Letter to Members of Ginn Tesoro Club Sheds Light on Credit Suisse Related Problems
The Tesoro Club Advisory Council updates members. The communication addresses several issues affecting club members and property owners.
Palm Coast, Florida – November 13, 2008 – Tesoro, a gated golfing community in Port St. Lucie, Florida is one of four Bobby Ginn properties encumbered by a $675 million mortgage with Credit Suisse. The debt has been in default since June 30, 2008. The Ginn Company remains stubbornly mute on the status of their ongoing negotiations with CS leaving property owners and club members in the dark. A straightforward communication from the Tesoro Club Advisory Board (not Ginn) to club members spells out issues now facing club members and property owners. The communication should be of interest to Ginn property owners everywhere. It should also serve as an alert to property owners in any of the several private communities adversely affected by financially strapped developers.
The letter represents how important it is for property owners and club members to be informed and as involved as possible. In the end, they represent the court of last resort. Through their actions and involvement, their communities and amenities may be preserved.
In the Tesoro case, the ongoing and seemingly non-ending negotiations with Credit Suisse have left members and property owners in limbo. Before the letter, most people, including myself, believed that the only properties encumbered by the lien were building lots. Apparently this is not the case. "All unsold land is owned by the Developer and is subject to the Credit Suisse mortgage, including the Watson golf course, The Grande Clubhouse, Swim and Racquet Club, and Golf Course Maintenance facilities." Apparently, the Palmer golf course and the Terrace Grille are not subject to the lender’s mortgage.
Other points in the letter include:
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Ginn has taken a zero tolerance position against members and owners that are not current on their club dues and POA fees. All legal means will be used to collect delinquent amounts.
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The Watson golf course is closed or "hibernating." Greens and tees will be maintained, but the fairways, roughs, and bunkers will only be cut or cared for sparingly.
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Club social events formerly subsidized by Ginn will have to be "self-funding."
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The Palmer course remains open.
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Club and POA expenses are being scrutinized and reduced where possible.
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The Terrace Grille is open for lunch Tuesday – Sunday and dinner Friday night only.
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The Fitness center and locker rooms are open but are unattended.
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The Swim and Racquet Club is open but there is no life guard on duty.
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Security remains 7/24.
The letter urges all members to pay their club dues and POA fees in a timely manner. Secondly, they are urged to support their club by participating, using the facilities, including the food and beverage operations. Further, members are urged to not start rumors or promote ill will. Lastly, they are reminded that members and owners have no legal standing in the CS negotiating process, although they have a vital interest in the outcome.
A parallel issue has recently surfaced at Tesoro. Membership documents provided to property buyers mention an escrow account into which member initiation fees would be deposited pending completion of the club facilities. The Club Facilities are defined to include the Beach Club – which "will include access to the ocean, private parking, ladies’ and gentlemen’s locker facilities, and a beach-themed restaurant. The Beach Club will feature a main pool overlooking the ocean, whirlpools and a children’s pool." The facility described has not been built.
Under a section titled "Assurance of Completion of Club Facilities; "Membership Deposits will be held in escrow……pending completion of the Club Facilities, as set forth in an Escrow Agreement for Membership Deposits, a copy of which is available for review in the Membership Office." The escrow funds could only be released if the Club otherwise provided security insuring completion of the Club Facilities. Several members have requested the Escrow Agreement for review. They report to me that they have been stonewalled. A Ginn spokesperson could not comment.
Follow the money
The first lien credit agreement was for $525,000,000 which was recorded in Flagler county on June 8,2006. The monies advanced from the mortgage was $449,975,500 leaving $75,025,500 available. On April 30,2007 by the ammendment to the first lien credit agreement, the Palm Coast properties we released but further encombering the other properties as called for in the origional mortgage. The interest due in 2008 was paid by an ammendment known as ammendment two in the amount of $979,500 dated Sept.8,2008. The additional fee properties, that were then built, were listed as part of the origional lien. All other properties may be included in the future as part of the origional lien, without any filing was stated then. The remaining portion of the origional lien is $74,048,000 that has not been released to the motgagor (Ginn) and can be released if needed to pay interest due,if any fee owned properties are pledged against it. So the changes showing the various encombered fee properties, is part of the origional agreement and can be pledged up to the remaining principal amount. So the defaults were only due to outside cash payments not available. Inside assets were used and will continue to be used without notice to keep the interest payments current. That will then end at a point where the fee properties are all pledged, then if payments are not made the entire amount will clock up as it is advanced against the other non pledged Ginn assest, no matter where they are, until the principal amount of $525,000,000 is exhausted, or bankruprcy is filed. It was set up just like a home equity line of credit would be.