Tee Time Anybody? Hello….
Posted by Chris Myers in Uncategorized, tags: golf, orlando luxury homes, orlando real estate
In central Florida sit Bella Collina, a sprawling development that was designed to hold 800 homes today though only 48 houses dot the landscape, and just three are occupied. The clubhouse, though open, is eerily quiet, and a promised swimming pool and equestrian center have yet to be built.
Bella Collina, the brainchild of Robert Edward Ginn III, looks like a ghost town. So does Tesoro, another resort opened by Mr. Ginn near Port St. Lucie, where just 150 houses sit on 900 lots. And the Conservatory in Palm Coast, also from Mr. Ginn, is even more barren: 335 out of 340 lots are empty.
Developers and home buyers believed that residential golf resorts were a sure-fire bet and many buyers looked to buy properties that they could flip for a quick profit. While there is no reliable data on the growth in residential golf resorts, analysts say the market is well past its peak — particularly in the Sun Belt — and there is now an overabundance of developments.
“The aggressive building of new resort courses continued from the mid-1990s into the 2000s, contributing to an increasing glut of inventory that finally found no market,” said Joe Beditz, chief executive of the National Golf Foundation, a trade group that tracks data on the golf industry.
Mr. Ginn, 60, was able to cash in on the boom despite a spotty record that included some well-publicized failures on Hilton Head Island, S.C., in the 1980s. But when the real estate market began to tank in 2007, his empire came undone. “As property values plummeted, many investors had property worth less than their loans, and they were unprepared to pay their club and association fees,” says Toby Tobin, a Florida real estate agent.
WCI Communities, which built resorts in Florida, Virginia and the Northeast, filed for bankruptcy in August. So did the Yellowstone Club in Big Sky, Mont., and three other resorts that. Even the venerable Greenbrier Resort in West Virginia has sought bankruptcy protection.
For Mr. Ginn, a man who could sell 400 lots in a single day during the height of the real estate boom, it has been a huge comedown. While other developers may have built more golf resorts, few did so as grandly or as extravagantly. The tab for the 116,000- square-foot clubhouse at Tesoro reached $48 million.
“Most developers used consultants,” recalled Dean Adler, co-founder of Lubert-Adler Partners, a private equity firm in Philadelphia that invested in Mr. Ginn’s projects. “Bobby had a feel. He could be handed a topography map at a site and sketch out the entire resort.”
“Bobby is very smooth and very likable,” said Hilton Wiener, a lawyer who bought an investment property at Tesoro. “He is a down-home guy who is not a pushy kind of salesperson.”
With a new resort was in the works, Mr. Ginn knew how to generate a buying frenzy by holding lavish parties where potential buyers greatly outnumbered available lots, say agents and investors who attended the events.
“You would come to one of Ginn’s sales weekends and you would be drinking and thinking, ‘I hope I get chosen as one of the select few who gets to buy a lot,’ ” Mr. Wiener recalled. “The setting is very lush: hand-rolled cigars, fancy parties, vans with the Ginn name plastered on them.”
The high times ended when the market turned two years ago. Sales stalled, and Mr. Ginn had trouble paying off loans. Two of his properties, Tesoro and Quail West in Naples, Fla., filed for bankruptcy in December 2008 and were later sold for a fraction of what he had put into them. He sold Laurelmor, a resort in North Carolina, to another developer for $32 million. Mr. Ginn’s network of companies still owns the facilities at Bella Collina and the Conservatory.
Mr. Ginn says his remaining properties will eventually pay off. “My belief is that when the depression ends, there will be a pent-up demand for happiness,” he said in an interview at his offices at the Hammock Beach Resort near Daytona Beach. “Sometime between 2035 or 2040, Florida will double in size.”
In the meantime, he faces dozens of lawsuits from angry investors alleging that his companies used deceptive and misleading trade practices in representing the demand for and value of his properties. “We will vigorously defend against these false allegations,” Mr. Ginn said.
In 1997, when Lubert-Adler started investing in his projects which gave him his big break. Over the next decade, the firm, pumped about $800 million into his properties. Their partnership was structured such that the private equity firm put up all the money and took 80 percent of the profits.
The timing of the relationship couldn’t have been better. “Their business really took off after Sept. 11, when people turned from financial investments to hard assets,” said Robert Gidel, a former president of the Ginn Companies.
Mr. Ginn’s development style was unusual: he didn’t build clubhouses or other services until a large number of lots were sold. “Typically, developers start with a hotel or amenities because skeptical buyers want to see things,” Mr. Gidel said. “But here the market was so strong, and people wanted to believe.”
Dan Gerner, who owned a home in Quail West, one of the few developed properties that Mr. Ginn bought, said Mr. Ginn’s lavish spending ornamented his operation with all the trappings of success. At Quail West, Mr. Gerner said, Mr. Ginn “spent $12 million remodeling the clubhouse, and when the members didn’t like it, he spent $4 million more changing it.”
Many buyers bought several properties and hoped to flip them for a profit.
Even Mr. Adler, the Lubert-Adler chief, was personally involved in at least one deal at Tesoro. According to property records, he bought a parcel in 2004 and quickly sold it for a $205,000 profit.
A partnership formed by Mr. Adler and Mr. Ginn, A & G, also bought and sold five properties at Bella Collina for a $2.5 million profit over a period of weeks.
Mr. Adler says that although he bought the single property at Tesoro in his own name, he had actually “made a loan to two individuals to purchase that property.” He said that they — not he — kept the profits from the transaction and that they repaid him with interest.
As for the five properties purchased by A & G, Mr. Adler said the situation was “rectified.”
“I transferred my investment back to Mr. Ginn and never participated or received a penny of profit,” he said. Mr. Ginn confirmed Mr. Adler’s account.
The A & G deals are cited in a class-action suit filed last week in federal district court in Florida, alleging a scheme to sell properties based on fraudulent appraisals. Although Mr. Adler and Mr. Ginn are cited in the case, their firms, and not they as individuals, are named as defendants. Mr. Adler said he was no longer a partner in A & G when the transactions took place and denied any wrongdoing. Mr. Ginn said he had not seen the suit but also denied allegations of wrongdoing.
But the next year, the real estate market began to enter a free fall, and by 2008 the partnership couldn’t make payments on the Credit Suisse loan. Tesoro and Quail West filed for bankruptcy, and Laurelmor was sold. “There were no buyers and no market,” Mr. Tobin said.
Mr. Ginn says he now faces about 30 lawsuits.
According to one filed in a Florida circuit court, buyers were required to turn over their power of attorney to Richard T. Davis, a partner in a law firm that represented several Ginn companies, in order to buy land in Tesoro. The suit alleges that Mr. Davis signed documents that never provided detailed disclosures about costs, as the government requires. Since Mr. Davis was the companies’ closing agent, the suit contends, he knew that the disclosures were incomplete.
“I assure you that we tried to disclose everything that was out there,” Mr. Ginn said. Mr. Davis’s lawyer said the allegations were without merit.
The Florida suit also alleges that Mr. Ginn worked to artificially inflate the prices of parcels in his development. In one case, according to the lawsuit, a buyer bought two properties for a total of $1.007 million, and Mr. Ginn’s title company recorded the respective sale prices as $1.007 million and $1. The company then used the larger price as a “comparable” figure in an appraisal for Roy Bridges, a British financial adviser who bought a property for $1.195 million, according to appraisal records. Mr. Bridges’s property is now in foreclosure.
Mr. Ginn contends that “the county recorded it incorrectly.”
According to a transcript of a video obtained by a law firm representing property owners in the suit, a Ginn salesman told a group of potential buyers at Bella Collina that “Lot 5 sold for $2.1 million this morning.” But property records showed that the parcel sold for just $416,900, according to the lawsuit.
Mr. Ginn said he was “shocked because the salesman deviated from company practices.”
MR. GINN’S partnership with Lubert-Adler still has three properties left to develop and owns some land at existing resorts. “At this point, we have invested more than we have distributed back to investors,” Mr. Adler said. “We got hit by the economic tsunami, and we did not anticipate how tough it would be.”
Mr. Ginn says he is “ready to sell properties in trophy locations” when the market turns around.
“If you can’t sell,” he said, “you die.”
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