With exotic offerings like the “salt float bath,” the “glacial facial” and the “cryo one,” the Carillon Miami Wellness Resort in Miami Beach would seem to promise the ultimate in luxury, pampering and serenity.
But in the condo community that wraps around the oceanfront spa, providing breathtaking views of beach and ocean, residents feel more insulted and abused than pampered. And they are not serene.
A feverish battle has ripped apart the relationship between the Carillon’s well-to-do unit owners and the hotel and spa — the latter one of the amenities that attracted them to buy in the first place. The Miami Beach condo dwellers, a number of them affluent snowbirds from the Northeast seeking a healthy lifestyle, say the spa, hotel and common areas, while still upscale, aren’t what they used to be — or what they were promised — despite the Carillon Miami still ranking as one of the top 15 domestic spas by Travel + Leisure Magazine and reportedly a draw for celebrities ranging from Alec Baldwin to Barbara Walters to Zac Efron.
The fight has bounced around the court system for nearly seven years, occupying a squad of lawyers. The circuit judge currently overseeing it is exhibiting impatience. Michael Hanzman, who steered the enormously complex litigation over the catastrophic collapse of Champlain Towers South, culminating in a $1 billion-plus bulk settlement to benefit survivors and relatives of the dead, signaled his displeasure at a hearing in July.
After arbitrating a case involving almost unfathomable grief and suffering, this Carillon lawsuit is ... different.
“I’m really getting kind of tired of it,” Hanzman said of the Carillon feud at one point from the bench.
No one needs to pass the hat for Carillon condo owners. They are wealthy at a time when many South Floridians struggle to pay the rent. For some, the Carillon is a second home, their reward toward the latter end of a life of hard work or good fortune or both.
But many feel they are being taken advantage of by an absentee owner who sees them not as a community, not as people, but as an entry on a vast, impersonal balance sheet.
Pick any condo tower along South Florida’s skyline and you are likely to find raucous board meetings, blood feuds and fights over assessments. Even so, what’s happening at the Carillon stands out.
WHAT’S IN A NAME
Back in 2015, before things went sour, the Carillon was known as Canyon Ranch, for the acclaimed health-and-wellness outfit that ran the resort to the exacting standards of the property owners in the three side-by-side towers that pitchfork skyward on Collins Avenue between 68th and 69th streets. To hear the owners tell it, those were blissful days. With its zen-like, holistic approach to health, proper diet and wellness, Canyon Ranch is considered by many the Rolls-Royce of destination resorts.
There was one problem. In the wake of the meltdown in condo values late in the prior decade, the hotel and resort were tangled up in bankruptcy. They wound up being snapped up by a global investment firm, Z Capital Group, what the residents derisively refer to as “the hedge fund.” It is headed by James Zenni, whose holdings have included Affinity Gaming, Mrs. Fields cookies, a Swiss wellness resort called Waldhaus Flims, Alpine Resort & Spa, and the Daily Racing Form.
The unit owners asked that Canyon Ranch be retained as the operator of the spa.
In an email to unit owners, Z Capital expressed a willingness to make that happen: “Your message was heard loud and clear — many of you want Canyon Ranch to remain involved with the property. ... We propose to retain Canyon Ranch in the spa, provided the feeling is mutual.”
For whatever reason, it didn’t happen.
Bad feelings soon boiled over, leading to a lawsuit by unit owners against Carillon Hotel LLC and Z Capital Partners LLC that has been plodding through the courts for years. This year things got spicy. The defendants sent aggressive notices to unit owners, citing “millions in unnecessary legal fees.” Exercising their authority to impose assessments, Z Capital and Carillon Miami decreed that unit owners — the folks suing them — were obliged to cover Z Capital’s legal fees, totaling millions, incurred while fending off that still-pending lawsuit.
The bills, itemized unit by unit, were stratospheric — as much as $4,200 per condo per month for a period of six months, depending on the value of an owner’s unit. That’s on top of the already high condo fees paid by unit owners, and the legal fees paid to their own lawyers.
Owners were aghast.
Turnabout is fair play, however: Some of the units in the Central Tower resort hotel have individual owners, who include residents of the North and South Towers. They are assessed fees by the Central Tower condo association. But other units in the Central Tower — several dozen, in fact — were bought by management, and were effectively used as hotel rooms. But as the owner of those units, management was subject to the same condo board assessments as the individual owners. That included special assessments levied to pay for litigation.
What it meant was that Carillon/Z Capital was billed to raise money to pay the fees charged by the lawyers who were suing them.
“Z Capital didn’t like that,” said George Luft, former president of the Central Tower condo association.
Being billed for something isn’t the same as paying the bill. Z Capital dragged its feet, Luft said, triggering moves by the Central Tower association to initiate foreclosure. The bills have since been paid, Luft said, but he claimed accrued interest and other fees are still owed.
At a court hearing last month to try to untangle things, Tyler Hendry, chief financial officer of the Carillon, said money spent on court battles with the unit owners is money that can’t be spent on maintaining the property. A lawyer representing Z Capital, Brian Dervishi, said the assessments — the ones levied by Z Capital on the unit owners, that is — are perfectly proper.
“They chose to live there,” he said of the plaintiffs.
Judge Hanzman called a halt to the collection of those legal fees sought by management. He also put the kibosh on the condo board’s efforts to foreclose on the management-owned units in the Central Tower.
He did require the condo associations to post a substantial bond in case they ultimately lose the case.
Unit owner Kai Bird — co-author of the Pulitzer Prize-winning biography “American Prometheus: The Triumph and Tragedy of J. Robert Oppenheimer” and one of the few owners willing to speak on the record — said Z Capital is trying to run out the clock.
“For six years, Z Capital and James Zenni prolonged the suit by changing law firms, dragging out court dates and not being responsive to our lawyers’ demands for documents,” he said. “He’s just waiting until a buyer comes along that he can sell it to. ... In the meantime, people here are increasingly alienated from a management team that treats us like hotel transients and not condo owners.”
Bird owned a Central Tower apartment in addition to the condo where he lives in a different tower. Individual owners in the Central Tower can have management include their apartments in the stock of available hotel units, which Bird did. Management charges a fee for the service.
Bird said when Canyon Ranch was running things and the hotel and resort were in better condition, his apartment would rent for as much as $2,000 a night — considerably more, he said, than it would fetch today. He no longer owns that unit.
Z Capital/Carillon Miami has declined to address the Miami Herald’s questions about the residents’ concerns, choosing to make its thoughts known through court pleadings and communiques to the owners that often serve to inflame them.
After Judge Hanzman’s adverse ruling on management’s attempt to extract legal fees from the owners, Carillon Miami sent a letter to the owners listing the many awards that have been bestowed on the resort, from the 2021 World Spa Awards — Best Wellness Retreat in Florida to the 2019 SHAPE Healthy Travel Awards — Best Hotel Gym.
Residents remain resolute. The lawsuit is scheduled to finally go to trial in November.
CONDO HOTEL
Condo boards are seldom lovefests. Unit owners — at different stages of life, sometimes having very different financial assets at their disposal — fight over the size of assessments, the makeup of boards, the pool deck pavers, the allocation and location of assigned parking spaces, the hiring of window washers, the repair of roofs and just about anything you can imagine.
The disastrous collapse of Champlain Towers South cast a spotlight on the combustible condo board squabbling that preceded it — and the importance of the decisions about maintenance and repairs that ultimately emerge.
The Carillon Miami, being a combination condo hotel, poses its own unique challenges.
At the Carillon, the three towers — Central, North and South — each have their own governing boards that establish assessments that must be paid by unit owners within their buildings. A fourth entity, known as the hotel lot, is in effect the governing body for the hotel, the spa, the restaurant, the elevators and such. It is controlled by management, with residents having no say. The “hotel lot” apportions to each unit owner in all three of the towers a share of the costs for maintenance, repair, taxes and insurance to cover the “shared facilities,” things like lobbies and elevators.
Unit owners became suspicious of where the money was going — whether it was being accounted for properly. Feeling powerless, they demanded the right to examine the books and audit the numbers. They say they were denied that access.
In their lawsuit, filed in March 2016, the unit owners alleged that Z Capital claimed the prior owner left the books and records “in a state of disarray,” resulting in a delay in getting the owners a look at the books. The unit owners also asserted that Z Capital insisted board members and no one else could peek at the numbers. No legal counsel, no auditor.
And no copying of documents to share with others.
Board members weren’t pleased. Fast-forward six years and the parties are still at it.
INTERTWINED WITH NORTH BEACH
The property has a rich history, and was once very much seen as a catalyst for a North Beach renaissance. It started in 1957 as a single tower, called the Carillon and designed by architect Norman Giller, a Miami Beach icon. Upon its opening, the state-of-the-art, $20 million, 620-room hotel stood tall on the oceanfront.
Amenities included a dining room with space to seat 1,200 and a brunch room that could fit 450 hungry guests. There was a nightclub, where stars like Frank Sinatra and Dean Martin crooned, a putting course, driving range, and volleyball and badminton courts. That first year the Carillon tied with the Deauville for the “Hotel of the Year” award, bestowed by the Miami Beach Resort and Hotel Association.
Archival video from the early years shows cars with fins parked out front, two primates walking hand in hand through the lobby, possibly as a publicity stunt, a kitschy beauty pageant featuring women in bathing attire and, puzzlingly, a man in what appears to be wearing a space suit taking a dip in the pool.
But by the 1990s the hotel operation had gone dark, part of a massive overhaul and expansion. That remake lasted for a decade, undertaken by a company called WSG Development. Preservationists objected to some of the proposed design changes, slowing things down and generating headlines.
WSG didn’t make it to the finish, with lender Lehman Brothers taking possession. When the project was completed, there were three towers, not one, with the new North and South Towers devoted strictly to condo living. In addition to condo units, the original building housed the resort hotel and spa, with a focus on health and wellness. Canyon Ranch took over the spa and the Carillon property became known as Canyon Ranch.
The year of completion — 2008 — was a memorable one in South Florida and not in a good way. It was right as the nation plunged into a precipitous meltdown of property values, with South Florida condos leading the charge over the cliff and into the abyss. Lehman Brothers itself was plunging into bankruptcy, a spark that helped trigger the Great Recession. South Florida real estate, more than in most metropolitan areas, is cyclical, with periods of boom and bust. In the estimation of Peter Zalewski, a principal with the firm Condo Vultures, the Carillon redevelopers “missed the market.”
Finally, on Jan. 14, 2015, a dispatch from PR Newswire excitedly announced the acquisition and the name change — back to the Carillon. It said the facility would be run by a joint venture involving the creator of The Setai, South Beach and a prior manager of The Breakers, Boca resort. Big promises were made: The Carillon would be part of a “five-star brand ... a luxury flag with exclusive locations around the world with the Carillon Hotel and Spa as its flagship property ... unparalleled luxury ... a world class experience” ... an “unforgettable” experience.
As Z Capital stepped in, Canyon Ranch bowed out.
Although none of it is itemized in the Florida litigation, the owners cite a litany of perceived problems, from diminished quality of the exercise classes and equipment to the high cost and reduced variety of the items on the restaurant menu to the water pressure in the North Tower. It also did not go unnoticed, they say, when staffers were let go and wellness classes canceled during the pandemic without any sort of reduction in fees.
WARTS AND ALL
To the eyes of a lot of people, the Carillon would seem quite nice. But people who pay a lot of money — and the Carillon owners do — expect a lot in return. And they say there is a discernible difference between what Canyon Ranch provided and the conditions that exist now.
“All you have to do is walk through today,” a North Tower unit owner said. “Walk through the lobby, walk through the hallways, walk through the spa, go to the pools. And just take a look and then go to the Four Seasons. Go to the Ritz-Carlton, and you can just see ..... The Carillon is a perfectly nice place today. It is not at all what it was when Canyon Ranch owned it or what they said it was going to be.”
Kayce Driscoll, a Central Tower unit owner who testified before the court in July, has harsher feelings, spurred by the effort to make owners preemptively pay the legal fees of the people they are suing, a demand she called “outrageous.” A real estate agent who specializes in luxury properties and has sold units in the complex, Driscoll says she has not been able to sell any there lately because of the recent developments.
“The greed from this hedge fund is appalling. As individual unit owners, thank God, we’ve banded together,” she said.
For some owners, the legal fees and other price increases are putting the Carillon lifestyle beyond their grasp. A former South Tower Carillon unit owner who had just renovated her apartment, one of many disgruntled residents or former residents who would talk only “off the record,” said she decided to sell her dream home after receiving an email informing her of a huge spike in her maintenance fees, which had been about $2,600. After selling her unit in June, she received the special assessment notice that would have required her to pay an additional $2,035.17 a month — for the legal fees management wanted reimbursed — at least for a while.
“It was supposed to be my home forever,” she said. “I knew I could afford it just when my mom passed away two years ago. So I had a little bit of extra money so I was able to do that upgrade. And then I invested in the renovation and then when the letter came.”
Other unit owners suggested that she wait until after the trial in November to see if she really needed to move, but she says she couldn’t. She now rents in an older building nearby.
“I actually felt I had no choice because if things don’t change, I couldn’t afford it,” she said. “And then what if the real estate values dropped and I wouldn’t have any place to live.”
(July brought an unexpected footnote: Eric Sheppard, who ran WSG Development, the Carillon developer that didn’t make it to the project’s completion, was charged with COVID-19 relief fraud, for allegedly misappropriating $900,000 in Payroll Protection Program funds. It did not involve Carillon funds. Sheppard pleaded not guilty.)
In his ruling in July, Judge Hanzman stipulated that owners selling their units must inform potential buyers — and lenders — of the ongoing litigation and the possibility that units could still be hit with the assessments to cover management’s legal fees.
Management is offering more promises. In a recent letter to unit owners, Carillon Miami said the restaurant will be “welcoming the renowned Michelin Starred Chef Tristan Brandt to join us in residence at the resort for the upcoming 2022-23 season.”
Despite years of turmoil, unanticipated fees and frustration, residents are for the most part not giving up on the Carillon.
Not yet.
“One of the things that many owners say, warts and all. We would not live anywhere else, me included," said a unit owner, anonymously. “I love it here. ... The staff that is here, the individual people, the bellman, the housekeeping people, they are lovely. They are family to us.”
