It required some legal legwork, but an oddball bankruptcy case brought on by the demise of a Myrtle Beach vacation real estate deal is coming to a close with a financial outcome no one quite expected.
Certainly not Columbia attorney Rick Mendoza, who’s seen his share of broken businesses.
“It turned out to be, frankly, a stunning success,” the Nexsen Pruet partner said last week.
In this case, the insolvent client was an organization that operated and maintained Sand Castle South, a speck of a timeshare property on South Ocean Boulevard. It was made up of a mere 39 units on the ninth and 11th floors of the 14-story Sandcastle Oceanfront Resort.
Its collapse was a collective effort involving hundreds of owners who, early on at least, were enamored enough with the idea of an annual weeklong stay on the Grand Strand that they purchased a piece of the tiny getaway.
But not enough buyers lined up to make Sand Castle a financial success. Only about 35 percent of the 2,000-plus weekly intervals were ever sold after they hit the market around 2007, according to court testimony.
Making matters worse, more than half of the co-owners dropped out of the picture entirely. About 500 of them stopped paying the monthly fees required to maintain the units, forcing the financially spent Sand Castle Timeshare Owners Association Inc. into bankruptcy about 18 months ago.
The goal of the filing was not to go after the past-due payments and re-energize the property. It was to liquidate the long-vacant units and pay off some of the mounting bills.
For Mendoza, it wasn’t as cut-and-dried as hiring a real estate agent and putting out a for sale sign. The legal process required him to reach out to the more-than-800 Sand Castle co-owners all over the map to terminate the original 2006 timeshare plan, which took about four months to pull off.
Then, he had to file a lawsuit against everyone with a potential financial stake in the property, partly to simplify the deed and partly to dictate how to carve up the sale proceeds. Another purpose was to keep the Sand Castle deadbeats from claiming money they weren’t owed.
Once the litigation was resolved, the final step was to put the 39 units on the auction block.
The Sept. 15 online sale was frontloaded with a guaranteed “stalking horse” bid of $765,000 from a group called South End Condos LLC. The court-sanctioned auction rules required any competing offers to be at least $30,000 higher.
Mendoza said he was floored to learn that more than 10 bidders had paid a hefty refundable deposit to participate. He credited the auctioneer and the real estate agency he had hired for creating so much interest.
“They knew how to reach the pool of potential buyers,” he said
At least two of them went toe-to-toe. U.S. Bankruptcy Court Judge John Waites noted in a legal filing that “vigorous competitive bidding occurred at the auction,” resulting in a winning offer of nearly $2.49 million from Myrtle Beach-based Airport Properties LLC.
“It far exceeded what I expected,” Mendoza said.
As it turned out, the second highest offer of more than $2.48 million wasn’t needed as a backup bid. Airport Properties closed on the units on Oct. 22, according to a court document filed last week.
Among the beneficiaries is Horry County, which will receive all of the $135,000 it’s owed in property taxes. Also, Sand Castle owners who were current on their dues up until the bankruptcy also will receive a check.
Airport Properties, which is run by Grand Strand hospitality business owner Henry “Tripp” Coane, couldn’t be reached for comment last week, but it knew exactly what it was getting into. It already owned most of the other floors within Sandcastle Oceanfront Resort.
Contact John McDermott at 843-937-5572 or follow him on Twitter at @byjohnmcdermott