Municipal Law Case Study: How Strong Legal Counsel Helped Ohio Real Estate Investor Turn Around a Struggling Resort Development

Tuesday June 18, 2024 Published in Corporate and Business
McCarthy with Hessler Lake Erie Shores

In the high-stakes world of real estate development, even the most promising ventures can quickly unravel without the right guidance. For Tim McCarthy, a seasoned investor and CEO of MotorCoach Resort Lake Erie Shores, the path to transforming a struggling 97-lot resort property into a thriving community was fraught with legal pitfalls and partnership challenges. However, with the strategic counsel of Wegman Hessler Valore, a respected corporate law firm, McCarthy was able to navigate the complexities and emerge with a reinvigorated development poised for long-term success.

The Resort’s Rocky Start

In 2019, McCarthy made the decision to back a group of entrepreneurs in their ambitious plan to develop a luxury RV property, Luxury Motor Coach Resort Lake Erie Shores, in the area where he grew up. With 97 lots spread across prime real estate, the potential upside was significant – but so were the risks. Within two years, it became clear that the operating partner McCarthy had initially backed was not up to the task.

“It became obvious that the first entrepreneur I backed was incapable of fulfilling his role,” McCarthy recounted. Faced with a potentially litigious situation and a his existing attorney on the brink of career change, McCarthy turned to Wegman Hessler Valore for guidance.

The law firm’s response was swift and decisive. “Wegman Hessler got me through a really tough time,” McCarthy said. They facilitated a settlement that allowed McCarthy and a new partner to take over operations in January 2022, providing much-needed stability. However, the challenges were far from over.

Quelling a Homeowner Revolt

As the new ownership team worked to put the resort back on track, they were confronted with a new crisis: a full-scale revolt by the property’s existing homeowners and lot owners. Concerns about the development’s management and future had reached a boiling point. Once again, McCarthy turned to Wegman Hessler Valore.

“They just saved us an extraordinary amount of money and time and hard feelings,” McCarthy said of the firm’s proficient handling of the situation. “All of it moved on without any repercussions.” By March, homeowner relations were on the mend and a rebuild was underway.

But McCarthy knew that the resort’s governing documents and HOA structure were likely still a liability. In a proactive move, he re-engaged Wegman Hessler Valore to conduct a thorough review and reorganization. The result was a smoothly functioning HOA and a rulebook that protected both the resort and its residents.

Untangling Partnership Woes

With operations stabilizing and homeowner relations improving, the next hurdle emerged from an unexpected quarter. The resort’s sales partner, whose role was crucial to the development’s success, “went south” and became bogged down in distractions and non-performance. Extricating the resort from this contract was another job for Wegman Hessler Valore.

“Again, I’m scared. So I ring-ring and say ‘Nathan, we’ve got to do another purge,'” McCarthy recounted. “I don’t want to hurt anybody. I don’t want to get hurt. Can you start figuring this out?” The firm spent four painstaking months untangling the agreement and negotiating a resolution embraced by all parties.

At the same time, a minority partner spooked by the resort’s earlier woes was looking for an out. McCarthy again relied on Wegman Hessler Valore to handle the delicate restructuring of the resort’s ownership, even as a new potential investor from a 460-lot resort north of West Palm Beach emerged with an interest in coming on board.

McCarthy credits the firm’s sage counsel in structuring a unique deal in which unsold inventory was sold to the new investor at half of the development cost, with profits split on future sales. “Complexity number five,” as McCarthy put it. “New sales partner wants ownership that I don’t want to give because I’ve just been burnt by all my partners and I’m sitting here alone.” Wegman Hessler crafted an elegant solution that brought in much-needed capital while protecting McCarthy’s controlling interest.

Navigating Taxes and Red Tape

Beyond partnership tangles and homeowner relations, the resort also found itself embroiled in a taxation quagmire that threatened its very viability. At issue was a tax increment financing (TIF) agreement that was intended to reimburse the resort for a million-dollar investment in sewer infrastructure. The county auditor, however, had other ideas.

“The county auditor decided that even though the contract said differently, he was owed that money and wasn’t going to distribute it back to us nor to the village,” McCarthy explained. To make matters worse, the auditor had prematurely placed the resort’s as-yet-undeveloped Phase 3 on the tax rolls at full value.

Faced with a county government’s unexpected “interpretation” of tax appraisals, TIF rules and a tangle of interlocking interests, McCarthy and his team were at a loss. Enter Wegman Hessler Valore. “They’ve made many trips here for the village. They’ve made many trips to the county auditor. They have made trips to Columbus for the state taxation board where the rules were that were being ignored,” McCarthy said. “That on its own was (an investment}. And our immediate return on that was (a 50% ROI) and long term return is about (an 8.5X ROI).”

The Art of Cutting Through the Noise

In McCarthy’s estimation, Wegman Hessler Valore’s key strength is the ability to cut through the turmoil and drill down to the core issues. “Here’s the key to Wegman Hessler Valore,” he observed. “They get beyond all of the noise. They look at the law. They look at fairness. They look at business strategy. And everything else becomes noise. Breaking through that noise is a pretty tricky thing to do.”

The firm’s strategy, as McCarthy sees it, is to focus in on the facts. “They do the heavy research, focus in on the facts, and then they never waver.” Equally important is the firm’s unflappable professionalism. “I’ve never seen any of them raise their voice or show emotion,” McCarthy added. “And that’s the key to getting through when people are trying to throw noise at you.”

A Trusted Partner in a Turbulent Industry

For McCarthy, who is involved in some 25 businesses and seven nonprofits, Wegman Hessler Valore has become the first call whenever a legal issue or need for strategy arises. The firm’s work on the resort development alone represented a (significant) investment, but the returns, he said, have been “uncountable.”

“I’ve got $14 million in this place,” McCarthy noted. “So what’s that cost if it goes under? Maybe I could sell the land for a couple million and the other $12 million is simply gone.”

Without Wegman Hessler Valore’s guidance, he suggested, that worst-case scenario could very well have come to pass.

But today the resort is thriving, with a reinvigorated HOA, a profitable partnership with a major outside investor, and a clear approach to taxes and finances. “What Wegman Hessler did – I mean, it was unbelievable,” McCarthy said. “I don’t know how they did it.”

In an industry where even the best-laid plans can quickly go awry, having a steady legal hand on the tiller can make all the difference. For Tim McCarthy and his luxury motorcoach resort development, Wegman Hessler Valore has been that essential partner, guiding a precarious venture through the shoals of litigation, partnership disputes, and regulatory pitfalls. The result is a real estate development case study example of how focused, strategic legal counsel can help position even the most challenged business for long-term success.

Wegman Hessler Valore specializes in business law for business leaders, applying legal discipline to solve business problems to help leaders run smarter. For over 50 years, this Cleveland law firm has provided full-service strategic legal counsel for closely held businesses, corporations, and individuals. Practice areas include: business law; municipal law; litigation; corporate governance; estate planning and wealth protection; intellectual property; HR and employee matters; commercial real estate; business acquisition, and more. Get in touch to learn more.

Visit or call us at (216) 642-3342.

Copyright © Wegman Hessler Valore. This information is for educational purposes. It does not reflect an attorney-client relationship with the author(s) or the firm. This information should not be used as a substitute for professional legal advice in specific situations.

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