MADEIRA BEACH — John's Pass Village is not immune from the financial pressures of a declining economy.
The recent foreclosure action against one of the tourist complex's major property owners, coupled with vacant storefronts proves that point.
A foreclosure action filed by Whitney National Bank last month primarily targets Dag Bros Inc., a company owned by Joseph and Anthony Dagostino. Frank Dagostino, another brother who personally guaranteed some of the affected loans, is also listed as a defendant.
Dag Bros owns a number of commercial properties in John's Pass Village, most notably Sculley's Boardwalk Restaurant and the Hut bar and restaurant. Those properties are not involved in the lawsuit.
"It is a tough time. The economy is brutal. The only thing we can do is fight through this," Frank Dagostino said Tuesday.
All the properties are for sale, according to Frank Dagostino, who manages Dag Bros' John's Pass properties. Previously, he was a principal in SimDag LLC, a developer in the failed Trump Tower project in Tampa.
Whitney National Bank is attempting to seize three properties, two vacant lots north of 128th Avenue and a waterfront property on the south side of 128th Avenue currently rented to a cigar store and a parasail business.
According to the lawsuit, Dag Bros is in default on a number of commercial mortgages, loans and lines of credit, which the bank says total more than $1.92 million.
Other defendants listed in the action brought by Whitney National Bank include Hubbard Enterprises Inc., Arthur Broaderick, and Northern Trust, N.A. All have some interest in the foreclosed properties, either by holding second mortgages or purchase options, according to the lawsuit.
Beginning in 2002, Dag Bros began purchasing commercial properties in John's Pass Village, most notably Sculley's Boardwalk Restaurant and the Hut bar and restaurant, purchased from Art Broaderick in 2006.
They also purchased and cleared a number of lots north of the John's Pass Boardwalk owned by Broaderick and Hubbard Enterprises, which are still used primarily for parking.
The intent was to consolidate enough property to develop a major hotel. Plans presented to the City Commission in 2008 called for a $15 million, five-story, 80-room hotel on lots facing 129th Avenue.
As the economy faltered, securing financing for the project also stalled. By August, Dag Bros was in default on loans on two of the lots.
"We are still planning to build a hotel. It's just a matter of lenders being willing to work with us," said Joseph Dagostino.
Three lots adjacent to those involved in the Whitney Bank foreclosure action and purchased by the brothers from Broaderick in 2006 for $1.63 million were sold back to Broaderick in April for $750,000, according to Pinellas County property records.
"What has happened to the Dagostinos is not out of the ordinary. They are smart young guys who got a bit aggressive and were caught in an economic pinch. I think they will come out of it," says Broaderick, who owns multiple properties in John's Pass Village.
As for the rest of John's Pass, Patricia Hubbard said her family's business, Hubbard Enterprises, has been hard hit by the economic downturn.
"I used to think I knew everything about business. This has been a very humbling experience," she said.
When the Hubbards built a $13 million five-level parking garage and 12,000 square feet of retail space at the southwest end of John's Pass Village, they expected to create a synergy between providing parking for John's Pass visitors and the new retail spaces at the south end of the elevated Boardwalk.
It didn't turn out that way and now, according to Hubbard, a number of the upper-level storefronts are vacant.
"When we finished construction, we had only one empty store. Now we are at 63 percent occupancy," she said.
The garage lost significant revenue when a gambling ship and shuttle service went out of business, she said.
"We are working with our lender, and are trying to find a new casino boat and new tenants," Hubbard said. "We are looking at our whole property and thinking we need to change the use of some to non-retail business spaces."
Yet, not all is bleak, she says. Business owners are beginning to call again, interested in relocating into the village.