The cause of the fire appeared to be accidental, according to assistant Islamorada Fire Chief Bruce Stoll. He reported that the fire started on the outside of the building and spread into a stairwell. Key Largo Volunteer Fire Department Chief Sergio Garcia said firefighters had the fire under control by 1 p.m. but were checking the building for flare-ups and were removing part of a stairwell. Fire and rescue crews from Key Largo to Big Pine Key responded.

Jim Costello, resort manager at Cheeca, said a demolition crew accidentally started the fire while cutting into a metal roof with a cutting torch. Sparks from the torch flew and accidentally caught the old thatch roof on fire, Costello said. Costello said the fire was contained quickly and won’t impact the resort’s plans to reopen by the end of the year.

Zirkelbach said the fire started somewhere along the northeast corner of the building opposite the starting point of the New Year’s Eve fire that severely damaged the structure and closed the resort. Zirkelbach said he heard reports that a welder’s torch ignited the fire somewhere on the fourth floor, but fire officials would not confirm it. Wagner said it appeared the fire could have started on a long thatch roof overhanging what used to be an outside dining area on the side of the building facing the ocean.

A thatched overhang on the north side of the building was the source of the first fire that is believed to have been sparked by an ember. The main building housed administrative offices, a lobby, two restaurants, bars, a conference center and 49 guest rooms.

“I’m just really distraught, how it could catch fire again,” said Wagner, who since the first fire has worked with other Keys fire officials to push for more stringent permit requirements for fire retardant on thatched structures. Wagner said his department hadn’t pushed for Cheeca to check its retardant on the ocean-side thatch, which was partially burned in the first fire, because Cheeca had planned to demolish and rebuild the structure. “They were going to demolish the building, so there was no reason to push the issue,” he said. “Now it’s just a matter of a big mess and drama.”

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It’s unclear how the filing will impact operations at the property, located at mile marker 84.5. But news of the legal action brought reaction from Islamorada’s Mayor Cathi Hill. “In conjunction with the events at Cheeca, this could not have come at a worse time,” Hill said. A New Year’s eve fire closed down Cheeca Resort and Islamorada officials and business leaders are still are unsure when the tony oceanfront resort will reopen.

Holiday Isle is also well-know for its charter boat row, where deep sea fishing boats line up for guests drawn from Holiday Isle and other resort properties throughout the Upper Keys. Charter captains, already on edge over an uncertain future for the resort and marina, talked Friday about their concerns with a weak economy and fewer people willing to shell out hundreds of dollars for a day of fishing. “I don’t know what our future is right now,” said Capt. J.R. Rudzin of the Captain JR charter boat.

Ceebraid paid $98 million for Holiday Isle in 2006 with plans to raze the famous party spot and its numerous onsite bars and erect an ancient-Greek-themed, 151-unit ultra-luxury resort called Ocanos. Starting prices were advertised at $1.2 million for a one-bedroom unit. That was in March 2007 and within months of buying the oceanfront property at mile marker 84.5, Schlesinger issued a press release saying 25 percent of the units were under contract to be sold. But under Florida law, buyers have 15 days to back out of pre-sale contracts, and that’s exactly what most of Ocanos’ initial investors did.

Schlesinger, who, along with other Holiday Isle representatives, did not return phone calls for this report, moved on to plan B. In April 2007, he announced plans to knock down Holiday Isle and replace it with a “five-star” hotel. That never happened either and on Jan. 28 a company that lent money for Ocanos to Schlesinger, his partners and up to six limited-liability corporations filed the foreclosure notice. VII Holiday Isle Funding, LLC, is the plaintiff in the foreclosure filing. It’s a subsidiary of the global investment firm Starwood Capital. James Robinson, the plaintiff’s attorney, said he isn’t authorized by his client to comment on the case.

It’s not clear how many people work at the Holiday Isle complex on Windley Key, but the resort’s bars, restaurants and hotels form a major business hub in the village of Islamorada. Capt. Rudzin has been renting a slip at the marina for 11 years. He pays about $875 a month, which he says is a good price, and a rate he’s not sure he’ll be offered if he has to move to another marina. “I don’t know where we turn from here,” Rudzin said.

Mayor Hill said she remains optimistic someone else may come along when the economy gets better to not only preserve the resort, which is said to have originated the iconic Rum Runner cocktail, but also to improve it. “Economic conditions are cyclical, and I have no doubt Holiday Isle and Cheeca will come back better than ever,” Hill said.

When Schlesinger first announced his plans for Ocanos, condotels were the hot real estate investment. The concept was that resort hotels would sell condominium units, purchased by investors, and then rent those out to paying guests. The hotel management company and the investor owners would share the rental income.

In the Keys, many landmark properties were sold to deep-pocket developers who hoped to redevelop dated hotels and motels into condotels. One of the most ambitious projects targeted Holiday Isle, and the $98 million paid set a record at the time.

The foreclosure notice lists VII Holiday Isle Funding as owed “$77 million in principal and other sums due, plus accrued interest, reasonable attorney fees, costs and other expenses.”

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The three-story, three-bedroom, 3,500-square-foot custom designed and fully furnished home is situated on a private shallow-water beach in an enclave called The Shore at Islamorada, off U.S. Highway 1 at mile marker 86.7 bayside. The home and its associated prizes, including a hybrid vehicle and an HGTV Doggie Dream Home, are valued at more than $2.2 million. People can register to win the home online at www.hgtv.com. Beginning Dec. 3, HGTV’s Web site is to offer 360-degree virtual tours of the home and details on its construction.

The home will be showcased on an HGTV special program scheduled to premiere at 9 p.m. ET Jan. 1, with additional airings until the contest’s conclusion Feb. 19. The dream home’s architecture and landscape design was inspired by the Keys’ traditional small waterfront fishing villages, and the elegant residence even has a room dedicated to Islamorada’s sportfishing tradition. The dream home’s winner isn’t the only one to benefit from the giveaway. The property is to be open to the public for tours from Jan. 3 to March 2, with proceeds from the $20 per person ticket cost slated to benefit the Florida Keys Children’s Shelter. The contest winner is to be announced March 16 on an HGTV special live program.

For information about Islamorada, including area accommodations, contact the Islamorada Chamber of Commerce at (800) 322-5397 or (305) 664-4503, or explore this Web site.

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