Members Turn Down Purchase of Reynolds Plantation Club Amenities
Reynolds Plantation members turned down a chance to buy club amenities for the $45 million that would have bailed out the Reynolds family. The next step is up to Bank of America.
Palm Coast, FL – April 30, 2011 – After a month-long sparing match between Reynolds Plantation owners and disgruntled property owners, the vote is in. Members declined Reynolds’ offer to sell them the club amenities for $45 million with more than 80% voting against the Acquisition Special Assessment yesterday. Reynolds needed the sale in order to satisfy Bank of America’s demand that Reynolds pay down their outstanding debt by $45 million by the end of April. Reynolds Plantation now faces possible foreclosure. The next step is up to Bank of America.
Like so many developers of highly amenitized master planned communities, the Reynolds family underwrote operating costs of their club’s lavish amenities with revenue from real estate sales and new club membership deposits. They were caught by the depth and length of the real estate crisis. When revenue dried up, they continued to maintain the lifestyle illusion by depleting their cash, including millions of dollars of membership deposits, and borrowing heavily while, at the same time, continuing to invest in new ventures.
According to one club member who took the time to follow the public filings that disclosed the burdensome Bank of America debt, the bank increased pressure on Reynolds each year. To extend the loan for an additional three years, Mercer and Jamie Reynolds were required to pledge an additional $60 million in personal assets and pay down the loan by $45 million by the end of April.
Yesterday’s vote climaxed an attempt by Reynolds to convince club members to provide the needed $45 million by buying the club assets. Reynolds attempt failed on many levels. First, they failed to keep members informed. Members were stunned when Mercer Reynolds first notified them of the company’s financial plight on February 3rd. There simply was not enough time to put together a viable deal with members.
Reynolds embarked on a campaign to sell the concept through a committee of supportive members while withholding information vital for an informed decision. Reynolds came across as arrogant and disingenuous.
The "take it or leave it" offer was laughable on its face. It would have members pay $45 million for assets that had been independently appraised at $12 million. Reynolds would essentially maintain control over key decisions, membership prices, a portion of new membership deposits, and all real estate sales. Reynolds could offer membership incentives for new lot or home buyers that would undermine existing members’ efforts to sell their properties at a competitive price. Watch this comic video which portrays the way many members viewed the Reynolds offer.
VIDEO [author unknown]
There was no upside for the members. They were told a YES vote would help preserve their property value and preserve their membership deposits. In fact, the opposite is more likely true. The club property is overburdened with debt. Shifting these obligations does not solve the underlying problem. It is simply too costly to continue subsidizing debt-laden amenities.
Just as farmers plow annually, turning under what remains of last year’s crop in order to nourish the current year’s plantings. It is time to turn over tired capital in stalled private amenity-rich communities. New owner/operators with a reasonable cost basis have a better chance of success. A successful club operation will help maintain property values. An unsuccessful club will destroy them.
There is life after the original developer. The club assets will be restructured (bankruptcy) or purchased; maybe by members, maybe not. In either case, the purchase price or restructured cost basis should be sufficiently low to allow the club to compete with other communities going through the same ordeal. Communities overburdened with debt, cannot remain competitive.
Foreclosure or bankruptcy is cleansing, ridding the new operator of past financial indiscretions; clearing the deck. The bank will likely become more flexible with the NO vote a fact. Members should not focus on their membership deposits. They probably will not get them back. But a YES vote would not have preserved them either. Members are not alone. This same scenario is being played out at many master planned golfing communities throughout the country, especially in the South and West.
There are indeed positives –
There indeed is something positive in this. For you Reynolds Plantation-ites, your Amenities, Features, Acreage, etc., all inducements for you to purchase remain intact.
Whereas for us, the above same that we Palm Coasters paid for, the same things that were part of the required official ‘Guided Tour’, those same things listed in the Florida Public Offering Statement I.L.S.R. Number: 0-1092-89-283 – ILS# 29870 , those same things mentioned Nationally on a Merv Griffin Show seen by Millions, and those same things shown in massive International World Wide advertising Promos’ using the U.S. Postal Service, and those same things clearly listed in the F.T.C. ‘Consent Agreement’ C-2854 and its’ ‘Compliance Report’ as part of the $ 30,000,000.00 in 1975 U.S. REDRESS ordered for us much now only exists in our memories.
However a neighbor recently brought out a positive for us…
She said…’..at least we still have a place to get a ‘Happy Meal’…’.
So indeed there are positives –