Question:  I just heard that Whitehall is backing away from Bankruptcy and will restart construction on the Riverview condominiums at Grand Haven.  The information supposedly came from Building Permit/Code enforcement folks at Palm Coast.  With the dearth of sales, I'm not sure I understand this strategy but it would be nice not to have empty hulls standing around the community.

Toby Says:  I spoke with a Whitehall executive today. They are renegotiating their credit lines. This requires a certification of city permits, engineering, and construction progress. That is why the city is involved now. Also required is a reappraisal of the property value, market conditions, and additional funding requirements. Whether or not the refinancing efforts are successful may not be known until early January. If unsuccessful, construction will not restart.

Question:  Why aren't developers for these major projects required to secure performance and payment bonds with completion dates before they are permitted?

Toby Says:  It’s a property rights issue. If you own property, you can do whatever is legally allowed. A building permit allows (permits) a property owner to build but does not require them to do so, nor should it. Bonding would make developments much more difficult to finance and make them more expensive. Legally, bonding requirements for private construction are not allowed. In a major development, bonding is allowed only for infrastructure that is going to be conveyed to the public (roads). Bonding for public construction (bridges, roads, public buildings, etc.) is legal. As for timing, a permit has an expiration date. Building cannot commence after the expiration date.

Question:  We are holding a reservation for a boat slip at Tidelands.  Do you know the status on the permitting process, the final plan, timing and pricing?

Toby Says:  I spoke with a Centex spokesperson. He could say only that they were actively taking reservations and the permitting process was underway. He could not comment on pricing or timing.

Question:  Do you know about Bobby Ginn's history at Hilton Head Island when Bumper Stickers read: "If Bobby Ginn owes you money, honk your horn?" Lots of Honking. Ginn over extended and promised the moon to HHI people and bankrupted several developments that were in good shape before he leveraged against the developments. It looks like he is doing the same thing again.

Toby Says:  Bobby Ginn did indeed have difficulty in Hilton Head during the 1980s. But the developments he bought were already in poor financial shape when he purchased them. When Bobby got into Hilton Head, he was steered for financing to two thinly capitalized S&Ls by an investment banker. It turns out that the banker had a stake in at least one of the S&Ls. The banks charged Bobby excessive fees for loans they arranged. These developments went through a series of owners with more than one bankruptcy. Bobby is reported to have gone through personal bankruptcy.

Investors take risks with their money. It’s a risk/reward business. Real estate developments take years to plan and execute but real estate is cyclical. Timing is not easy. In the Hilton Head case, the investment money came from institutions without staying power. The eighties were not good times for real estate. Today, while the market is also weak, Bobby Ginn has the support of Lubert-Adler, a real estate investment company with $35 billion in assets and a long range view of investment.

I find it interesting that a baseball player who succeeds only three in ten tries gets into the Hall of Fame while a business investor or developer who has one failure over twenty years ago is forced to carry the label for life.