Owners at South Beach’s Shelborne fight $30 million assessments, foreclosure

By Francisco Alvarado, FloridaBulldog.org 

The Shelborne Wyndham Grand South Beach

The Shelborne Wyndham Grand South Beach

For the past four years, about 40 investors and snowbirds who own 42 rooms in a landmark oceanfront art deco hotel have been locked in a pitched court battle with one of Miami Beach’s most politically connected families to keep their units.

An ongoing civil lawsuit in Miami-Dade Circuit Court alleges that Miami Beach developer Russell Galbut, along with relatives and business associates, broke Florida condo association laws by passing nearly $30 million in illegal assessments for renovations at what is now the Shelborne Wyndham Grand South Beach. That works out to roughly $107,142 per room.

The group, 10 of whom spoke with a reporter but asked that their names not be used, claim Galbut stacked the condo association’s board with flunkies and is trying to take control of the entire building by initiating foreclosure proceedings against them for refusing to pay what they believe are outrageous assessments. They also alleged that their rooms were demolished without their consent during the renovations, resulting in the City of Miami Beach revoking their certificates of occupancy until they fixed their units.

“They are using the old game of charging us exorbitant assessments to push us out,” said one New Yorker who purchased two rooms in the late 1990s as an investment. “There is a conspiracy to take our deeds for peanuts. Their end game is to own all the units.”

Galbut is not a defendant in the case, but a Galbut company that owns 100 rooms and 57 commercial spaces at the Shelborne is a defendant. Other defendants with Sherborne Property Associates are four shell companies Galbut controls, his cousins Keith Menin and Joan Brent and the Sherborne Ocean Beach Hotel Condominium Association.

Ronald M. Rosengarten of the Greenberg Traurig law firm represents Sherborne Property Associates. 

“While it is true that friends and supporters of the Galbut family projects may sit on the board, the Galbut family does not ‘control’ their votes,” Rosengarten said. “Currently, Galbut family related entities only have a minority interest in the Shelborne, owning less than one sixth of the units and certainly do not control the units.”

Rosengarten said court records also show the Galbuts’ renovation of the Shelborne “has been a financial boon for the unit-owners and not a fraud.”

Built in 1940, the iconic hotel at 1801 Collins Avenue was entirely owned by Galbut and his relatives in the 1980s. A decade later, the Galbuts began selling some of their units to outside investors when the property was converted to a condo-hotel, according to the 10 owners and Rosegarten. The new owners were allowed to rent their rooms to tourists through a Galbut entity that managed the hotel or other companies that provided booking services.

Galbut family big political contributors

Galbut family members and companies they control have contributed tens of thousands of dollars to political committees supporting Miami Beach city commission candidates. Through six companies he controls, Russell Galbut also has raised $10,000 for a PAC supporting Miami-Dade Mayor Carlos Gimenez’s re-election. Three Galbut family members have contributed a combined $15,100 this year to Republican congressional candidates including Sen. Marco Rubio, and Republican U.S. Reps. Carlos Curbelo and Ileana Ros-Lehtinen.

Things began going awry in 2010, a year after management of the Shelborne was handed over to Menin Hotels, a company controlled by Galbut and his cousin, Keith Menin, the lawsuit states. From 2006 through the beginning of 2015, Menin also served on the condo association board. The lawsuit alleges Menin and the board voted in favor of a $15 million renovation in 2011 to redo the Shelborne’s common areas, from the hotel hallways to the lobby to the pool deck without obtaining approval from at least 75 percent of the unit owners as required by state law.

Yet the non-Galbut owners still got a bill for the $15 million through a series of special assessments between 2011 and 2012.

“Keith Menin knows the Menin Alterations are unlawful,” the lawsuit states. “But he caused or allowed the partnership to make them anyway.”

The lawsuit also claims that Joan Brent, the other Galbut cousin who served on the condo association’s board from November 2011 and June 2013, knew the Menin Hotels renovation was unlawful.

Barely a year later, Galbut and his alleged surrogates signed an agreement with Wyndham Hotel Management allowing them to market 125 rooms and the common areas of the hotel under the Wyndham brand, the lawsuit states. The non-Galbut owned-rooms were not part of the deal.

Despite just finishing the $15 million update to the building, the condo board initiated another renovation project in the summer of 2014 in order to meet Wyndham standards, the lawsuit states. This time, the non-Galbut owners were assessed a combined $28.7 million, according to the complaint.

Again, the condo board did not obtain consent from 75 percent of the owners, the lawsuit alleges. It also says Galbut, Brent, Menin and their allies on the board devised a plan to lie to the non-Galbut owners about the extent of the renovations – saying only that they were replacing the Shelborne’s windows and making repairs required by the City of Miami Beach.

In the ensuing months, the lawsuit say, the non-Galbut owners learned that the scope of the work was much bigger than they were told and that the developer and his cohorts barred them from entering the hotel, preventing them from seeing what was actually happening in the building.

“While the property was closed, the conspirators caused or allowed the structure to be completely gutted,” the lawsuit states. “By closing the property, the unit owners were simultaneously deprived of the use and income generated by their residential units.

Many Shelborne owners “forced to sell”

Predictably, many members could not afford this wave of special assessments with or without the building being closed so they were forced to sell their units.”

The lawsuit also notes that Shelborne Property Associates obtained a $125 million loan around the same time the deal with Wyndham was signed. The proceeds were used to buy rooms from non-Galbut owners who wanted out, the lawsuit alleges. Court and property records confirm that Galbut-owned shell companies purchased 120 units at the Shelborne since 2012, the complaint alleges.

“There were not $125 million worth of units for sale when Shelborne Property Associates obtained this financing,” the lawsuit alleges. “But SPA knew that the association was about to levy tens of millions of dollars of additional special assessments against its members, and close the condominium property for over a year.”

The purchases gave Galbut controlled entities 75 percent ownership of the Shelborne, and the board the necessary majority to approve the Wyndham renovation after the construction had already begun.

A non-Galbut owner who identified himself as “Jackie” said Galbut and his accomplices are squeezing them out because they don’t want to pay them fair market value for their rooms. “They saw that Miami Beach real estate in general was skyrocketing, especially beachfront hotels,” Jackie said. “Rooms have been going for $700,000 to $800,000 a room. That was the case with Raleigh Hotel, the SLS South Beach and the Shore Club.”

According to a review of some of the Shelborne units purchased by Galbut-related entities in the last four years shows rooms have sold for an average between $150,000 and $250,000. Rosengarten countered that non-Galbut owners who sold rooms to his client got good deals.

“Property records evidence that the overwhelming majority of transfers occurred in sales whereby the owners received vastly greater prices for the units they sold compared to what they paid for them,” Rosengarten said. “In other words, the condo owners were not victims but were beneficiaries of the increasing valuation which resulted from maintaining and improving the building.”

Adding insult to injury, construction workers entered their units without their consent and destroyed their rooms, the non-Galbut owners allege. “When we finally gained access to our units, we found our rooms completely wrecked,” said the New Yorker who owns two rooms. “They demolished my kitchen, my bathroom and my living room. They never repaired the damages.”

The owner said city inspectors flagged his units for 20 life safety violations and told him he couldn’t use the rooms until he fixed it. He spent close to $25,000 per room after paying nearly $40,000 in special assessments, he said.

Another owner, a retiree who lives in Atlanta, said she had to dip into her 401K to finance her repairs. She had plans to live out her retirement in her Shelborne unit.

“In anticipation of losing my unit, I tried to buy a house,” she said. “But I was denied a mortgage when the bank saw I was shelling out these huge sums of money and that my income had dropped to $50,000 a year. All because of the Galbuts.”

Print Friendly, PDF & Email
16 Comments Post a Comment
  1. Leah Jackson says:

    Very disappointed in the scope and slant of this article. ‘The Bulldawg’ should be called ‘The Poodle’.

  2. Evelyn Bailey says:

    This article only begins to tell the story of individuals who bought into a struggling South Beach condohotel more than a decade ago; improved and rented our units to establish clientele and invigorate interest in the Shelborne; trusted a board of directors to act in our best interest, only to have our investment jeopardized by the actions described in this story. Many of us are Miami-born, average-income people, as I am; who, for two years, were hit with monthly, on-demand payments, some as high as $16,000. At one point, I was paying nearly $5,000 a month in assessments—nearly three times more than the rental income I was receiving. We were assessed $100,000 individually over a two-year period; had no income for a year and a half while the hotel was closed during the secret Wyndham conversion; and had our units deliberately vandalized and rendered uninhabitable, requiring us to pay thousands to make them rentable again. We were never allowed to vote on the assessments, nor on the secret agreement to become a Wyndham property. These actions aimed at driving us into foreclosure, along with countless others, have put us in a long, legal battle with a developer whose similar Board of Directors tactics are reported in related stories on this site. See Plaza Health reports.

  3. Westy says:

    There is a clear pattern here – condos on West Ave. Worse, tried to sabotage the neighborhood associate reining in his rowdy nightclubs.

  4. GIA HUTT says:

    I’m one of the owners in this lawsuit,I can promise you,this is the tip of the Iceberg.
    There’s a lot more going on including Judge Bailey’s ruling that indeed they had the right to vote retroactively,to approve the work that was done AFTER they had obtained the majority of the units by forcing the owners out,how convenient!
    Not sure if it was filed already but I understand it was signed,so it’s just a matter of time until this becomes a “new ” law
    Just imagine what this ruling will do to millions of condo owners in Florida!
    This in the hands of a “runaway” corrupt board would be used to not take a vote of 75% BEFORE the work is done,then destroy the place,charge owners in the form of illegal assessments,(not voted on or approved by the 75% required by law) and the only recourse the owner would have would be to sue the board,and then,in the event they prevail,the board would have the right to assess them AGAIN to restore the property back to the condition it was before the work was done,insane isn’t it?
    What recourse will owners have in Florida?
    Should this become a “trend” all of this because the law doesn’t include the word “before” a vote is taken,?
    So if it doesn’t say it then,regardless of the absurd result,it’s allowed !!!
    Where did this law go wrong? How can it be open to such interpretations?
    Time for a change to PROTECT the owners for a change!
    This is a case where the victims are being victimized again and again…
    To be continued…

  5. leonard wadler says:

    The big-shot Shelborne ‘family & friends’ -and their ‘selected Board’; trampled on the ownership rights of the regular middle class owners ,purposely -vandalizing , exploiting ,plundering , and effectively forcing sales.

    Mr .Rosengarten, as a point of information prices are up on all prime ,oceanfront South BEACH hotel properties; but in the case of the those who were already
    pushed/ “bought out ” , and for those stalwart owners currently defending themselves in this David vs Goliath perpetuated battle , your assertion [higher values ] ,is of little comfort or benefit.
    i sincerely ask you and your clients to reflect on your strategy ; recognize our grievances as legitimate – and seek a just resolution .

  6. Dom Rodriguez says:

    The Shelborne Hotel Group with its family controlled board have passed special assessments in the thousands of dollars without the approval of the owners (75% vote required), forcing many owners to sell their units at much below going prices in the South Beach area, leaving the remaining owners in a much weaker position and subject to the Shelborne Group demands for additional special assessments and increase in fees. We need to correct the laws so that owners are protected from such potentially fraudulent behavior.

  7. Mark says:

    While this is a great article that outlines some of the issues at the property, it hardly scratched the surface. Using 3rd World style Guerrilla tactics, these people cut off the food supply for all the owners in this building until they starved metaphorically speaking. Taking small investors and forcing them to sell their units for pennies on the dollar with respect to their values is worse than putting a gun to their heads tying their hands behind their back, and robbing them blind. The common criminal uses a gun and it’s usually over quickly. These people intstilled hope in the unit owners, making them feel like they could possibly be part of something bigger and better only to simultaneously stab them in the back. The intentionality of it all it’s what makes these acts so egregious. The thing that is most disturbing about what transpired is wondering how people can stoop so low and hurt so many people and be completely fine with it.

  8. Miami Holidays says:

    $30 MILLION ( x 2)
    In South Beach it is not unheard of to special assess for the 40-year certification. But -WOW!! $30 MILLION for the assessment.
    So, but wait, -knocking it all down, and doing it AGAIN for
    another $30 Million -only 2 YEARS LATER..??? As we owners discovered from a little mistake which opened a Pandora’s box, it was a complot to muscle owners out at fire-sale prices.
    And it’s apparently not just limited to the Galbut’s intentions with The Shelborne.
    At The Shelborne, it all surfaced the evening when the Galbut-controlled board realized they didn’t have the majority vote anymore, and would be voted out…so they ABRUPTLY cancelled the meeting. That’s when we knew we were in trouble…and we were dealing with fraud. And these perps need to be investigated. FBI. CIA. AFL-CIO ..not just Miami Beach police. Some workers at the Miami Beach Building and Zoning were freaked out at the level of corruption that they encountered with the Galbut entity (“The Shelborne is such a mess, even toilets have portfolio numbers!”).
    How is this allowed to continue in this county? Remember Alex Daoud? (associated with Galbut) He went to prison for corruption. We can’t let their unscrupulous actions continue with their efforts to dominate by corruption and fraud . Justice needs to prevail.

  9. Yvette says:

    My husband and I were born and raised in Miami. We are middle class hard working professionals that looked into investing into a property in our backyard, beautiful and historical Miami Beach. Little did we know our dream investment would turn into an unjust nightmare. This story is just surfacing some of the “bullying” tactics these people have put us thru…there are numerous details and remarkable facts that are not mentioned that we are trying to endure and are suffering for. How can the city allow such scandals? How dare they try to entice us with improvements and then deceive us with monstrous illegal assessments, sustained closure of the building and defacement of our property. Our unit was vandalized, robbed and altered without our consent. We are OWNERS, we should be warranted the right to consent what would be done in our units. We hope that our justice system WILL seek truth in this case and find that these people are corrupt and need to be stopped. Until then, we refuse to be “bullied” out of what is legally ours!

  10. armando cruz says:

    I am another owner involved in this law suit.I would write a compilation of everything but I don’t want to bore you the readers with the same comment again .I just agree one can not be bullied .And justice will be done.

  11. Ben Rush MD says:

    “Some men rob you with a six gun. Others do it with a fountain pen.”
    Woody Guthrie

  12. Evelyn Bailey says:

    “Silence encourages the tormentor, never the tormented.”
    Elie Wiesel

    Owners at The Bentley and The Mondrian hotels, and Plaza Health employees, we welcome your support. Please speak up!

  13. FRANK DADDARIO says:

    ………..this is a similar situation i can remember at the SHOPPES OF OCEAN COURT with richard layfield and dr adrian and the promenade between the clevelander and versace casa suarina ……….. and indeed recounts many similar issues as covered by gerald posner in MIAMI BABAYLON ……….. the ego controls the checkbook and next thing you know you are financially involved with a property with more pizzazz than promise and then you realize you just want OUT = period

  14. Jan Crowne says:

    Greetings ! I understand you and this case is really ugly. Owners and Wyndham falsified the financials regularly. Wyndham cooked the books, that’s why Morimoto sucked too. Can someone tell me who is representing you? I will share important documents that may help your case. Good luck to all.

  15. Steve W. says:

    Now, let us see what happens to Mondrian after Menin has bought it.

Leave a Reply




Newsletter

Notify me by email when new stories are published.