News of a bankruptcy filing for Georgia’s Sea Island resort illustrates a failed funding scheme relying on land sales that never materialized — leaving lenders in the lurch. G8 Summit host, and haven of the rich and famous, the posh US resort is now counting on a nearly $200 million sale of its facilities to emerge from bankruptcy. See the following article from Property Wire for more on this.
Major lenders including Lloyds and Bank of America are facing multi-million dollar losses after a US luxury resort popular with celebrities and politicians, filed for bankruptcy protection.
Sea Island, which has hosted the G8 Summit as well as a host of famous guests including Bill Gates, Anna Kournikova and George Bush who spent his honeymoon there in 1945, filed for protection after it was unable to repay $600 million of debts.
The debts were amassed whilst pursuing an aggressive expansion plan at the height of the real estate boom but the global downturn and recession in the US has left owners unable to pay creditors.
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According to court documents filed in the US, Sea Island is planning to emerge from bankruptcy protection by selling its four resorts, three golf courses and two private clubs for $197.5 million to a group of investors represented by Los Angeles based Oaktree Capital Management and New York based Avenue Capital Group.
The tiny island off the coast of Georgia has a two by five mile stretch of private beach and many acres of undeveloped coastal land which the company said it was planning to sell.
But it leaves lenders, including Lloyds, Bank of America and Synovus Financial Corporation with a considerable shortfall after they were forced to write off loans to the company. The banks are likely to split the proceeds of the sale with other creditors.
Sea Island had been relying on future revenues from the sale of plots of land in a new development but they have failed to sell, according to chief executive Bill Jones.
‘We are very pleased to have reached an agreement with an investment group that has come to know Sea Island well and appreciate what made us special from the start. We believe this is the best outcome. The additional financial strength gained through the transaction provides an ideal foundation for our future,’ he added.
He added that Sea Island hopes to emerge from Chapter 11 by the end of 2010. Analysts point out it is a classic example of using on-going sales to fund expansion which just didn’t work in the downturn as real estate investors disappeared. They also say that the sale marks a turning point in the real estate crash and major lenders will have to accept losses as the market fails to recover from the recession.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.
