News

By Tim O’Meilia
    
The future of the Palm Beach Oceanfront Inn — which pitted neighbor against neighbor and roiled South Palm Beach politics for four years — is now in the hands of a foreclosure judge.
    The owners of the two-story, 58-unit motel, restaurant and bar have been battling foreclosure since February when PNC Bank filed suit in Palm Beach County Circuit Court to collect on a $3.4 million loan.
    That didn’t prevent the owners, the Paloka family, from suing the town of South Palm Beach in April after the motel’s second attempt to build a high-rise hotel-condominium was denied by the Town Council in 2009. The suit also named five current or former Town Council members, three planning board members and the town manager.
    In that lawsuit, the inn’s attorney withdrew his firm from the suit since it had represented the family of Pat Festino, one of the town officials named in the suit, in an unrelated case.
    The owners claimed the town officials violated their federal civil rights, conspired against them, refused to release public records, denied use of their waterfront rights, illegally appointed planning board members and enacted charter amendments in violation of state law, among other things.
    Shortly after the town successfully moved the suit to federal court, the Palokas withdrew the suit in May.
    “We’ve always got a lot of stuff on our plate. Not having this hanging over our heads is helpful,” said Town Manager Rex Taylor, who added that he was confident the town handled the motel’s applications properly.
    The motel has been a landmark since it opened as the Palm Beach Hawaiian Inn in 1964. The inn is the only commercial property in town.
    The Palokas, under the name Kosova Realty, obtained the loan from Fidelity Federal Trust in 2004 when they bought the property. Fidelity Federal was later taken over by National City Bank, which, in turn, was absorbed by PNC.
    In 2006, the inn applied to build the $250 million Palm Beach Picasso — 150 units in a 14-story building with two underground parking levels.  The family later reduced the scale of the project by two stories and 51 units, but the Town Council unanimously denied the application in 2007.
    The Palokas returned in October 2009 with a 10-story design but that, too, was defeated by a 3-2 vote.  In early 2010, town voters took the right to change zoning out of the Town Council’s hands and made changes subject to a town-wide referendum, making it more difficult for the inn to get approval for its plans.
    In its foreclosure suit, PNC Bank claimed the inn failed to pay its property taxes in 2008, 2009 and 2010, prompting the bank to seek full repayment on the note. The property taxes have since been paid, according to court records.
    In October, Circuit Judge Lucy Brown ordered the motel into receivership after finding that deterioration of the property, including its need of a new roof, required a third-party manager. Hotel revenues would be put in escrow.
    The Paloka family appealed Brown’s ruling to the 4th District Court of Appeal in November.
    Meanwhile, the court-appointed receiver, Wayne Ginter, withdrew after meeting with Paloka family in early December and after questions arose about whether he could post the required $850,000 bond.
    PNC has asked that a second receiver be appointed. The Palokas, through their third law firm, are challenging that request.