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Date of Issue: May 03, 2007

GSR to Bradenton Beach: 'We're broke'

gsr-bb-perry.jpg
Show me the money
Bradenton Beach city attorney Ricinda Perry expresses her concerns to GSR attorney Richard Prosser and GSR restructuring manager William Maloney, at left, on when and how various city code violations at GSR properties will be remedied. Islander Photo: Rick Catlin

It's official.

GSR Development LLC, headed by the once-heralded "wonder boys" of Island real estate development - Robert Byrne and Steve Noriega - is broke, and the prospects of an immediate cash infusion look grim, according to GSR restructuring officer William Maloney.

 Unless the Island real estate market improves dramatically in the next few months.
Hopes by Bradenton Beach officials that Maloney and GSR bankruptcy attorney Richard Prosser were like the wise men of the Bible and would come to an April 26 meeting bearing offers to fix numerous code enforcement violations at GSR properties were dashed.

"We're broke," said Maloney, when Bradenton Beach city attorney Ricinda Perry asked how the company would bring its various properties into compliance with city codes. The violations are "hard to remedy" when the company has no money, he added.

Prosser said that the city was "not looking at a debtor flush with cash."

Perry indicated that the company needed to put a man-made sand berm at the Rosa del Mar property at 2510 Gulf Drive N. back into the ground, put up a "No Trespassing" sign and remove some open utility connections to comply with city codes. The company currently faces a code violation fine there that is mounting daily.

There's also a safety issue with the berm. Should a hurricane strike the Island, the sand would either be swept onto Gulf Drive or out onto the beach. Either way, it would create a safety hazard and the city would have to clean up the mess. Unless GSR removes the problem first.

Perry also discussed code violations at two other GSR properties, 109 Fifth St. S. and on Seventh Street South, and asked what the bankrupt company could do to "address our concerns."

Prosser replied that although the company was broke, he and Maloney would "probably" get a cost estimate to repair the berm and "see if it's possible."

Bradenton Beach interim building official Stephen Gilbert said his estimate is that it would take about $15,000 to remove the berm and place the sand back into the hole that GSR dug for its foundation at Rosa del Mar.

Even that amount, for a company with two principals who each have claimed to be worth more than $20 million, appears to be beyond GSR's means. "There are financial limitations," said Prosser.

Maloney said he would respond to Perry's requests within the next two weeks, but Perry admonished Maloney. "If you are going to walk away and we don't hear from you, the city will be forced to do something," she said.

 While the city has mounting concerns about code violations and wants them fixed at GSR properties, there's yet another problem with the Seventh Street South property.

Perry wants the owner to bring the property - now nearly 98 percent completed - into compliance, but the property now appears to have two owners.

She noted that the building permit doesn't allow split ownership. And a stormwater runoff issue must be resolved before a certificate of occupancy can be issued. But a CO can't be issued to two owners because the original building permit was for one owner.

As Ollie might say, "Another fine mess you've gotten me into, Stan."

Maloney said that generating any funds for GSR is going to take time. If M&I Bank - holders of the first mortgage - wants to advance funds to bring the property into compliance, that would be great, but bank officials at the meeting declined on the basis that it doesn't own the property.

Which brought the meeting back to square one.

None of the properties can be sold until they're brought into compliance and that takes money which GSR doesn't have.

Maybe the properties can be saved with a buyer.

Maloney did say he expected to sell some of GSR's various Island properties, "hopefully at auction," which he anticipated could be within the next 90 days. While that would bring in some much-needed cash to the bankrupt company, it might not solve the city's problems with GSR as the federal bankruptcy court will decide who gets any money.

That would mean any buyer would have to "commit" to funding the repairs needed to obtain a CO on any of the GSR properties in question, he observed.

But any buyer of GSR's Fifth Street South property will face another issue.

Perry said the property was built as a planned urban development, but the city has no evidence on file that any PUD was granted. If it's not a PUD, that means the structure is violating the setback ordinance. In addition, Perry noted, the structure is now four separate single-family residences when it's supposed to be two duplexes.

"That makes the property illegal," she said, but Maloney added that one of the units is already occupied.

Gilbert said he was going to investigate how the PUD designation was granted, but that would take some time, perhaps two weeks at the minimum.

At least three different building officials were involved in the project, he indicated, adding that the city can't be held liable for certificates of occupancy issued in error or by mistake.

"A $4 million dollar mistake," chimed in Maloney.

"We need to hear back how this happened," added a concerned Prosser.

OK, said Perry, but when is GSR going to fix the problems?

As soon as it gets some money, indicated Maloney and Prosser.

At the least, Perry wanted a "No Trespassing" sign on the Rosa del Mar property as soon as possible and Maloney agreed.

The GSR bankruptcy has been ongoing for 10 months, said Maloney. "We are nearing the end game," he concluded.

Wonderful, Perry indicated. "We'd appreciate some help" in getting those properties fixed up.

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