Barrett Freeman steers a Toyota Tundra up the side of a mountain east of Boone and Blowing Rock, crunching along a steep gravel road whose sides are shored against erosion. This is the resort development of Laurelmor, and the terrain underscores its wildness and size. The west entrance in Watauga County peaks at 4,200 feet above sea level. At the lower entrance, straddling the Wilkes County line nine miles away, elevation has plummeted 3,000 feet. On Dugger Creek, a great blue heron soars above the rippling waters, and herds of deer blend with the underbrush, their white tails betraying them when they bolt.
Freeman, 28, guides visitors and prospective buyers around the project. He studied religion at St. Andrews Presbyterian College in Laurinburg and Vanderbilt University. As he drives, he makes it clear he’s a disciple of the man he works for. Awhile back, after driving 80 miles from Charlotte in a rented car, Edward Robert Ginn III took him on a tour of the resort. “Just like anybody else.” A charismatic developer of high-dollar properties from the Caribbean to Colorado, Ginn grew up in a small South Carolina town where the county courthouse had an outhouse. He can be self-effacing and even laugh at himself. Years ago, after a spectacular bankruptcy, local wags printed bumper stickers: “Honk if Bobby owes you.” Rather than bristle, he got a grin out of it, acquaintances say.
Only time will tell if Laurelmor produces a new wave of Bobby Ginn bumper stickers. Negotiations between his Ginn Resorts Co. and Credit Suisse, the Zurich, Switzerland-based bank that is its prime lender for Laurelmor and three similar properties in Florida and the Bahamas, remain under way after the company's subsidiaries missed interest and principal payments on $675 million in loans for the properties June 30. For now, bulldozers are at work on what will be the biggest private development ever in western North Carolina. It will compete with the ritziest, including Mountain Air, near Burnsville, where the rich arrive on private planes to play golf above the clouds, and The Cliffs at High Carolina, near Swannanoa, where owners will drive and putt on the first course Tiger Woods has designed on American soil.
“Everything he does is big,” says Wayne Huizenga, the billionaire whose Port St. Lucie estate adjoins Tesoro, one of a half-dozen resort properties Ginn’s company has developed and manages in Florida, its base since 2002. But this time, his big plans fly in the face of economic forces that have the real-estate market reeling. “Sales activity has slowed down dramatically, no question,” says Doug Miller, a former civil engineer who oversees Laurelmor and the company’s Burke Mountain development in Vermont. “The amount of tours we should be giving at this time of year is way down. A lot of our customers are tied up in Florida, and they can’t sell what they’ve got there.”
According to press reports, buyers snapped up 240 lots — ranging from $450,000 to $1.2 million — the first day of sales in November 2006. Many apparently didn’t go through. Through early July, Laurelmor had closed about 200 sales, a spokesman says. Prices averaged $625,000, indicating total sales of about $125 million. “We’re certainly behind what originally we’d hoped to be,” Miller says. “After the initial launch, we reforecast our projects. We figured we’d sell about 90 a year. We sold 92 last year, but this year we’re falling short.” First-quarter sales totaled only about $12 million. The problem is not finding willing buyers, he adds. “Banks don’t want to lend money on high-end real estate.”
Ginn isn’t the only developer in western North Carolina to find that out. In July, Orlando, Fla.-based Land Resource LLC shut its sales office for Grey Rock, near Lake Lure in Rutherford County. It had spent about $50 million on the 4,000-acre development, but only about half the 900 lots had been sold. It also closed its sales office for Wild Ridges, a similar development in McDowell County where about 150 of 900 lots had sold. All told, the 11-year-old developer of second-home communities closed six sales offices in the Southeast and West Virginia.
But Ginn isn’t just another developer of high-end real estate. “Bobby learned his lesson in the Hilton Head days,” Miller says. “Bobby got taken under by two or three savings-and-loans through no fault of his own. We’ve got a pension fund. They’re our partners. They have nothing but a vested interest in seeing us through. That’s a whole different thing.”
The Ginn Co.’s primary funding source is Lubert-Adler Partners LP, a Philadelphia-based real-estate equity firm whose principals, Ira Lubert and Dean Adler, invest billions on behalf of major pension funds and university endowments, including those of Duke and Princeton. The Ginn Co. has distributed fliers that say Lubert-Adler owns half of it and 80% of each project. Together with Independence Capital Partners, in which Lubert and Adler each hold a stake, Lubert-Adler boasts more than $11 billion in equity and $15 billion in assets such as 700 Albertson’s stores, 257 Mervyn’s department stores and several Marriott hotels, including one in Winston-Salem.
“If we have the ability to control our environment, we can ride out any economic downturn,” Ginn says. “Like now. This is one of those once-in-a-lifetime events that take place every 10 years or so. We’re not in a two- or three-year cycle. We’re in a 15-year development program. The downturn has been great for us. There’s a silver lining in some of this. While others have abandoned projects or cut back, we’re going forward.” It wasn’t that way in the 1980s, when he presided over the spectacular bankruptcy of Ginn Holdings Corp. on Hilton Head Island, the South Carolina coastal resort. Years later, he introduced himself to Huizenga, who owns a summer home and golf course near Linville, by asking the billionaire if he had seen the bumper stickers.
Ginn, 59, began life and his career in Hampton, S.C., about 50 miles north of, and a world away from, Hilton Head. The town is the seat of the rural county of the same name with a population of just over 21,000, up only about 1,000 since 1920. It bills itself a hunter’s paradise. After attending Florida Military School, he enrolled at the University of South Carolina but left in 1969 to help run the family construction business when his father became ill. His corporate biography says he “started modestly, building four or five houses annually.” Before long, the number was up to 700. Ginn branched out, building apartments, shopping centers and warehouses.
The biographical sketch has him at Hilton Head from 1975 to 1987, developing, building and operating golf courses and hotels. But the next entry jumps to 1998, when Ginn Resorts was incorporated. A lot happened in the missing 11 years. By 1985, his companies had acquired some of Hilton Head’s most valuable real estate, including Sea Pines Plantation, Port Royal Plantation and Harbour Town, where the PGA Tour’s Verizon Heritage tournament is played. But he was spiraling into debt. In 1986, he sold his interest in Hilton Head Holdings. Two years later, he declared personal bankruptcy.
John Curry, court-appointed trustee for one of the properties, believes Ginn was a victim of the times. “Bobby is the consummate salesman and developer. He had a concept that did not consider what a dramatic change in interest rates and a slowdown in foreign investment could do.” Curry says Ginn owed about $110 million to some 2,000 secured and unsecured creditors. The court ordered him to sell assets, including a personal jet that brought $1 million, raising about $65 million. Most secured creditors’ held liens or mortgages, but many whose claims were unsecured — businesses that had provided supplies and services, for example — suffered losses.
Ginn began rebuilding even before emerging from bankruptcy in 1994, and his comeback was as spectacular as his fall, mainly due to timing. He caught the wave of Florida real-estate development in the late ’90s and bought premier properties along the coast north of Miami-Fort Lauderdale and close to Walt Disney World, near Orlando.
“When you’ve got the trophy properties, you’ve got them,” Ginn says in a telephone interview from his farm near Charleston, S.C. His new project, he adds, fits that description. “Laurelmor is definitely a trophy property.” Ginn first saw the land from a helicopter in late 2004. The company closed on 5,600 acres — including a development called Heavenly Mountain started, then abandoned, by followers of the late Maharishi Mahesh Yogi — in 2005 for $56 million. It later bought 1,000 more acres, including 400 intended for a valley golf course.
“It’s absolutely stunning,” says Jasmine ShoShanna, 45, a local environmental leader and former opponent of Laurelmor who has changed her mind. “It’s the headwaters of the whole Yadkin Valley water system.” Ginn’s marketers may be right when they claim there is no other tract like it. Laurelmor lies near the Blue Ridge Parkway, a 469-mile road along ridgelines from Cherokee to Waynesboro, Va. Once criticized for encroaching on Parkway views, Ginn has graded a nine-mile, three-lane Laurelmor Parkway through the main parcel. He calls this access road a “mini-Parkway” in the making. But this is not a parkway for the millions. It’s a parkway for millionaires.
Because The Ginn Co. and its affiliates are privately held, the company’s net worth is not known. But with nearly 40,000 acres under development and in the planning stages, the Ginn empire is expanding. In addition to those in the Sunshine State, it has three resort projects in South Carolina, one in Georgia and pieces of two resorts in Vermont and Colorado. Under construction on Grand Bahama Island is the $4.9 billion Ginn sur Mer. Bella Collina and Reunion, comprising more than 4,000 prime acres within hiking distance of Disney World, surround more than 5,000 single-family home lots and four golf courses. Hammock Beach Resort, where he lives near St. Augustine, hosted a PGA Tour seniors event in March. A one-time owner of the NASCAR teams of Sterling Marlin, Mark Martin and Joe Nemechek, Ginn moves in fast crowds.
He’s also made fast money for customers who have followed him from project to project, flipping properties by buying and holding them briefly before selling at a profit. The first buyer at Laurelmor’s grand opening was Sandra Rodriguez, who already owned a home in Tesoro. Whether the current slowdown respects that tradition remains to be seen. Miller calls the old market investor-driven. The new one, he says, is owner-driven. The $3.75 billion question for Laurelmor may well be how comfortable will investors be having to live with what they buy?
Laurelmor is The Ginn Co.’s first Tar Heel development. Its first residents are expected to move in next year. When built out in 20 years, it is projected to add 5,000 people near Boone, population about 14,000, and Blowing Rock, where the 1,500 winter population swells to 10,000 or more in the summer. Laurelmor’s first phase calls for about 1,100 traditional single-family homes, 325 one-bedroom cabins and 200 condominiums. A second phase of about 800 homes will begin when — and if — the first sells out. The cheapest lot listed is $489,000 and nearly double that — $800,000 — if you want a cabin on it. His sales reps call this a “shelter product.” Bigger 10- to 25-acre “estate lots” are planned for wealthier customers, who seem at the moment to be in short supply.
“Bobby has a long-term vision of things,” Miller says. “We look at this as an asset that’s just going to get more and more valuable. The strategy of the company is to develop, get everything expensed and then own all the assets. Then we’re in the hospitality business, the rental-management business. We’re not in a panic, don’t need to make a zillion dollars on development. Compared to most, we’re a lot more patient. Having said that, there are still issues.”
One is sustaining growth in an economic slump. When the company began operations in Florida, it had six employees. By 2006, there were 3,000. It laid off about 400 last year, and, by March, the total had shrunk to 2,200. Ginn says the layoffs were the result of finishing condominium construction in Florida, especially at Hammock Beach. “Last year was the worst year [for real estate] since 1973,” Miller says. “So to that extent, we’re encouraged. We had other properties in Florida that didn’t sell a lot — not one. But the fact that we sold $50 million here — I can tell you that our pension fund was delighted. That really convinced them of the long-term value of this project.”
To shore up that relationship, some say, is why Robert Gidel was hired last year as president of The Ginn Co. (Ginn remains chairman and CEO.) Gidel, a veteran real-estate executive, has close ties to Lubert-Adler. Ginn claims he has the best of both worlds. “Our capital comes through them. We’re not at odds with our capital source. We have capital very much like a public company, but we operate as a private company, which enables us to be entrepreneurial, to act quickly to take advantage of opportunities and create equity. If all I had invested was debt, I’d be in trouble. But it’s not. It’s equity.”
As for trouble, there is a class-action lawsuit filed against The Ginn Co. last year on behalf of nearly 100 Michigan buyers of Ginn’s Florida properties. They contend that they were promised “substantial profits” when they acquired property at five Central Florida resorts in 2005, at the height of the speculative boom. “They bought land. They own it,” Ginn told the Orlando Sentinel last year. “As far as I’m concerned, that’s the end of it.” Bobby Masters, a lawyer who is executive vice president of The Ginn Co. adds: “They were speculators. There is not one substantive allegation in it. We have moved to dismiss.” The plaintiffs’ Michigan attorney did not return calls, but only the venue has changed — to a Florida court.
Masters says the company is offering incentives for buyers at Laurelmor, including free one-club memberships that entitle members to use all Ginn properties. “We’ve not changed our pricing,” Miller says, “and we aren’t going to.” Despite dozens of foreclosures at his Florida properties this year, Ginn is encouraging investor-owners not to sell cheap. His line is that this is a great time to catch up on projects in development. At the Conservatory, part of the Hammock Beach Resort, lots bought in 2005 for more than $325,000 to $500,000 are listed below $200,000. “No buyers have come out of the woodwork,” Palm Coast real-estate writer Toby Tobin says. “But to Ginn’s credit, he completed the golf course and the clubhouse.”
If trouble is again stalking Bobby Ginn, it could be as big as these forested mountainsides. Engineers have sunk 15 wells, many 1,000 feet or deeper, to provide water without disturbing trout streams. Ginn hired Texan Tom Kite, winner of the 1992 U.S. Open, to develop an 18-hole golf course and moved tons of earth and rock to flatten the most treacherous slopes. The course will afford striking views, including a huge lake fed from the runoff.
When word first leaked about the development, there was a flurry of protest from local residents about its environmental impact. To foil critics, Ginn adopted the rope-a-dope tactics used by Muhammad Ali in his 1974 heavyweight title fight with George Foreman. The idea is to let an opponent punch himself out, exposing his weaknesses. He let his critics vent, listened, then responded.
“Bobby believes the best way to go about doing developments from the standpoint of the community is, when you’re ready, you make a grand announcement and you stick with it, and you’d better be able to fund it,” says Miller, whose title is president of the Eastern Mountain Region. “You need to have your act together, do your homework and listen intently to what concerns are, because they will come out in those opening days and weeks in those first years.”
In less than a year, Ginn Resorts won over some protesters and co-opted others. It hired Audubon Society consultants and donated more than a third of the property — 2,750 acres, including 64 twisting miles of trout streams — as a conservation easement to the Blue Ridge Rural Land Trust. ShoShanna, once a self-described enemy of the project, partnered with Miller to reduce landfill waste in Watauga County. “We’re sensitive from the beginning,” Ginn says. “We’ve got to find a balance to let nature survive and at the same time build the kind of development we want. One of the things we did initially was move away from the trout streams. There’s really only one way to do things these days. And that’s to do everything not because you have to but because you ought to.” At Tesoro this spring, Ginn set aside 140 acres of waterfront to protect a pair of nesting bald eagles and their offspring, grabbing favorable national press in the process.
At Laurelmor, Ginn is doing more than what was required. His limit on the number of people per acre, restrictions on water use and environmental set-asides may be unprecedented. Homeowners can be fined $50,000 for felling a tree without approval by the development board. To many observers, when compared to other mountain developers, Ginn looks and sounds like a born-again environmentalist. He laughs at this characterization. “Maybe I am an environmentalist. At the same time, I’m a developer.”