Linger Longer (Reynolds Plantation) Selling Club Assets to Pay Down Debt
”With this downturn we found ourselves in the position of having acquired more real estate, and debt, for Reynolds Plantation than is supported by recent demand.”
Palm Coast, FL – February 3, 2011 – [Updated 2-8-2011] Mercer Reynolds, Chairman of Linger Longer Development Company (Reynolds Plantation) notified property owners this morning that the company has offered for sale the Club assets and amenities. The sale was necessitated when lenders’ required Reynolds to pay down a credit line by $45 million by the end of April 2011 as a condition of a three-year renewal. Further, Club Founders Mercer and Jamie Reynolds pledged additional assets totaling approximately $60 million.
Reynolds emphasizes that "this credit line is for use only by Linger Longer Development Company (LLDC), its joint ventures, affiliates, and the businesses owned by LLDC and its subsidiaries, namely Reynolds Plantation, Great Waters, The Landing, and Achasta." He continues, "….other projects which are either owned or managed by Reynolds Companies outside of the Lake Oconee area are completely separate from the ownership and management of LLDC and are not financed or otherwise funded by LLDC." [Presumably Laurelmor, Cobblestone, Lake Burton Club or any other recent acquisitions] Reynolds subsidiaries manage several communities developed by Bobby Ginn including the Hammock Beach Club in Palm Coast and Reunion near Orlando.
A number of potential purchasers are being evaluated:
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The Property Owners Association
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An independent third party (which has made an offer)
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A smaller group of property owners
A Q&A section of the email to property owners expanded on the list of assets that will be sold. They include golf courses, clubhouses, maintenance facilities, marina facilities, pools and cottage rental operation, The Lake Club, the Jackson House, the Nature & Heritage Center, Administration Building, Central Services Building and furniture, fixtures and equipment related to such facilities. The company’s investment in the Club amenities is approximately $136 million.
The areas mentioned include 7 golf courses. Construction on an 8th, Richland Golf Course, will begin in 2013, subject to real estate sales improvement. All but one of them is in the Greensboro/Eatonton area of Lake Oconee, GA. The 8th course, Achasta is in Dahlonega, GA. Dahlonega is about 70 to 80 miles north of downtown Atlanta.
The Jackson House is the jewel of Reynolds Plantation and today sits majestically over the entrance to the community. The Jackson House was built by Mary Davis and William Reid Jackson in 1883
LLDC states it will place restrictions in the purchases and sale agreement to protect the existing members use and privileges in the Club. There are no plans to change the refund policies.
The LLDC/Reynolds Plantation move comes shortly after The Cliffs Communities attempted to resolve cash flow issues with a $62 million loan from property owners in February 2010, only to be followed a few weeks ago by the announcement of a joint venture agreement with Texas-based Urbana Communities. The joint venture will reportedly allow Cliffs to resume construction of the Tiger Woods-designed course, The Cliffs at High Carolina. Construction had been halted in December due to financial pressures.
Reynolds Plantation and Cliffs Communities represent the best among developers of highly amenitized, family oriented, luxury communities. Their financial struggles attest to the Great Recession’s affect on combined real estate and golfing markets. Golf amenities have relatively fixed cost structures. Yet their revenue, based heavily on the availability of disposable income, is subject to significant fluctuations.
Reynolds admits to overextending by acquiring too much real estate and debt. Many think High Carolina was similarly an overreach for The Cliffs’ Jim Anthony.
Question for Toby
Any chance that the Ginn community amenities will be offered to transfer to member owned? What is the percentage of condo/lot owners who today are paying their pro-rata monthly share of the dues for Beach Club, etc? Thanks for your effort.
Reply to KD
Developer-owned clubs with refundable membership deposits are difficult to sell, to members or to third parties. Typically, the sum of all membership deposits dwarfs the value of the hard assets. Although they represent a balance sheet liability, deposits rarely have to be paid back with the club owner’s funds. The refunded money usually comes from the sale of new or replacement memberships. Yet they represent a large liability, making financing very difficult and scaring existing members unfamiliar with the cash flow implications in these uncertain economic times.
I can’t answer your second point. I know that the developer is currently subsidizing club operations, but I’m uninformed of the current delinquency rate.