Bobby Ginn’s Laurelmor project is struggling financially, but he has one thing in his favor. The real-estate market is so bad that lenders aren’t eager to foreclose — even on the high-dollar acreage of western North Carolina’s largest residential development (cover story, August).
That might buy Ginn wiggle room as he scrambles to restructure $675 million of debt held by Zurich, Switzerland-based Credit Suisse on Laurelmor and three other properties under development by Celebration, Fla.-based Ginn Resorts Co. President Robert Gidel says a real-estate slump forced the company to seek new terms and more time. “It became clear it would not be possible to meet home-site sales objectives necessary to make payments.”
Ginn’s problems — he also faces several lawsuits by disgruntled buyers — are reminiscent of those he suffered with luxury developments on Hilton Head Island, S.C., in the 1980s. There, more than $110 million in debt, he declared bankruptcy. He resurfaced in Florida in the 1990s and has since built — or started — more than a dozen projects. That rebound is in jeopardy now, says Don Tobin, a Florida real-estate analyst.
Laurelmor sprawls across 6,600 acres in Watauga and Wilkes counties. Since sales began in late 2006, the company has sold roughly 200 of 2,500 homes and lots, at prices of up to $1.2 million, but that hasn’t been enough. On June 30, Credit Suisse gave Ginn 30 more days to make payments, though talks continued into August.
Is this a Hilton Head redux? Selling off undeveloped land in a chilly real-estate market could force Ginn to dump assets at less than cost. In one of his Florida projects, lots that would have fetched more than $500,000 three years ago were recently reduced to less than $200,000. In another project, lots originally sold for $300,000 were unloaded by the lender for less than $100,000 after owners defaulted.
Tobin says weak prices might persuade Credit Suisse to give Ginn extra time to work through his pinch. Ryan Juliason, a Ginn spokesman, says the company is seeking more than short-term fixes. “This is more than reducing prices on a few lots trying to get some cash flow. This is about a long-term restructuring.”