October 4, 2007 - Palm Coast, Florida - Over the past few months, things in Bobby Ginn's world seem to have been disassembling. Bobby now faces a total of seven law suits; two related to his real estate empire and five to his personal foray into and embarrassing exit from NASCAR racing. Some property owners at The Conservatory at Hammock Beach, mostly investors, are rattling sabers because they find themselves unable to flip lots purchased at the market's peak. Ginn has a new president, Robert Gidel, who, not coincidentally, has very close ties to Lubert-Adler, Ginn's longtime funding source (story). Gidel will be responsible for all aspects of the day-to-day management and operation of Ginn Resorts. Most recently, Credit Suisse pulled back its financial support for The Gardens at Hammock Beach, his latest Intracoastal golf community in Flagler County. And sales at projects under development are sluggish, a dramatic departure from the former days of "pre-sold with a waiting list."
This flood of unwelcome news, fueled in part by a lack of solid communications coming from the Ginn organization, caused a lot of consternation among Ginn club members, property owners and Ginn watchers. But communications have started to flow and, from where I sit, things look a lot better than the impending train wreck forecast by Ginn detractors.
Lubert-Adler stepped in to take over funding for The Gardens (story). In fact, Ginn has renewed activity there, taking a look at fine tuning development plans to allow a phased opening better suited to today's market conditions. Lubert-Adler's relationship with Ginn goes back much further than Ginn's relationship with Credit Suisse. They better understand the long term development cycle of large projects and the interruptive effects of intervening market conditions. They have supported the recent acquisitions of Bulow Shores (story), a prime Intracoastal property near the Gardens and the BriarRose Community near Atlanta (story).
Communications have begun to flow. Ginn met with Conservatory property owners (story) and began measures to enhance marketability of their properties. These measures include temporary incentives (offsets towards club dues and property owner's association fees) to encourage residential construction. Bobby Ginn recently communicated directly with club members and property owners (story) to update them, including the announcement of the new president and additions at other executive level positions. Most importantly, he stressed that construction activity continues at all Ginn projects. And finally, three months after his appointment, a press release yesterday announced Robert Gidel as the new President of Ginn Resorts.
I'm not trying to put a pretty face on things. The market is really tough. In the past, Ginn could rely on buyers drawn from the community of real estate investors and speculators, many of whom had profited in early Ginn projects. With quick appreciation no longer likely, they have moved to the sidelines. He will need to learn how to sell to a totally different buyer - the end user, the person who will actually build a house and live on the property. Unlike the investors, these buyers cannot be counted on to follow Bobby from one development to the next.
There will also be much pain and many personal tragedies. The Conservatory will long be cited as the benchmark of what can happen at the top of the market, when irrational exuberance creates prices that are too high and when speculative investors cannot find buyers willing to pay yet higher prices. The music stopped and there were no chairs. I visited The Conservatory today. There are yet no resale transactions. The market has not found a price level where buyers are willing to step in, but this development has a lot going for it. The golf course and soon to be completed clubhouse are magnificent. Once the market determines the true value (price) of the lots, transactions will start to happen. Though narrow, all lots are well positioned with nice views. The Conservatory is a fiber optic community. The property owner's association fees include, phone, data cable, security monitoring, landscape maintenance, and irrigation. This will be a nice place. Unfortunately, most of the people who build here will pay less for their lots than the people from whom they buy them.
I imagine there were some "come home to Jesus" meetings between Bobby and his financial backers. If so, these meeting succeeded to the extent that they played a roll in Bobby's retreat from NASCAR, the appointment of a new president with vast industry experience and ties to Lubert-Adler, the new marketing and sales management team, and a comprehensive communications strategy to assure property owners and quiet rumors. Bobby remains the face of the company as Chairman and CEO as well as its visionary. With his attention refocused on executing his vision, backed by a solid management team and committed financial backers, things in Bobby Ginn's world may start looking up. Let's all hope so. The contributions of Bobby Ginn's developments, sporting events, and charitable giving to the Flagler County economy are immeasurable.
Toby Tobin is Editor & Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast and Flagler and Volusia counties in Northeast Florida
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Bobby Ginn has done such a good job managing the company, they have laid off around 300 employees to date. Given that, he'd make a hell of a president of the U.S. He could continue what bu$h has started.
Terry,
Given the down market, I would be surprised if there had not been layoffs.
This is great information, Toby. And as always you state it beautifully. I think Ginn has been great for the area, and provides great vision. I loved the recent Golf Tournament and the coverage the Golf Channel provided. Unfortunately, our area has seen some challenges and like always some are trying to find where to "point the finger". What I hear a lot is that "the market is bad", but truth is more that the market is more along the lines of just not being what we would care it to be most times. As you point out, too many are seeking large returns quickly which may have been the case for a short period of time but has never been the case in real estate over the years. I think the issues brought up about the Conservatory are a great example of this. The fact is we are still seeing sales of just residential properties at about 100 per month. Sales to listing ratios are still a bit high at 1:3, but fortunately have remianed in tact as the number of sales has reduced compared to last year. And land sales have gone down for obvious reasons in realtion to the amount of great properties that are for sale many of which are move-in ready. Overall, our area is very attractive and it will take some time to stabilize but we are seeing signs of that now. And we are seeing much more attraction to the 4+ bedroom market as pricing has come more in line.
Pricing, yes, is presenting challenges. But there are many misconceptions even in that area. Pricing is being taken too lightly at times, and often strategies are to simply lower price to try to spur attraction without getting any feedback and instead of looking at other things which could be creating barriers to selling. For example, I just had a conversation with a woman the other day who paid to have her property listed on MLS to sell on her own. After several months on the market with no interest, she reduced the price twice. She rationalized from all that she has heard that it was because the "market is bad" and that's the problem with selling. After doing an analysis for her, I found her pricing to be a lot lower than it should be priced at. For her, the greater issue is marketing of the property not pricing.
Overall, I see great things to come and it's an easy "out" to simply say the "market is bad". Ginn is providing great things for the area and great vision to help spur the luxury component and the tourism anemities to the area. Again, great information and thanks for sharing.
Kathy,
Thanks for your comments. Just as the post dot.com bubble brought stockholder suits, the real estate reversal brings on developer bashing. The speculators that got caught are bound to angry. The media treatment doesn't help either.
Locally, the inventory is dropping slightly. And prices for single family residential homes are relatively stable. As soon as buyers decide the bottom has been reached, activity will pick up. Also, the commercial real estate activity in Palm Coast (Town Center and Cobblestone Village) will soon answer the "where do I shop?" and "where do I eat?" questions.
Mark,
Bobby seems to be avoiding the anti Ginn South Carolina bumper stickers with his current real estate ventures. His financial backers have deep pockets and are patient. They have taken steps they feel necessary by placing some of their people into key positions at Ginn to safeguard their investment. On the personal side, Bobby's move into NASCAR has been a total flop, both from a financial and public relations standpoint. At a recent NASCAR event, a banner plane trailed the message "How much money does Bobby Ginn owe you?"
Forest - Thank you for taking the time to post. A picture of vacant lots with unpaid property taxes, foreclosures, and POA issues is beginning to emerge at several of Ginn's developments.
I was briefly involved with a small family group of investors who had over 40 Ginn proeprties between them...there were three families..and they were being foreclosed on all the properites...bought pre construction and now the loans are past due, lives are ruined, credit is ruined, and yet they still had hope that Ginn would make the deals good until the end...I never met the guy, but they had and could not believe the Ginn operation would allow them to lose everything...
The facts are simple Ginn realtors were instructed to mislead investors. Some of the owners are very wealthy and powerful people that were lied to and cheated out of their money. It is tough to do business from out-of-state never mind out of country. The Ginn Company took advantage of this. In the case of the villas in Reunion, as people were backing out of their contracts Ginn realtors insisted they were selling for 750,000 to 800,000 (great profit from the 660,000 thousand launch PARTY prices) to force you to close. Yes that is fraud in the very essence of the word. Bobby sleep well you crook!