A bankruptcy judge has rejected the proposed sale of the Palm House Hotel to a former owner who claimed a $37.3 million secured interest in the unfinished hotel-condominium in tony Palm Beach, Law.com reported. A dispute between the owner and a key creditor KK-PB Financial LLC, which is managed by Wellington developer Glenn Straub, has jammed up the proceedings on a property tainted by civil allegations of EB-5 investment visa fraud. The owner and debtor, 160 Royal Palm LLC, filed for chapter 11 protection last August, putting the Palm House Hotel in line for auction. KK-PB Financial wants to place a credit bid, saying it holds a senior mortgage on the property where a 79-unit development was planned. Straub bought the property at auction for $10 million in 2009 and sold his membership interest in the company in 2013. KK-PB Financial maintains 160 Royal Palm defaulted on the $27.5 million mortgage issued with the 2013 sale and now claims a security interest of $37.3 million. The stalking horse bid for the bankruptcy auction is $32 million. KK-PB asked U.S. Bankruptcy Judge Erik Kimball to estimate its secured claim to get a credit from the auction. 160 Royal Palm’s court-appointed manager Cary Glickstein, a former Delray Beach mayor, responded by asking the court to limit KK-PB’s ability to credit bid.
