Attorney: “Minister Lake wanted to unwrap a beautiful present for IFPS” Corallo’s IFPS wants to stop Caravanserai auctionPOSTED: 07/30/14 7:16 PM
St. Maarten – The Court in First Instance will rule in summary proceedings on Friday August 8 whether Scotiabank will be allowed to proceed with the public auction of the Caravanserai property in Beacon Hill. International Financial Planning Services (IFPS) – a company linked to BPlus Giocolegale and Atlantis World Group owner Francesco Corallo – wants the court to stop the auction, because it claims ownership of the part of the property where the Dunes Casino is located. The company got a little help from Vromi-Minister Maurice Lake, but the bank’s attorney contests his decision.
IFPS bought the long lease on the contested property from Kildare Properties on March 29, 2011, for $1.5 million. Because Kildare had not asked permission from country St. Maarten to split the long lease, the court ruled that the purchase is void. Based on this argument, the court dismissed attempts by IFPS and one other entity, NHKK, to stop earlier auctions of the whole property by Scotiabank.
The bank actually undertook two earlier attempts to auction Caravanserai, after Kildare failed to meet its financial obligations. At the first auction, the property was priced at $20 million, but there were no takers. The second time, the bank lowered the price to $16 million – and again there were no takers. On August 13, Scotia will organize a third auction, this time with a preferred price tag of $12 million. The auction includes the properties IFPS and NHKK bought from Kildare.
Attorney Willem Nelissen asked the court on behalf of IFPS to stop the auction until there is a ruling in a regular court procedure about the property’s ownership. This legal procedure kicked off on August 12, 2013 and according to Nelissen a ruling is expected in September of this year.
The attorney said that the bank’s argument that there is no approval for splitting the long lease of the Caravanserai property is a moot point, because Vromi-Minister Maurice Lake has in the meantime approved the split and the transfer of the contested property to IFPS.
On June 27, Minister Lake signed a document that gives permission to change the use of the property from the existing “hotel” to “commercial activities.” The document, registered under number 1200/14, approves that Kildare splits the long lease and transfers the long lease for two parcels (of 929 and 999 square meters) to IFPS. The lease canon is 8 guilders per square meter – 15,424 guilders per year. In 1964, notary O’Connor signed a deed that gave Caravanserai the long lease to the complete property (24,850 square meters) for 1 penny per square meter – just 248.50 guilders per year.
Scotiabank’s attorney Roeland Zwanikken noted that during the past year the debt of Kildare to his client has increased from $16 to $17 million. “If the auction succeeds at the preferred price of $12 million, the bank will still be $5 million short,” he said, adding that the bank is being harassed for the second time by IFPS about the same issue. “This is a disguised appeal against the court ruling of September 27, 2013.”
The attorney’s focus was however on the agreement Vromi-Minister Maurice Lake signed on June 27. “This decision is a freak,” he said. “Apparently the minister had a serious need in the context of the elections to unwrap a beautiful present for IFPS. But it is a soap bubble.”
While many of the arguments during the summary proceedings were of a legal-technical nature, the bottom line according to Zwanikken is that the minister’s decision is not a ratification of the splitting of the long lease. This has to be done in a notarial deed, he said.
“It is at best a conditional approval. One condition is that all parties involved have to accept the split as legally valid. Scotiabank has written in a letter to the minister on July 16 that it does not agree with the split. IFPS is therefore not the owner of these parcels of land.”
The attorney said that Kildare had asked on December 20 of last year to split the long lease of the Dunes Casino from the Caravanserai property. Three days later, another request for splitting the property’s long lease was submitted to the Vromi-ministry. Zwanikken wanted to see these requests, but he said yesterday in court that he had never received a copy.
Zwanikken also criticized the minister’s decision to crank up the long lease canon from 1 penny per square meter to 8 guilders. “This leads to an erosion of the bank’s rights. This way, no bank will want to finance in the future property that stands on long lease land.”
The attorney labeled Minister Lake’s decision as “nothing more than a preparatory action” whereby a decision is taken first and splitting of the long lease follows later. Zwanikken furthermore remarked that the permission to split long lease rights have to be requested and granted before selling and transferring those rights.
Because, according to the attorney, the long lease rights have not been split, the purchase by IFPS does in fact not exist. “It is not possible to keep a non-existent part of long lease rights outside of the auction,” he said. “Potential buyers are only interested in acquiring the complete property.”
Lastly, referring to attorney Nelissen’s remark about an upcoming ruling in the regular court procedure, Zwanikken noted that it is not at all sure that this ruling will be there in September. “The debt to my client increases by about $100,000 a month. And it could take months before that ruling is there.”
Nelissen said that his opponent is leading the court up the garden path. “The legality of the split is a discussion for the regular court procedure and it is a fact that the approval to split the long lease is no longer lacking. There is not a single reason to auction this property now.”
IFPS bought the property assuming that it was mortgage-free, but according to attorney Zwanikken the company could have known better. “The notary (Gijsbertha – ed.) has dialed to research the mother-parcel, otherwise he would have seen that it was mortgaged.”
Kildare mortgaged the Caravanserai property in 2007 for $12.7 million, in 2008 for another $452,000 and in 2009 for $1,047,500.