David Holland to relinquish ownership in The Lowell
February 20, 2010
On March 1, David Zatz, founder of the now dissolved David Holland Resort Lodging (DHRL), will officially lose his interest in The Lowell, a condominium hotel located between the Marriott MountainSide and the Resort Village at the base of Park City Mountain Resort.
Zatz made several business deals in 2009 in an attempt to save his company after a budget shortfall in March of that year made it impossible for him to pay condo owners their share of January and February profits. One such deal involved a loan for which he posted his ownership interest in The Lowell as collateral.
Michael Fried, founder of Phoenix Realty Group, will hold an auction on March 1 with the intent of collecting Zatz’s 49.5 percent interest in The Lowell.
Fried emphasized on Thursday that this is not an auction for units at The Lowell.
"It has nothing to do with the apartment units. It only has to do with one owner of the limited partners and his interest in it that is being foreclosed," he clarified.
The interest guarantees a portion of profits from the sale of the remaining units, but also requires the holder to share the burden for current expenses.
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Fried attempted to save Zatz from his debts last summer by organizing the company PRG Resort Management. PRG purchased the assets of DHRL in July and offered to repay condo owners their missing profits if they’d sign a three-year contract with PRG. A critical mass refused the deal, leaving Zatz without a business to generate revenue, and without assets to liquidate.
The Uniform Commercial Code, article 9 section 610, requires that collateral be disposed of in a "commercially reasonable manner." Sometimes that can be an auction, explained Michael Kerr, legal counsel for the Uniform Law Commission.
But Fried plans on placing the winning bid in that auction, and does not anticipate anyone trying to outbid him. It will be a process required for the creditor to take possession of the collateral.
Upwards of a million dollars of debt are secured by the interests in The Lowell, therefore a winning bidder would have to bid higher than the amount that’s owed, and the winning bidder would be responsible for their share of ongoing expenses at The Lowell, Fried explained.
Kerr said the process is required for two reasons. First, to make sure that a creditor can’t take control of collateral worth more than the debt in an unfair manner, and second, to make sure the maximum amount possible can be subtracted from the debt after the disposal of the collateral.
Kerr said this type of auction is often used when the amount of debt far exceeds the value of the collateral.
Steve Martin with the Summit County Appraiser’s office said the last unit of record sold for $1.2 million in March 2009. The most recent sales previous to that were in 2008.
David Zatz was called, but could not be reached for comment.