island and having first-hand knowledge of, and having possession of documents evidencing the restrictive height covenant at issue, defendants failed to disclose the covenant to plaintiff.”

They added: “From the inception of the relationship, plaintiff communicated an intention to build multi-storey condominiums on the property and inquired as to height and density restrictions. When presented with the property on February 26, 2019, this was the very first issue discussed when the property was presented by Coldwell Banker’s representative.”

A copy of Mr Stegawski’s e-mail to Ms Higgs, filed with the south Florida federal court, shows he inquired about zoning and height restrictions for the Great Harbour Cay property but did not give specifics of his plans or what he was looking for.

“Do you have any information on zoning or density with the multi-family lot (ie. how many units/height restriction/building size limits)? This could be spectacular with three apartments and a rooftop terrace,” he wrote on February 26, 2019.

Mr Stegawski alleged that Ms Higgs replied the following day “and made certain document disclosures, but specifically omitted any reference to the restriction regarding allowable building height”.

Arguing that he has fully performed his obligations under the contract, Mr Stegawski is demanding that the south Florida court grant him possession of the half-acre without any construction height restrictions.

Should Mr Fender and his agents be unable to deliver that, he is requesting a damages award “equal to the value of the land without restrictions” less its present value.

Disclosing why the removal of the three-storey height restriction is absolutely vital to his strategy, Mr Stegawski’s lawsuit revealed: “Due to the remote nature and few inhabitants, almost all construction materials and labour must be imported to the island.

“In addition, the Bahamas is characterised by high local wages and has governmental restrictions imposed on hiring foreign labour. The result is that construction costs are extremely high. In order to offset the high cost of construction, plaintiff sought to develop higher density and luxury properties to sell the condominiums at a profit.

“The property sits at a high natural elevation and, beginning at about 25 feet in height, the proposed construction would have sweeping, panoramic views of one of the most beautiful beaches in The Bahamas. However, with the height restriction, plaintiff would be substantially limited in the number of units of construction and the views that could be obtained from each unit.

“The property without height restriction is extremely valuable. However, with the pertinent restriction of building height and in combination with the high construction costs, the property has nominal value and is not suitable for plaintiff’s intended use.”

Ms Lowe declined to comment when contacted by Tribune Business yesterday, while Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president, said he was off-island and had not been able to review the legal documents sent to him by this newspaper.

However, one source familiar with the dispute, speaking on condition of anonymity, suggested that Mr Stegawski’s lawsuit appeared to ignore the fundamental concept of “caveat emptor” or “buyer beware”.

“It’s frivolous and vexatious,” they added of the legal filings. “This is not an issue of title. It’s buyer beware, and I understand he was put on notice that there were restrictions.” Mr Stegawski, according to the documents filed with the south Florida court, also appears to have been represented by a Bahamian attorney in the shape of Adam Cafferata of Freeport-based Cafferata & Company.

The sales agreement, which has been studied by Tribune Business, specifically says the land being purchased is “subject to the applicable restrictions imposed on lots in the subdivisions in Great Harbour Cay, including those for single-family residential lots”.

Such usage appears to be incompatible with Mr Stegawski’s condominium plans. The lawsuit, though, refers to “multi-family residential land”, while the sales agreement - acknowledging that the purchaser needs to comply with the International Persons Landholding Act - also says he does not need a permit.

The deal also enables the seller, namely Mr Fender, to rescind the sale if the purchaser makes unreasonable demands. The source suggested that Mr Stegawski should have first checked whether the height restrictions could be overcome before paying the purchase price.

Another source added: “This type of thing has to be determined by Town Planning. Realtors can’t tell you what the restrictions are. They’re willing to do changes in places like Great Harbour Cay because they’d love to see development there.”

Mr Fender and his family have been heavily involved with Great Harbour Cay since the early 1990s, when they obtained a Heads of Agreement to redevelop the island’s rundown clubhouse and airstrip into a resort development. The Government, though, revoked the deal after the family failed to live up to their obligations within the set five-year timeline.

A May 2013 report in this newspaper confirmed they still own one thousand unsold lots, a 10-acre hotel site, the marina, the golf course (which is maintained by the homeowners themselves), the dilapidated beach club, the roads, the water utility, the monopoly fuel concession, and two blocks of rundown apartments.