By J. Scott Truby and Maria Saporta
Friday, January 29, 2010
The Jones family’s eight-decade sole control of the posh Sea Island resort could soon come to an end.
Sea Island Co. Chairman and CEO Bill Jones III confirmed Jan. 27 the company, founded in 1929 by his grandfather and cousin, would hire an investment banker to review its “strategic options,” which could include finding a buyer or major investor in the struggling ultra-luxury Georgia coastal resort.
“Over the past year and a half, Sea Island’s management and board of directors have taken decisive action to address the significant downturn of our industry and our near-term obligations to lenders,” Jones said in a statement. “Unfortunately, even as we took these prudent actions, the market deterioration continued.”
Sea Island officials said the company would not disclose discussions with its investment banker, which has not been named, until a deal is reached.
In a private, 30-minute meeting with 500 Sea Island members at The Cloister hotel, Jones told members the board was looking for a buyer or investor with the financial wherewithal to continue Sea Island Co.’s vision for the resort.
Jones also confirmed Jan. 27 that Sea Island Co. had reached a forbearance agreement on its defaulted debt — as much as $400 million — which was restructured into a note due in 2012. Synovus Financial Corp.’s Columbus Bank & Trust was the lead lender, holding about $220 million.
For months, rumors swirled that 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.
Georgia’s most luxurious and world-renowned resort got into trouble starting in 2008 after a massive nearly decade-long redevelopment and expansion that sources say cost more than $500 million.
In summer 2008, Jones resigned as a director of the bank holding company, saying it would be easier for the bank to work through the company’s credit problems without his presence on the board. The move came after former Synovus CEO Jimmy Blanchard stepped down from Sea Island Co.’s board.
The fallout of the Great Recession has ravaged the storied coastal five-star resort, which has laid off hundreds of employees over the past 18 months. Home sales — which were to be the financial driver of the club’s enormous overhaul — plummeted, and even the ultra-wealthy clientele that Sea Island coveted as guests and members stayed at home.
In early 2009, Synovus listed the $220 million loan as non-performing, meaning the borrower was no longer complying with timely payments.
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.
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 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.
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.
Jones’ grandfather and cousin founded Sea Island Co. with the construction of The Cloister in 1928. The resort thrived despite the Great Depression and World War II.
Facing competition from luxury hotel chains, the company 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.