Tesoro Property Owners and Members Raise Serious Issues

Issues over Ginn-LA’s actions take on new importance as Tesoro property owners and club members become creditors. $20 million may be missing.

Palm Coast, Florida – January 19, 2009 – Most of the assets of Tesoro, a luxury private golfing community developed by Ginn-LA (real estate developer Bobby Ginn and his financial partner, Lubert-Adler) in Port St. Lucie, Florida came under a Chapter 7 bankruptcy (liquidation) filing just before Christmas. The process has brought to light several unresolved issues between Ginn-LA and Tesoro property owner/members, including a reported member deposit escrow account that is missing an estimated $20 million. As an overwhelmed court appointed trustee tries to sort things out, the two sides jockey for position.

The Issues

Tesoro owners feel duped. There is some evidence to suggest they may be right. Their present status places them seventh in line behind the secured creditor, the trustee, administrative costs, unsecured claims, wages, and employee benefit plan. Areas of immediate concern are:

Escrow of membership deposits

The status of an approximately $20 million escrow account supposedly set aside to assure the completion of all the amenities promised new members. 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 a copy of the Escrow Agreement for review. They report to me that they have been stonewalled. Some owners have been told that the account is no longer necessary because the amenities have been essentially built. Other members were told that the escrow agreement cannot be located. But the fact remains, the $20 million is not there.
One former Tesoro property owner relates how the Tesoro Club failed to remit a membership deposit when the owner’s property was purchased by someone who then bought a social membership. After several months’ delay before acknowledging that a refund was legitimate, the actual payment was stalled until the bankruptcy filing. The individual is now an unsecured creditor with little chance of receiving any funds.

Special Assessment District

The Special Assessment District (SAD) bond issued for Tesoro infrastructure construction included money for a turnpike interchange at Becker Road, the extension of Southbend Blvd, and a new fire station. This 19-year bond is being paid solely by Tesoro property owners although adjacent developers, including Wayne Huizenga, have benefitted. Claims made by an engineering firm hired by Port St. Lucie that 100% of all traffic would be the result of the Tesoro development to support the bonding allocation are of dubious merit, suggesting possible collusion between the city and the developer. While documents provided to buyers mention the SAD, they mention neither the amount of indebtedness nor the terms of payment (approximately $2,400 per year per lot).

Ginn trying to hang on to some property

Ginn-LA is apparently trying to carve out the discovery center (sales center) and Tesoro Beach Club properties from the bankruptcy. Clearly, the value of Tesoro property and a membership would be diminished if the beach club is never realized. The status of additional land owned by Ginn-LA in nearby Martin County, alluded to in the membership offering as an18-hole "All Green" Championship Golf Course located approximately nine miles from Tesoro in Martin County is also questioned by some Tesoro owners. As do many developers, Ginn has created literally hundreds of LLCs, and limited partnerships to shield one entity from the other.

POA services without competitive bids

The vertically integrated Ginn Company is alleged to have engaged Ginn Hospitality as manager of the Property Owners Association (POA), which, in turn, contracted with Ginn Security and Austin Outdoor (a landscape services company reportedly owned in part by Ginn) at uncompetitive rates without a proper bid process (according to several members who have contacted me). A representative of Austin refutes this fact. His comment is posted as a reader comment below. When owners gained control of the POA at Ginn’s Conservatory in Palm Coast, Florida, they dismissed Ginn Property Management, realizing a 75% savings.  
It’s obvious that bankruptcy is not the result of things gone well. Many people will suffer losses, both financial and emotional; property owners, investors, creditors, even Ginn employees. The only apparent winner here is Credit Suisse. The $675 million (the amount of the loan in default which led to the bankruptcy) was not their money. The money came from 52 private investors (mostly hedge funds). Credit Suisse acted as the intermediary, collecting a fee for arranging the credit facility and, presumably, additional fees for negotiating the final settlement agreement.
6 replies
  1. Bill Dellecker
    Bill Dellecker says:

    Tesoro POA and Club Landscape Services

    Austin Outdoor first contracted for landscape services at Tesoro in 2004, well before Ginn acquired any financial interest in the business. (In 2005, a Ginn entity did acquire a passive ownership equuity interest in Austin Outdoor,which continued to be partially owned and exclusively managed by Edward E. Schatz, Jr., who founded the company in 1994.) Upon expiration of the original 36 month landscape service agreements in 2007, both the Tesoro Club and the Tesoro POA solicited competitive bids (from both national and local firms) and Austin Outdoor offered lower prices for comprehensive services. Accordingly, Austin Outdoor was selected and entered new multi-year agreements. Up until the fall of 2008, the aesthetic standards for Tesoro were held very high and, in fact, the community was recognized in 2008 with "#1 Awards" for its landscape at both the State and National levels. As of 2009, Austin Outdoor has been recapitalized and Ginn no longer has any ownerhsip share in the business; current management continues leading Austin Outdoor, which is now a company within the Yellowstone Landscape Group. Austin Outdoor has always operated in an independent, market-based and client-focused manner and looks forward to continuing its relationship in Tesoro, just as it has at Conservatory. "Creating premier properties. Bulding lasting realtionships." is much more than a slogan for our business; it is what drives us every day. We look forward to working with Tesoro owners through this diffulct period and making whatever service-level adjustments are required going forward.

  2. Peggy
    Peggy says:

    Where are all the people who benefited?

    I am shocked that all those millions of individuals, businesses, communities and states that have benefited from Bobby Ginn in his amazing foresight to assume the RISK and invest in areas that would NEVER have seen the appreciation and growth without his vision. WHERE ARE YOU? Are you such cowards? So much money has been made throughout the years riding his coattails. Bobby, I for one, think you are a brilliant businessman and appreciate your tenacity. Indeed, I remember when those same bottom feeding attorneys were out advertising to all who lost money in the stock market crash of the 80’s— "lost money, call us" without regard to the greed involved in those that jumped on at the market peak and cried foul. You have my admiration and respect. Although I’ve lost much in this mortgage and real estate debacle, I remain, respectfully yours. Peggy

  3. tim
    tim says:

    Repsonse to Peggy’s admiration

    Peggy, I have read that you have lost money in this real estate debacle, and for that, I am truly sorry. But the fact remains that 20 MILLION dollars are missing from escrow, and current Club members and Property members stand to lose out. Yes, Ginn may have vision, but with his reckless spending in building out a still imcomplete Tesoro, and the financial damage he has done to current property owners it seems to me he has mastered the Ponzi scheme. He is the Bernie Madoff of Port St. Lucie

  4. George Edward Chuddy
    George Edward Chuddy says:

    Our Beachside Club

    Hello Tesoro- We are very sorry to hear that you lost your Beachclub too as we have lost ours. Honestly, our thoughts are with you during these troubled time, for you see, we also had a house in Vero, tho’ sold it regretably and just kept the Palm Coast places because of what Palm Coast was once offering: see:.
    Cover Story:
    Palm Coast Blossoming as New Hometown
    PALM COAST< Florida This rapidly growing planned community is becoming the ‘resort hometown’ planners at ITT Community Development Corporation envisioned ten years ago.
    The "hometown’ aspect of life in Palm Coast is evident everywhere. Citizens are involved with community growth; activities and challenges. Local government and ITT-CDC play stong roles in planning for and meeting those challenges successfully.
    The ‘Resort’ envionment is Florida at her finest. Palm Coast golf courses and all-surface tennis club have earned national recognition. Complimenting these are five miles of beach.., a new beach club with pool, waterways and marina for boating, community-wide landscaping and a waterfront hotel and timeshare resort for vacationers and visitng friends. It is an atmosphere that attracts new industry, stores, services and more than 100 new residents each month to Palm Coast.*
    * The Palm Coaster, Winter 1988, Page 1.
    "Get Lost" at the Sheraton Palm Coast resort Inn If you are traveling to Florida to get lost for awhile there are two great ways to Get Lost at the Sheraton Palm Coast Resort Inn located on the Atlantic Ocean beach about 28 miles north of Daytona Beach on the scenic oceanside highway, State Road A1A. The hotel if offering two package vacation plans for those seeking a way to get lost. One way to get lost is called the Honeymooners’ Paradise the other is the Golfers Weekend. Either adds up to four days and three nights.
    The Sheraton Palm Coast Resort 9nn is built in the Old Spanish Missionstyle, with coquina rocks and nestled in acres of green , rolling lawn sprinkled with subtropical trees and shrubs with access to five miles of beautiful beach. Each airconditioned guest room has double beds and color television. Honeymooners are guaranteed a room with an ocean view.
    The ocean is just a few steps away. Also close by is the Intracoastal Waterway, which offers good fishing, boating, and waterskiing. On the Inn grounds, there is a large free form swimming pool surrounded by sundecks. Close by are two tennis courts which will soon be lighted for night play. Just a short ride by boat is an 18 hole championship golf course, the Palm Coast Golf Club. The Golfers’ package includes unlimited play at the Palm Coasta Golf Club, an electric cart, a gift package of golf balls and a complimentary bucket of practice range balls daily at the Pro Shop. At the Inn, the cuisine is superb in the Coquina Room or Cafe del Mar. The newly completed Beachcomber Bar, located beside the pook, offers the finest in mixed drinks and sandwiches. Dancing and nightly entertainment are popular in the newly decorated Jon-kanoo Lounge. For a slightly different atmosphere the visitor can also eat at the Palm Coast Yacht Club acorss the Intracoastal Waterway. Sightseeing is a must at nearby historic St. Augustine and Marineland, and Daytona Beach, is just a shosrt drive for shoppping or touring. For the young at heart, Walt Disney World is approximately 98 miles away.*
    ( For the new arrivals, and Golf Enthusiasts, you really would have loved it here then, we and so many others used the Boating (water taxis) that we once had here. A lot would go to the ‘Boat to Golf’ Dock’ ( directly behind the putting green directly behind our ‘Contemporary Clubhouse’ of Stucco and Coquina, ( now demolished and all the enticements apparantely sold or bartered off or some such) and go the the Jon-Kanoo Lounge. It was fantastic beachside! What Parties, What atmosphere, what a wonderful place we once had last for decades last Century. Rum drinks and Music played – dancing under the stars, singing, and more Rum Drinks flowed – ) Many people would laugh that they used their boats every day, and only their cars once a week or every other week to make the ‘Stagecoach’ Ride to Daytona. So what if we had to put a cooler in the weekly car trip for groceries; we once had better than PARADISE here for all the rest of the week! Very early on, there was indeed a ‘Stagecoach’, a guy with a Model A I think – maybe a 1931, would regularly drive ‘to town’ for us to get groceries, etc., for those of us living in Paradise at that time last Century. ( We restored a 1929 Model A with *rumble* seat that we used in our Darien, Ct. home so we know the years)
    The Palm Coaster, Summer 1978, pp. 10-11.
    Please Tesoro Residents, HANG IN THERE – o.k.!
    George Edward Chuddy

  5. Toby
    Toby says:

    Reply to John

    I assume the existing contract will be reviewed and that services will be put out to bid. At the Conservatory, the newly owner controlled POA kept Austin, but negotiated a much lower rate at a reduced level of service, trying to keep expenses in line with realistic revenues.

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