Miami developers Ophir Sternberg and Ricardo Dunin spent about four years and millions of dollars trying to turn a resort on Nicaragua’s Pacific coast into a swanky ecotourism hot spot. They failed.
Left behind was a detritus of debt, unpaid taxes, missing funds, unpaid vendors and unfinished construction. The American retirees, outdoor enthusiasts and animal lovers who owned the villas were forced to clean up the mess.
All the while, an ownership dispute with Armel González, a local businessman, has only made it more difficult for villa owners to sell their units. One key contention: some of the owners say they were threatened by machete-wielding laborers. That never happened, according to González.
“There’s definitely several significant concerns when developing abroad,” said lawyer George Breur of the Miami law firm Mark Migdal & Hayden. “If the project goes bust, what recourse would I as an investor have to sue a contractor or developer?”
Buying property in developing nations carries plenty of risks, from sudden currency devaluations that can topple governments to endemic corruption and somewhat imperfect enforcement of the rule of law.
In Nicaragua, protests against President Daniel Ortega’s authoritarian rule, which included the killing of unarmed activists by the police, ultimately upended Sternberg and Dunin’s plans. The situation got worse when a global pandemic disrupted international travel for more than two years.
Among the many questions left unanswered is a big one: No one will claim ownership of the entity that controlled the common areas, as well as outstanding debt to the government amounting to more than $1 million, according to villa owners.
Investors say they were misled all along by Lionheart Capital, led by Sternberg and at the time, Dunin. They say they bought into a glittering track record that included a luxury condo development in Miami Beach, the Ritz-Carlton Residences, that Lionheart completed in 2019.
These days, only Sternberg is left of Lionheart’s principals. The pair split after the Nicaragua debacle. Sternberg is leading a $33 billion — yes, billion — SPAC with John Ruiz, a Miami healthcare trial attorney, to take Ruiz’s healthcare litigation business public.
The saga of Aqua Wellness Resort is a cautionary tale of how human hubris collided with emerging-market real estate. More than that, it’s the tale of what happens to small-time investors when swaggering Miami developers decide to cut their losses and leave.
A $45 million bet
Lionheart’s big adventure began in 2014.
Sternberg pitched a can’t-miss venture: Bring Six Senses, an upscale Asian hotel brand, to a resort in the coastal Nicaraguan city of Tola. Lionheart would more than double the number of villas to 110, add a pool, a spa and a new restaurant that would help them raise rates. The developers planned to spend up to $45 million, according to the Wall Street Journal.
Nicaragua had been a remote destination for all but the most intrepid surfers in the decades since Ortega swept into power in the Sandinista revolution that overthrew the U.S.-backed Somoza regime. Instability reigned as Ortega lost re-election in 1990 and was reelected in 2006 as the nation’s leader.
Still, the Central American nation sandwiched between Honduras to the north and Costa Rica on the south is home to rainforests, volcanoes and miles of uncrowded beaches. Just one year before Lionheart first visited Nicaragua, the nation’s first five-star resort, the Mukul Resort, had opened. Rates there start at $550 a night.
The timing, Lionheart figured, was perfect. Nicaragua seemed poised to shed its image as a nation plagued by revolutions and proxy wars. After Ortega returned to office in 2007, the government encouraged private-sector development, in addition to offering tax incentives on real estate and income.
Sternberg, who served in an elite combat unit in the Israeli Defense Forces, had visited Nicaragua to donate hospital equipment from the former Miami Heart Institute, a property that Lionheart later turned into the Ritz-Carlton Residences.
“I didn’t go there with the intention of investing any money or spending any time in the country,” Sternberg told the Journal in 2015. “But I loved what I saw.”
Lionheart invested in the Aqua Resort’s corporate entity, Azor SA, through a Nicaraguan company. Sternberg anointed Trevor Barran, a confident Princeton University graduate with a technology background and part-owner of an Aqua villa, to run and oversee the project.
The ultimate aim: Attract an eye-catching international brand to lure more tourists.
Aqua Resort homeowners bought into the idea. Among them was a New York City native known as Jungle Bob. Legally named Bob Smith, he’s a reptile enthusiast with an affinity for brown safari hats who operates Jungle Bob’s Reptile World, an exotic pet store on Long Island. Intrigued by the natural beauty of the property, where howler monkeys roamed, Smith bought a unit from the resort’s owner, American podiatrist Dan Rubano, around 2007, before it was completed.
“It’s a beautiful spot on the planet,” Smith said, recounting the private ocean cove that’s home to Aqua. The villas “are on stilts amongst the trees and most have a water view.”
Six Senses, a Bangkok-based operator of luxury spas and resorts stretching from Bhutan to Brazil, appeared to have signed up in 2015. Six Senses would operate Lionheart-owned resorts, spas and residences in Nicaragua, Travel World News reported at the time. The new villas would be offered for sale at an average of $2 million.
Those plans fell apart.
“We were working on a deal in the past but there was no progress,” Six Senses said in a statement. “At present, this is not on Six Senses’ project list.”
The Lionheart-led group lined up a new partner — The Surf Lodge, from Montauk, New York, and an expansion project soon began. Heavy machinery uprooted trees surrounding the property to lay down new roads. The sole restaurant was ravaged.
The destruction was heartbreaking for Smith and other villa owners. The local town had few to no dining options. The restaurant had been a main selling point and a communal gathering spot. Smith said he only heard the news after a confused renter called in December 2018 trying to locate it.
“He sent me a video and I cried,” said Smith. “Why would you knock down the only infrastructure? It’s the only place to go.”
By 2018, Nicaragua was teetering on the edge of a political crisis. The Ortega regime cut social benefits and raised taxes. In April, protesters took to the streets, calling for Ortega’s ouster.
Prospective Aqua investors were visiting one weekend when protests broke out. They were caught in the middle of unrest on the way back to the airport and their car windows were smashed, according to Barran. That was the breaking point.
“Everyone just freaked out,” Barran said. They “stopped putting more money into the whole enterprise.”
Construction came to a halt and Barran headed back to the U.S.
That’s when villa owners say they discovered a trove of unpaid bills, including debts on leased cars and a defaulted loan on a generator along with money owed to the government’s tax authority.
Debt woes became a blame game among Lionheart’s former principals. Barran said the resort simply ran out of money because of the political strife and the exit of Surf Lodge, which didn’t return requests for comment.
“The bottom line is they (Surf Lodge and Lionheart) just stopped funding it,” said Barran.
Dunin said he conducted his own audit in 2019 and found flawed financial records. He said he also questioned some of Azor’s decisions.
“When I confronted Trevor about it, he kept pointing to the revolution and no guests coming to the hotel for years and people being unreasonable,” Dunin said. “There was always an excuse.”
Dunin said the issues over the property’s books were especially perplexing.
“There was some story that the financial records for a few years were eaten by termites,” Dunin said. “Go figure.”
Barran claimed that some money was stolen before, during and after his time overseeing the resort. He said he reported everything back to Dunin and Sternberg and there was a criminal investigation into former employees siphoning money.
“It’s part of business down there,” Barran said.
Sternberg, for his part, downplayed Lionheart’s involvement in the whole operation, despite leaseback agreements signed by Barran.
“The big misconnect here is it wasn’t Lionheart,” Sternberg said in an interview. “It wasn’t even related to Lionheart. Lionheart was an investor. Lionheart bought a couple of villas, just like the other homeowners. This was not a resort owned by Lionheart. This was a resort with an HOA that already was operating and all the villas were sold when I arrived there.”
Sternberg’s role was to bring in a “five-star brand,” he said. “When that didn’t work out and political chaos came along, I just decided it wasn’t for me.”
Sternberg was focused on bigger ventures. He started eyeing the lucrative SPAC sector, where companies could raise millions of dollars in the public markets without a business plan. Dunin and Sternberg officially split in late 2022, dividing their properties. That left Dunin with the Nicaraguan assets.
Dunin said he quickly sought to exit the investment. Raised in Brazil, Dunin said he knew the pitfalls of building in developing countries and was not all that excited about it at first.
Enter González, the local businessman, who claims to be one of the original owners of Aqua land. He said he was owed $500,000, plus interest and other fees, from Azor through debt from a previous owner.
Fast forward to today, and González is back in the picture with another ownership dispute. González said Aqua’s corporate entity, Azor, was never transferred to him, nor did he want it.
“I don’t own any stock in the company,” González said.
González said Lionheart’s principals settled its debts with him at a meeting in Miami with Barran and Dunin in early 2020. As a result of that meeting, González said he gained control of the common areas, without taking on the liabilities of the corporate entity.
Dunin confirmed that power of attorney was given to a lawyer in Nicaragua to “transfer Azor’s assets in order to satisfy its debts with Armel.” Dunin said González was working to settle the tax issues.
The dispute has created a rift between some of the owners and González. They question González’s motives. González says he is helping resolve the resort’s issues and transferred common areas to a master HOA.
Smith and some owners banded together to recruit Paul Cohen, the owner of a tourism consultancy, in February 2020. Cohen said he started cleaning up the mess, taking over sales and marketing, building a new restaurant and operating the resort as a hotel.
The conflict between González and villa owners came to a head in May of last year, when men with machetes appeared on the property, according to some villa owners and a police report. González and another villa owner have contested the incident.
“They said we went in with machetes,” González said. “We simply locked the restaurant. They didn’t care that we had a contract.”
Dunin called reports of men with machetes storming into the property “a joke.” Nicaraguan farmers “all carry machetes,” he said.
Back in Miami, Lionheart remains largely unscathed.
Sternberg’s blank-check company, Lionheart Acquisition Corp II, which initially eyed investments in proptech companies, is working on completing its merger with Ruiz’s business.
Dunin has founded his own company, Oak Capital in Miami, which controls some of Lionheart’s former assets.
Barran is in New York City, leading a venture capital firm, CloudTree Ventures, that’s focused on investing in the Metaverse.
In Nicaragua, some of the villa owners hired a lawyer who sent legal notices to Sternberg and Dunin requesting $2.2 million in damages, or a transfer of the Aqua land to their homeowners association. The letter cited a loss of rental revenue from the leasebacks as well as damage to the property.
Dunin disputed the allegations.
“If anything, the people that got less hurt were the unit owners,” Dunin said. “They still have their properties, they have their easements, all the banks are satisfied, the tax authorities are being satisfied. So I understand that they’re upset. I probably would be upset in their shoes. But I’m not sure how to fix it at this point.”
The owners have tried to move on. The resort, now fully built and operating as a hotel, has hosted weddings and events as well as fitness influencers and fashion bloggers. It rates four and a half stars on TripAdvisor and was included in a Nicaragua Chamber of Tourism marketing video to attract post-pandemic visitors. Cohen says the resort is profitable.
But owners say all the lingering issues around land ownership have left them in purgatory. They cannot sell the properties, which require constant upkeep because of their proximity to the ocean.
One owner, who requested anonymity because he didn’t want to be defined by his investment, said he “owns a degrading wood house in a tropical rainforest.”
He points the blame at Lionheart, as well as on himself for not demanding more information about the resort’s issues.
“I didn’t believe it would be this bad,” he said. “We’re fundamentally locked into a cycle of doom for quite some time.”