The fate of the Gulfstream Hotel, the faded crown jewel of Lake Worth's historic downtown, appears at first glance to rest in the hands of the Schlesinger family of Palm Beach and Connecticut. The hoteliers/developers bought the property in 2005 but have fallen on hard times. The hotel is in foreclosure, likewise the family's luxurious Omphoy, on Palm Beach, and Traymore, on South Beach. The Gulfstream's plight is a problem for Lake Worth, whose residents have long dreamed fondly of the day when the hotel, shuttered some years, would reopen and greet fresh streams of visitors to regenerate the town's economy.
But the path to rebirth may prove murkier than a simple restructuring of the Schlesingers' assets. Their mortgage note is held -- Fire Ant has learned -- by an imploding Wall Street hedge fund with roots in the financial black hole of the Cayman Islands. The fund's identity and that of its CEO -- a controversial and combative Wall Street figure -- lies hidden in a maze of property records, court documents, newspaper archives, and regulatory filings.
Less hidden -- though its present ownership interest is unclear -- is the
role of a globe-spanning Mideast investment group whose multiple
billions, like the Wall Street fund's, are also rendered opaque via the
Caymans. The Persian Gulf investors may or may not have washed their
hands of the Gulfstream.
Who are these actors, how are they interrelated, and what do they intend for the Lake Worth hotel? New Times
repeatedly reached out to all involved -- to their offices, their lawyers,
and their media reps. Nobody's talking. So all we know is what we found
along the paper trail. Here's what it shows.
HIDDEN
HAND ONE/JULY 2005: The Schlesingers announce their purchase of the
Gulfstream for $13 million. They promise to renovate the interior,
"transforming the popular Lake Worth landmark into a distinctive
boutique luxury hotel." They have a partner in the deal, Investcorp,
with whom they soon also buy up the Palm Beach Hilton, renaming it the
Omphoy Ocean Resort, and Holiday Isles, in Islamorada.
In the
Schlesingers' announcement and in news reports, Investcorp is described
only as a New York-based "global investment group." Fair enough, but
incomplete.
Bahrain-based Investcorp -- with $12 billion in assets -- is basically Mideast petrodollars flowing back through the Cayman Islands and buying up property throughout the Western world -- everything from
Italian vending machine manufacturers and French auto parts distributors
to Seattle kitchenware retailer Sur La Table and American Banker
magazine. Forbes once called its CEO, Nemir Kirdar (an honorary fellow
at St. Antony's College, Oxford, no less), "Michael Milken in a
burnoose."
Fire Ant finds it unsettling that Bahraini oil wealth depends on a certain amount of stability (AKA crushing pro-democracy protests) in the little island kingdom. But what the heck? Their money's green.
(Investcorp claims to have sold its interest in the Gulfstream in November 2011. But since its arrangement with the Schlesingers is shielded by Delaware corporate registration, we'll just have to take its word for it.)
HIDDEN
HAND TWO/APRIL-JULY 2010: The Georgia bank that
holds the mortgage note on the Gulfstream, United Community Banks, struggling to stay afloat in
the aftermath of the 2008 economic collapse, strikes an unusual deal
with a Wall Street hedge fund, Fletcher International. In April 2010, the
bank loans the fund $80 million and the fund buys $100 million of the
bank's troubled loans, also agreeing to buy a share of the bank. As a
kicker, in July 2010, the bank signs over the Gulfstream mortgage note to Asset Holding Company 5 LLC, a Fletcher entity.
(Asset Holding Company 5's corporate structure,
like Investcorp's, is hidden by Delaware registration. But its
principal place of business is the same as Fletcher's New York hq, and
its managing partner, George Ladner, is a Fletcher officer.)
Who's the Mister Big behind Fletcher International, a schmoozer so
smooth banks loan him tens of millions, trust him to rescue them from
massive losses in real estate, and make him part owner? Alphonse "Buddy"
Fletcher, that's who, a man well on his way to becoming the Black Gatsby.
BLACK
AND PROUD: A Harvard grad and in the early 1990s the highest-profile
African-American trader on Wall Street, Fletcher made his name at Bear Stearns (now bankrupt) and quickly jumped to Kidder Peabody (since dissolved), where he resigned
within a year over a pay dispute, filing claims of racial discrimination. The claims were not upheld, but Fletcher walked away
with a million-dollar settlement. He started his own firm, with
statements soon boasting triple-digit returns, and made a
fortune -- an estimated $150 million at one point. He gave away millions
(on paper, at least) to Harvard and to civil rights groups and lived a
life of extreme luxury -- art, antiques, a country estate.
This dream died at the Dakota,
the landmark Manhattan apartment building best-known as John
Lennon's last residence, where the former Beatle was assassinated. Fletcher had
bought not one but four of the building's über-pricey pads, and when he sought to buy a
fifth, in 2010, the co-op building's board of directors examined
Fletcher's finances and balked. Appearances notwithstanding, they said,
Fletcher didn't have the cash.
In January 2011, Fletcher sued the Dakota, charging (again) racial discrimination. Bad move. The dispute sparked the interest of the Wall Street Journal, and the dominoes started falling. The WSJ concluded
that Fletcher's assets were overstated by 150 percent, the SEC launched a
probe, and a collection of pension funds that had invested $100 million
with Fletcher asked for their money back. Fletcher offered them an IOU.
The pension funds sued. Last April, in the Cayman Islands, where the main Fletcher fund is stashed, a judge ordered liquidation.
In June, Fletcher's Bermuda-based "master fund" filed for bankruptcy in
New York. High-flying Buddy Fletcher had been grounded.
COLLATERAL
DAMAGE: So what's the upshot for little Lake Worth and the Gulfstream
Hotel, mere dust in the cosmos of the Fletcher empire? For one thing,
soon after the Gulfstream mortgage note was assigned to Fletcher's
control, in August 2010, his Asset Holding Company 5 foreclosed on the
property. They're still in court, the Schlesingers arguing that the
foreclosure is invalid because the original mortgage paper is lost. A
common plaint these days, and one that hasn't yet proved much of a
defense.
In the meantime, the Gulfstream piles up back taxes and mortgage debt, and
the building lacks good care: In February, Palm Beach County cited it
for fire code violations.
Whichever party prevails -- and Fire Ant isn't betting on the Schlesingers -- the result will be a hotel owner who's a highly motivated seller, in dire need of funds.
That should make for a selling price well within reach of a creative
entrepreneur -- a good thing for Lake Worth. If it's a buyer with cleaner,
steadier hands than those who've held the hotel before, so much the
better.
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