November 15, 2008 - Land Resource LLC, Orlando FL

The developer of a controversial marina community on the Georgia coast near Cumberland Island National Seashore has filed for Chapter 11 bankruptcy protection.

Land Resource LLC, which was headquartered in Atlanta until last year, filed in Orlando, where it is now located. Company owner J. Robert Ward is seeking “breathing room” to sell Land Resource’s assets, valued at $115.2 million, the filing says.

In the filing dated Oct. 30, the company lists liabilities of $214.8 million. Among the creditors are the Atlanta Braves, owed $50,000, and a former employee who is owed $787,000, according to Land Resource.

Ward said his company fell victim to the real estate downturn, fueled by the credit crisis and low consumer confidence. He was not making enough money on sales to complete the promised projects.

“The banks stopped making loans to our customers,” Ward said in an e-mail. “It just doesn’t seem fair that the banks can put us into bankruptcy because of their failure to lend and then get a federal bailout, but then chase me personally and ruin a very good company and put 250 people out of work and affect thousands of property owners and leave them with uncompleted lots.”

Ward, who is 60, said he will start over.

The company’s assets include 128 unsold lots in Cumberland Harbour in St. Marys, where the largest marina complex on the Georgia coast has been proposed. According to Land Resource, 936 lots have been sold. They asked from $150,000 to $750,000 for lots.

In 2005, the state Department of Natural Resources issued a permit for two marinas, including 3.2 miles of docks, board walks and slips in Cumberland Harbour. Along with dry dock storage, the complex could hold more than 800 boats of all sizes.

But work has not yet started. The Center for a Sustainable Coast, an environmental group, appealed the state’s permit all the way to the Georgia Supreme Court.

A decision is scheduled to be released Monday.

If the environmentalists win, their lawyers say the case could set a new precedent for the way coastal land is developed. The Center for a Sustainable Coast wants the state to protect the tidal marsh by regulating the way land is developed adjacent to the marinas. Land Resource maintains that would overstep the state’s authority.

Neither side believes the bankruptcy will affect the Supreme Court’s ruling.

In the meantime, many homeowners in Cumberland Harbour —- and those building their homes —-have no water access. According to the bankruptcy filing, two purchasers are suing the developer and others are threatening to sue, claiming they did not know about the marinas’ status.

Land Resource, which Ward started in 1997, has developed or is developing 19 vacation communities around the Southeast. Eight of those are incomplete or barely begun, and now sales have stopped, Ward said.

The company’s business strategy was to buy land in beautiful, rural areas on the coast, along a lake or in the mountains. The company would then build common areas, including roads, clubhouses and swimming pools, and sell lots to people who would build their own vacation homes.

Many of the buyers are from metro Atlanta.

Original Story - AJC.com

Update January 4, 2009

Developers, agents trying to adapt in tough economy

How long will the pain last? As the calendar turns to 2009, that's a crucial question for the local real estate market.

Last year's economic tailspin largely was driven by trouble in the national property market, as skyrocketing foreclosures led to tighter lending standards from banks and a nationwide slump in home sales that lingered into the end of the year. According to the National Association of Realtors, the annual rate of existing single-family home sales was down 8.8 percent in November, compared to the previous year, while the median price was down 12.8 percent.

Local real estate observers frequently point out that East Tennessee has fared much better than disastrous markets like California, Florida and Michigan, but 2008 was still a rough year on Rocky Top.

Besides taking a hit at the macro level - among local Multiple Listing Service, or MLS, listings, home and condo sales were down nearly 37 percent in November, and the median sale price of a three-bedroom home was down nearly 6 percent - the turmoil also was apparent in a range of individual projects.

Two of Knoxville's top local builders were sued by lenders over allegations of unpaid debts, while a pair of waterfront projects ran into heavy turbulence. In December, unsold lots and developer rights to Lowe's Ferry - a residential project in Blount County - were deeded back to Fifth Third Bank, after the developer's cash flow dried up. The developer estimated that 52 lots had been sold in the project and 88 were returned to Fifth Third, which retained many former employees of the developer to continue marketing the properties.

In Campbell County, Orlando-based development company Land Resource closed its sales office for The Villages at Norris Lake and stopped development work for the waterfront project near LaFollette. In July, the developer said buyers interested in lots had been unable to get financing and that as sales dried up, the lenders who financed his company's operations said they wouldn't continue to provide money and wanted to see a revised plan. In October, Land Resource filed for bankruptcy protection.

During the same month, a foreclosure auction at a Pigeon Forge condo project next to the Country Tonite Theatre was derailed when the property owner filed for bankruptcy protection.

It adds up to a year that most real estate pros probably would like to forget. Unfortunately for them, there's no guarantee that a quick comeback is on the way.

Phil Ford, a Realty Executives agent who recently wrapped up a term on the local Realtors association board, said last week that he's seen a pickup in buyer activity, but it's not necessarily leading to deals. The Water Resort at Pigeon Forge is a four-building condo complex located just off of the Parkway next to the Country Tonite Theatre. A trustee for Alabama lender Nexity Bank had scheduled a foreclosure auction in October, a sale that was to include dozens of unsold condos.

The Water Resort at Pigeon Forge is a four-building condo complex located just off of the Parkway next to the Country Tonite Theatre. A trustee for Alabama lender Nexity Bank had scheduled a foreclosure auction in October, a sale that was to include dozens of unsold condos.

"The offers are fairly low, and the sellers aren't necessarily willing to come down and meet their offering price," he said.

Ford said he expects this year will probably be similar to 2008. Citing forecasts he's heard, Ford added that "I think probably we haven't seen the bottom yet locally, but hopefully we'll be seeing it by mid-(2009)."

The good news is that intervention by the federal government has helped drive mortgage interest rates to extremely low levels, spurring a wave of interest in mortgage refinancing. But when it comes to local builders, low interest rates could have some drawbacks in the long term.

Dale Akins, president of local research firm The Market Edge, said that if homeowners refinance at a 4.5 percent rate, they'll face a "huge opportunity cost" if they need a home in three or four years and rates have gone back up. "You'll have to really think long and hard about that because now you're looking at rates probably a little higher," he said.

The Market Edge found that Knox County residential building permits were down 41.8 percent through the first three quarters of the year, and Akins said he doesn't see any information that indicates an increase anytime soon.

But he also sought to put the building slump in perspective, saying that the housing market isn't terrible but it has been "running at 150 miles an hour for about five years and we've slowed down to about 60."

"The reality of the situation is we live in a different world now," he said.

That leaves developers in a battle to figure out the best way to market their properties and take advantage of the opportunities that do exist.

Robin Turner, the developer behind The Estates at Norton Creek, a high-end project in Gatlinburg, said his company will continue its focus on marketing to people once they come to Gatlinburg, rather than mass mailings or targeted approaches in cities like Cincinnati or Chicago.

"It's too expensive right now, in this market, to try to sway somebody to come to us versus North Carolina," he said.

Update Story - Knox News