The condo conversion trend, which had swept Southwest Florida in 2004 and early 2005, had already petered out by that time. But Hickernell was still willing to pay Daniel Prewett more than twice what Prewett had paid for the 46-unit complex just nine months earlier.
It was no secret that Hickernell and Prewett, a tax felon who was recently arrested in Italy on money laundering charges related to a cocaine deal, had known each other a long time.
Now, a lawsuit filed against Prewett by Sarasota dentist Steven Wieder reveals that Hickernell played a part in Prewett's original purchase of Bermuda and acted as project manager after Prewett assumed ownership.
Wieder's lawsuit goes as far as to label Hickernell as "an insider," and raises the question about why an insider would be willing to pay such a high price in spite of the fact that the condo conversion market was softening.
"It was a total shock and surprise to learn of his situation and the allegations against him," Hickernell wrote. "Dan Prewett has been a very active investor in Sarasota and completed many real estate transactions with many banks here in Sarasota. I had never heard of any misconduct with his projects and he seemed to have a sound reputation."
Hickernell said Prewett hired him as an independent contractor, responsible for renovating and converting Bermuda into upscale condo units and then assisting in the sale of the completed units.
"Larger developers from outside the area continue to come to our little piece of paradise looking for various types of projects," Hickernell said. "One of the new out-of-state investment groups was interested in buying out Mr. Prewett in this project during 2005 and an agreement was eventually reached in late 2005."
He said that the new investment group was willing to pay twice what Prewett had paid because Prewett's original purchase did not include "an assignment fee to the prior sellers that controlled ownership rights of the complex, the closing costs of the original purchase, the future bank loan advances to cover operating costs, interest reserve costs, insurance costs and the actual renovation costs of the entire project.
"The subsequent buyout during the renovation process included these items plus additional closing costs for the second closing, additional real estate brokerage fees and then a remaining profit to Mr. Prewett's LLC and its investors," Hickernell wrote.
"We elected to accept this early out due the sudden and recent collapse of the real estate bubble that has been driving property values upward at an unprecedented rate," Prewett wrote. "For the next nine to twelve months, we predict a glut of available units will appear in the market place as investors who did not sell during the upswing are now forced to liquidate their holdings or face long term carrying expenses."
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