Digging deep: Cliffs Communities asks owners for $60M

The Cliffs is putting up its legendary amenities, including golf courses, wellness centers and restaurants, as collateral for money it hopes to borrow from property owners.

Palm Coast, FL – February 5, 2010 – The fallout from a bad economy that is wreaking havoc on the high end of the leisure residential market, as well as an unfortunate bet on Tiger Woods, may have caught up with upscale Cliffs Communities in North and South Carolina. According to a Cliffs property owner, developer Jim Anthony is testing residents’ and club members’ appetite to commit $60 million in debt financing, or about 40% of what The Cliffs has reportedly invested in its High Carolina community, including land and Woods’ alleged $20 million design fee.

The $60 million would be raised in the form of bond notes that will pay a minimum of 12% interest over seven years, according to the Cliffs owner. Minimum participation is $100,000 per owner, and The Cliffs is putting up its impressive roster of amenities, including golf courses, wellness centers and restaurants, as collateral. Non-owners will not be eligible to participate.

The Cliffs is putting up its legendary amenities, including golf courses, wellness centers and restaurants, as collateral for money it hopes to borrow from property owners.

The Cliffs investigated outside debt financing but their payments would have exceeded 12%, according to the owner. Such interest rates imply great risk and, if anything, compromise The Cliffs’ well worked public image of sophistication. That image, however, has taken a beating courtesy of the Woods scandal and the ill-timed placement of embarrassing billboards around Asheville.

By offering ownership of the debt to residents, The Cliffs avoids the potentially unpleasant publicity of a “junk” rating. It also avoids the potential that, in the case of a default on the loan, outside investors would likely rush to liquidate their investment, an especially unpleasant scenario for owners of Cliffs properties who could see their property values plummet along with the value of their club memberships (for which they paid as much as $150,000).

According to our owner contact, who says he is inclined at this point to buy into the bond note, The Cliffs has opened its books to residents, and Jim Anthony has put up his personal assets, along with The Cliffs amenities. Cliffs owners and club members, some of them lawyers and financial experts, are proceeding with due diligence, but no matter what they decide, they appear to be between a rock and a hard place. They can either support The Cliffs with the requested $60 million or risk outside investors carving up their communities in the event of default.

Give Jim Anthony and The Cliffs organization props for coming up with an offer owners can hardly refuse.

Larry Gavrich is the editor of GolfCommunityReviews.com.

The<Source Story> was published Feb. 4th
2 replies
  1. John
    John says:


    I think that is a pretty good idea. It makes sense on the surface AND if it works a 12% return is a lot heftier than the market is yielding. Of course it could fail miserably and the owners could be out $100k on top of their equity loss.

    Does anyone know what the billboards that are noted in the article is referring too? I can only imagine that the advertisements had Tiger all over them but I’m wondering if anyone has seen or heard about them?

  2. JW
    JW says:

    Billboards, etc

    Your comment "Ill-timed placement of embarassing billboards around Asheville" is flippant. The billboards you are referring to have been installed for well over one year and accurately dipicted Tiger’s local presence and relationship with The Cliffs. They were certainly not "ill-timed" when they were installed, long before the Woods controversy. As for the PPM, we have been assured by The Cliffs that they have alternate financing available should the PPM not be successful. Therefore, any mention of "default" on your part is nothing more than conjecture which serves no purpose other than to plant a seed of negativity in the public’s mind. I find it interesting how someone who didn’t attend the meetings is reporting on the story, but given the media’s quest for dirt on the real estate industry, perhaps this shouldn’t surprise me.

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