Amid a Lousy Real Estate Market, Law Suits, and Rumors, is Bobby Ginn Imploding? Not from My Viewpoint.

Ginn’s image of invincibility is gone. He’s down but he’s not out.

October 4, 2007 – Palm Coast, Florida – Over the past few months, things in Bobby Ginn’s world seem to have been disassembling. Bobby now faces a total of seven law suits; two related to his real estate empire and five to his personal foray into and embarrassing exit from NASCAR racing. Some property owners at The Conservatory at Hammock Beach, mostly investors, are rattling sabers because they find themselves unable to flip lots purchased at the market’s peak. Ginn has a new president, Robert Gidel, who, not coincidentally, has very close ties to Lubert-Adler, Ginn’s longtime funding source (story). Gidel will be responsible for all aspects of the day-to-day management and operation of Ginn Resorts. Most recently, Credit Suisse pulled back its financial support for The Gardens at Hammock Beach, his latest Intracoastal golf community in Flagler County. And sales at projects under development are sluggish, a dramatic departure from the former days of “pre-sold with a waiting list.”

This flood of unwelcome news, fueled in part by a lack of solid communications coming from the Ginn organization, caused a lot of consternation among Ginn club members, property owners and Ginn watchers. But communications have started to flow and, from where I sit, things look a lot better than the impending train wreck forecast by Ginn detractors.

Lubert-Adler stepped in to take over funding for The Gardens (story). In fact, Ginn has renewed activity there, taking a look at fine tuning development plans to allow a phased opening better suited to today’s market conditions. Lubert-Adler’s relationship with Ginn goes back much further than Ginn’s relationship with Credit Suisse. They better understand the long term development cycle of large projects and the interruptive effects of intervening market conditions. They have supported the recent acquisitions of Bulow Shores (story), a prime Intracoastal property near the Gardens and the BriarRose Community near Atlanta (story).

Communications have begun to flow. Ginn met with Conservatory property owners (story) and began measures to enhance marketability of their properties. These measures include temporary incentives (offsets towards club dues and property owner’s association fees) to encourage residential construction. Bobby Ginn recently communicated directly with club members and property owners (story) to update them, including the announcement of the new president and additions at other executive level positions. Most importantly, he stressed that construction activity continues at all Ginn projects. And finally, three months after his appointment, a press release yesterday announced Robert Gidel as the new President of Ginn Resorts.

I’m not trying to put a pretty face on things. The market is really tough. In the past, Ginn could rely on buyers drawn from the community of real estate investors and speculators, many of whom had profited in early Ginn projects. With quick appreciation no longer likely, they have moved to the sidelines. He will need to learn how to sell to a totally different buyer – the end user, the person who will actually build a house and live on the property. Unlike the investors, these buyers cannot be counted on to follow Bobby from one development to the next.

There will also be much pain and many personal tragedies. The Conservatory will long be cited as the benchmark of what can happen at the top of the market, when irrational exuberance creates prices that are too high and when speculative investors cannot find buyers willing to pay yet higher prices. The music stopped and there were no chairs. I visited The Conservatory today. There are yet no resale transactions. The market has not found a price level where buyers are willing to step in, but this development has a lot going for it. The golf course and soon to be completed clubhouse are magnificent. Once the market determines the true value (price) of the lots, transactions will start to happen. Though narrow, all lots are well positioned with nice views. The Conservatory is a fiber optic community. The property owner’s association fees include, phone, data cable, security monitoring, landscape maintenance, and irrigation. This will be a nice place. Unfortunately, most of the people who build here will pay less for their lots than the people from whom they buy them.

I imagine there were some “come home to Jesus” meetings between Bobby and his financial backers. If so, these meeting succeeded to the extent that they played a roll in Bobby’s retreat from NASCAR, the appointment of a new president with vast industry experience and ties to Lubert-Adler, the new marketing and sales management team, and a comprehensive communications strategy to assure property owners and quiet rumors. Bobby remains the face of the company as Chairman and CEO as well as its visionary. With his attention refocused on executing his vision, backed by a solid management team and committed financial backers, things in Bobby Ginn’s world may start looking up. Let’s all hope so. The contributions of Bobby Ginn’s developments, sporting events, and charitable giving to the Flagler County economy are immeasurable.