Relationships drive Sea Island/Goldman pairing

By J. Scott Trubey and Maria Saporta
Friday, February 26, 2010

When it came time to select an investment adviser for the potential sale of beleaguered Sea Island, it all started with relationships.

Sea Island Co. announced Feb. 18 it had retained Goldman Sachs & Co. to advise it in a possible sale of the posh but debt-riddled resort and seaside community.

Enter Walter Driver, former United States Golf Association president, Augusta National Golf Club member and Southeastern chairman of the powerhouse Wall Street investment bank, who is said to be leading Sea Island Co.’s search for a buyer or equity investor in the iconic seaside resort and golf mecca. As one might imagine from a man of his background, he’s also one hell of a golfer.

Driver is the retired chairman of powerhouse Atlanta law firm King & Spalding LLP, the longtime attorneys for Sea Island Co., and is a director of Columbus, Ga.-based Total System Services Inc, or TSYS, (NYSE: TSS), the credit card processing firm and spin-off of Sea Island’s lead lender, Synovus Financial Corp. (NYSE: SNV).

In January, Sea Island Co. Chairman and CEO Bill Jones III revealed the company had defaulted on approximately $400 million in consolidated debt from its half-billion dollar renovation and expansion of the fabled Cloister and Lodge hotels and residential developments.

Sea Island Co. announced it had reached a forbearance agreement with its lead lender, Synovus-subsidiary Columbus Bank & Trust, which held at least $220 million of that debt.

The resort and development company said it expects to complete a review of its options — which include finding an investor or an outright sale — in “a timely manner.”

“We have dealt with uncertainty long enough and I am confident that this review will provide us an opportunity to build a solid financial foundation for our future,” Jones said in a statement Feb. 18.

Driver and his team at Goldman Sachs is said to have beat out other interested investment banks, including Morgan Stanley, in a relative “beauty pageant” of competing Wall Street houses.

“Walt certainly knows all the players and most of the board members at Sea Island and the board of Synovus,” said Tom Bell, former CEO of Cousins Properties Inc. “He would be a real asset for them.”

In an interview with Atlanta Business Chronicle (see related story Page 1A), Synovus Chairman and CEO Richard Anthony said there is interest in Sea Island because of its “uniqueness” and its “exceptional lifestyle.”

“There are interested buyers and we’re aware of some of them and others have come directly to the [Sea Island] company,” Anthony said. “But over the next few months I think we’ll all learn a lot about the interest level and how fast this will all move. It’s going to be very attractive to a lot of people but in the end you don’t know what form [a resolution] will take.”

The focus now turns to whom the potential investor, or group of investors, might be.

Sources have said the members of Ocean Forest, the gated golf community on Sea Island’s northern tip, have been negotiating with the Jones family to acquire the community and its world-renowned links for $35 million, which was also said to be the amount of an interest payment that was due Sea Island Co.’s lenders Dec. 31, 2009.

Residents and real estate sources familiar with the situation have speculated that prospective buyers and investors could include Kohler Co. CEO Herb Kohler or hospitality-focused private equity firms.

Facing competition from luxury hotel chains, Sea Island Co. created a new vision for itself and launched a renovation and expansion that lasted from 1998 to 2006. Among other projects, it developed Frederica, a 3,000-acre community limited to 400 to 500 single-family homes on the north end of St. Simons Island.

But to fulfill that dream, Sea Island Co. took on tremendous debt. That, coupled with cost overruns on the resort, the tanking housing market and then the global recession, has placed the company under enormous financial strain.

Last summer, the hotel and resort management company announced it had finalized the terms of an April 22, 2009, restructuring agreement with its lenders, and had consolidated as much as $400 million in outstanding debt into a three-year credit facility that matures in July 2012.

For months, rumors swirled a sale was imminent for part or all of Sea Island Co.’s holdings, including its thousands of acres of coastal marshland, pine forests, gated communities and golf courses.

Still, it’s a stunning turn of events for a historic resort that has played host to leaders of nations, captains of industry and been a playground for elite families from across the globe.

Despite its prestigious heritage, Sea Island Co. was caught in a real estate and financial maelstrom that has felled many beleaguered developers who found their projects hemorrhaging cash and deep underwater without a way to refinance.

In November, Wells Fargo & Co. took over the deeds to its 3,000-acre Frederica golf course community on the Georgia coast and to an undeveloped 400-acre parcel on St. Simons Island. In October, Sea Island announced it was selling nearly 18,000 acres, including land planned for a massive residential and mixed-use development.

Maria Saporta, Editor, is a longtime Atlanta business, civic and urban affairs journalist with a deep knowledge of our city, our region and state.  Since 2008, she has written a weekly column and news stories for the Atlanta Business Chronicle. Prior to that, she spent 27 years with The Atlanta Journal-Constitution, becoming its business columnist in 1991. Maria received her Master’s degree in urban studies from Georgia State and her Bachelor’s degree in journalism from Boston University. Maria was born in Atlanta to European parents and has two young adult children.

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