Will Reynolds Plantation Linger Longer? Will Property Owners Buy Amenities?

The lifestyle was propped up with a debt burden serviced with the proceeds of ongoing real estate sales and property owners’ own ”refundable” membership deposits.

Palm Coast, FL – April 1, 2011Linger Longer Development, AKA Reynolds Plantation, has begun distributing ballots to 3,600-plus property owners at its luxurious Lake Oconee, GA development. The property owners will vote April 29th on whether or not to accept LL’s offer to sell its amenities for $44 million, reportedly way above its current market value. Linger Longer needs the money by the end of April to avoid possible foreclosure by Bank of America.
Postings to an property owner-driven blog site tell a poignant tale of successful, affluent people who bought into a beautiful lifestyle, rich with amenities; golf, boating, and tennis. Only recently have they learned that their lifestyle was propped up by a debt burden serviced with the proceeds of the developer’s ongoing real estate sales and their own "refundable" membership deposits. Real estate sales are way off, along with new club memberships. The lender, Bank of America, is playing hardball.
One blogger who saw the handwriting on the wall and got out, summarizes the financial situation well in his blog posting [emphasis added].
As a former Member of over 16 years, and a Real Estate professional since 1972, my years at Reynolds Plantation were often in conflict with management, and many of you knew that.  The simple reason I fought for my opinions, ideas, and standards was easy for me to see:  Knowledgeable, experienced, and capable real estate professionals were not running the place or making the important financial decisions based on the reality of the market place.  I could see that, even if individuals that were jaded by the beauty of either the lake or the early golf courses, could not, or chose not, to do the due diligence that they might have otherwise accomplished in their own, individual professions otherwise.  I concur that the quality of the people at RP is substantial, but those are the Members, obviously not in the management realm.
I kept up for many years with the RP financial circumstance, even if it was sketchy and not always up to date.  How did I do that, you ask?  Simple computer research.
The State of Georgia has a website called Georgia Supreme Court Clerks Cooperative Association (GSCCCA).  There, one can find every recorded legal document in the State, including Deeds, Mortgages, Liens, Loan Documents, etc, etc. , not matter what County the recordation might pertain.  It is searchable by Grantor and Grantee, with as little as a person’s last name.
Without further boring explanations, I was able to read the yearly loan modification agreements between Mercer, Jamie, LLDC, and Bank of America, who has had for a number of years a renewable and revolving Line of Credit of $150,000,000 due for renewal approximately November of each year.  With the 2008 renewal, it was evident that BA was tightening the noose on Mercer and LLDC.  By the time the 2009 renewal was put to Record in Greene County, it was evident that, EFFECTIVELY, Bank of America already had every ounce of collateral that had any value to it that Mercer, Jamie, and/or LLDC could offer.  This included ownership of every intellectual property that Reynolds has ever owned or created, including Logos, Web Sites, Names of developments, golf courses, every amenity that you are considering purchasing, all Golf Memberships of every kind, including deposits, cash flow from operations, profits (if any) from Land, and even the Family Trust in favor of Gabby Reynolds.  You can read
the document in the Greene County Courthouse!  Mercer has almost nothing imaginable in Greene County that is not collateralized to Bank Of America as the lead bank.
For LLDC to convey ownership of amenities to anyone, the bank’s release must be given for that to be accomplished.  And that will come at a huge premium I would guess.  Hence, there is little room to negotiate with Mercer and Co.  He has no leverage to stand on himself.  Bank of America, in my opinion, pretty much owns him and all that he’s tried to stand for in the Lake Oconee area.
Thankfully, as some of you know, I was able to sell my home there in November at a huge discount to appraised value—about 62% of the October, 2008, appraisal.  I did so with the knowledge that I needed to get out of there because the November, 2010 Bank of America loan was due, not just up for a renewal or extension.  The time was up under the multi-year renewal and roll over, and I knew it.
I could see the writing on the wall.  I knew the industry.  I knew the financials.  And I knew that BA did not need one more ounce of collateral to take all of Mercer’s toys away at the mere filing of a foreclosure.
What do Mercer and Jamie really want with the sale of amenities?  A bit of time to try and find a way to protect the rest of their assets, and the Membership is not considered a part of those, IMO.
Property owners face limited options. The bank is in the driver’s seat. Property owners have little or no negotiating leverage with Bank of America. If B of A takes over, property owners will have to deal with whomever the bank sells to or hires to run the operation. If owners accept the offer, they can choose to run the amenities themselves or hire a professional amenity management company. Another blogger gives his thoughts on those options.
We are definitely not in favor of it.  As you know, I have been in the Real Estate industry for 36 years, although on the commercial side, rather than residential, but I know a little about these type transactions.  In addition, I had the unfortunate experience of being an equity member of my club in Atlanta, Brookfield CC, when the members “bought” the club from the original developer.  Like the current “volunteers” of the POAGI, the members at Brookfield were, for the most part, very successful business people in other industries (like IBM) who had bought a home there and retired.  How could running a country club and golf course be a big deal, they reasoned, compared to what they had done in the past?  No problem, they thought.  How wrong could they be….
Very wrong, as it turned out.  I really don’t know where to start, it was so bad…..the members, now “owners”, all thought they could tell the employees what to do or get them fired if they didn’t like what they said.  All the prior staff (great people) left for better opportunities and we couldn’t hire anyone decent.  The course, the service, everything went to hell.  We had a large assessment up front plus we were faced with annual operating assessments.  Finally, we “leased” the club (basically a sale) to an outside party who had country club expertise with the caveat that the members basically had no say so in club operations.  That approach has worked well for over 10 years.  Recently, due to some legal issues with the original lease document, our Lessee triggered a purchase agreement that gave him the right to buy the club at an appraised price.  The club members also had the right to buy the club and run it themselves…..last week we had a vote of all the original equity members and they voted to sell it to the Lessee, BY a 60 – 1 MARGIN.  That should tell you something about what all our equity members remember about what happened when WE owned it.  And that was only one course with one clubhouse, one swimming pool, no marina(s), etc.   The POAGI group has no idea what they are getting into.
A Property Owners Advisory Group, Inc. (POAGI) was appointed to negotiate on behalf of the property owners. Some say the representation was stacked by Reynolds. Group dissention reached a climax when the POAGI finance subcommittee resigned in mass.
Reynolds Plantation POAGI finance committee resignation letter
There seems to be consensus among the bloggers on which way the vote should go. A straw poll shows a resounding rejection of the offer with 94% of 94 voters saying they plan to vote "NO."
Linger Longer and their property owners are not alone. In various forms, this same scenario is being played out in scores of similar highly amenitized communities throughout the country; especially in the South and West. Developers propped up the value of their real estate offerings with high-grade amenities. Buyers jumped in and paid "refundable" membership deposits that in some communities exceeded $100 thousand. So long as real estate sales boomed and new members were added, the model worked. Developers could easily subsidize the amenities with revenue from land sales, membership deposits, and loans against their developments’ ever-increasing value.
But cash flow reversed when the sales engine ground to a halt. The refundable deposit money had simply disappeared, used to build amenities, fund operations or to further development. Developers had planned to fund resigned membership deposits with new membership proceeds. Meanwhile, amenities needed cash to continue operations. With negative cash flow and heavy debt obligations, developers had no end game. They often leave club members holding the bag.
So far, there have been few successful outcomes.

4 replies
  1. Frank Principe
    Frank Principe says:

    Lubert Adler is at it again

    These were the idiots taht Lubert Adler had come in and take over Reunion after that crook Ginn had his way with everbody ! Now we find out these guys are just as crooked. Looks likw LA is one big scam with the property owners caught in the middle.

    If only the laws were stronger to prevent this type of crap. Theses guys are crooks plain and simple !!

  2. Gerry Giesler
    Gerry Giesler says:

    One Sided opinion

    Your article quotes only Bloggers who you don’t know and whose credentials you cannnot verify. You should be telling both sides of the story or none at all.

  3. John
    John says:

    RE: Gerry

    What is the other side of the story? It seems to me that Reynolds is either trying to see the club to the members or not. There really isn’t a side to the story. Everything else is opinion on whether or not it makes sense for the members to proceed. Based on the representatives that the members voted to to help aid in the negotiations they believe it is a very bad idea. That has nothing to do with bloggers it has to do with the members representatives believing it is zero sum transaction in which only the developer would win.

    So I ask again, what is the other side?

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