Nearly One in Every Four Properties in The Conservatory Has a Delinquent Tax Bill.

Eighty lots are on the market. None are selling. One foreclosure and a pre-foreclosure hint of tough times ahead at this Ginn development.

June 20, 2007 – Palm Coast, FL – Hailed as a hugely successful offer in 2005, 337 Conservatory at Hammock Beach lots were oversubscribed by eager investors at prices ranging from $329,900 to $529,900. The final tally was nearly $142 million. Many buyers planned to flip their lots, reaping a nice profit, as many had done with previous Ginn projects.


Today, 80 lots are listed for sale on MLS. No Conservatory lots have sold through MLS in the past 24 months. Nor does MLS list any Conservatory lots in either a pending sale or contingent sale status. (MLS data does not show subsequent sales brokered through the Ginn sales organization since they do not participate in MLS. However, the Flagler County Property Appraiser recorded only one sale from an original owner to a third party in all of 2006 and none so far in 2007.)


As of June 18th, seventy-seven of three hundred thirty-seven Conservatory property owners were delinquent in paying the 2006 real estate tax on their lots. That’s 23%, or nearly one in every four. Other than builder model homes, little or no construction has begun, although the highly rated Tom Watson golf course is completed and the elaborate clubhouse is nearing completion. The delinquent tax news highlights and gives focus to what can happen in an irrational real estate market.


Many buyers were investors, planning to flip their investment quickly, as many had done with previous Ginn projects. In the two previous years, real estate prices in Flagler County grew about 20% – 25% per year with some types of property doubling. Buying now, then holding for at least a year for favorable long term capital gains treatment, seemed like a great plan. But as was bound to happen eventually, the market peaked, and then it went very quiet. Flipping quickly for a profit was not an option. Hopes for a profit began to fade while carrying costs mounted. Owner/investors had looked forward to The Ginn Championship tour event to showcase their properties. But the tournament venue was changed to Ginn’s recently acquired Ocean Course at Hammock Beach, where it is scheduled to repeat next year.


We are seeing the beginning signs of a very painful process.

  • One lot listed at $299.000 was taken back by SunTrust Bank from the original purchaser who had paid $404,900.
  • A lot originally purchased for $329,900 is advertised as a pre-foreclosure at $299,900.
  • Another lot listed at $299,900 was purchased originally for $339,900 and carries a delinquent tax bill of $6,192.
  • Nearly all other listings are at or above their original acquisition cost by owners apparently unwilling or unable to accept the reality of a changing market.
  • The four-year requirement to build is past its half way point.

The pain to property owners is obvious – ongoing interest, taxes, and association fees on a non-performing or depreciating asset. Ginn properties are best known for their amenity rich lifestyle format. Owners do not want their properties to lack club memberships because they would be less saleable. So most owners are now paying monthly club dues of several hundred dollars. Others cannot afford to do so. A few have already taken steps to unwind their investment and take a loss. For some, the banks have initiated this step. Others may be too leveraged on their investment to sell into this market. Tax delinquencies prove that at least 77 property owners are financially stressed. Most are likely to suffer steep losses.


How about Ginn? Ginn did what Ginn does best. The Conservatory was his concept. He secured the development order, permits, and funding. He installed the infrastructure, including a championship golf course and clubhouse. He marketed his product to a very receptive group of prospects, many of whom had profited from investing in prior Ginn projects. Some were investors who knew and understood the risk. Others were speculators with faith that someone would pay more for the property than they did. They all willingly paid the going price. There was a waiting list.


The price Ginn is paying is the loss of invincibility, not because The Conservatory was a failure for him, but because it was a falure for some of his customers. Many of the Conservatory buyers cannot be counted on to invest in future Ginn projects. And new prospects are bound to be a bit more skeptical. People bought in The Conservatory because they thought their lots would increase in value. They did not contemplate the intrinsic value of the investment – what is the true value of this lot with a house on it, minus the cost of the house?


In my opinion, The Conservatory will ultimately be a successful development. But the people who build homes on the lots will pay the intrinsic value for the property, which will, in most cases, be less than the original owners total cost.

2 replies
  1. Herb Whitaker
    Herb Whitaker says:

    Is Ginn becoming vulnerable?

    I know the blimp still flys, the race cars do as well but is the image also flying away. Sources I talk to say that the Bahamas project is not booming, the Gardens is virtually on hold, the newspaper says he is still trying to purchase Bulow from Centex. I’m sure the REITs he uses as investors are deep pocketed enough to sustain through this correction, but how long are they willing to hold. They obviously have to answer to their investor pension funds at some point.
    Will Ginn survive this correction, of course he will. Will buyers be as willing to buy into his super-hype, I think not to the degree he has previously enjoyed. Time alone will tell.

  2. Dalgarnif
    Dalgarnif says:

    Why so many Delinquencies?

    It seems odd that nearly 25% of the properties would be delinquent already. The december 2006 tax bill would have been only the first or second tax bill that these people would have been liable to pay. It seems unlikely that they would allow their properties to slip into tax delinquency at such an early point unless the buyers were so extremely financially stressed that they would let the properties be subject to potential lien foreclosures. Or is something else afoot here?

    Also, what is the penalty if these people do not begin building within the proscribed period? With virtually no homes under construction at this time it seems improbable that within less than 2 years every lot owner will start building.

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