"One of the mistakes we made is we overshot our market," said Bill Jones III, the company’s CEO and the fourth generation of his family to lead Sea Island said. "Given all the facts that we had at the time, it was not a mistake to borrow. It was our belief that slowing the construction process would have resulted in a multiyear disruption."The economic turndown "hit everything we had," Mr. Jones added. "They are not buying homes, they’re not buying resort residential products that we were developing…." In 2009, Cloister revenue was just $34.8 million, down 31% from $50.5 million in 2007.
Sea Island, Ga. – Sea Island Co., a genteel luxury resort for wealthy vacationers that has fallen on hard times, is selling its assets to two investment funds in a deal that is causing creditors to walk away from $340 million in debt.Sea Island Co.’s Cloister Hotel on Sea Island, Ga., is being sold for a spectacularly low price to financiers. .As part of a pact expected to be announced on Wednesday, funds managed by Oaktree Capital Management LP of Los Angeles and Avenue Capital Group in New York have agreed to pay $197.5 million in cash for Sea Island. Under the deal, Sea Island also is expected to seek bankruptcy protection on Wednesday.The 84-year-old resort is famed for its Cloister hotel, four golf courses, exclusive clubs, a private development called Ocean Forest Golf Club, and hosting a Group of Eight summit in 2004. Sea Island hit a financial wall when it couldn’t repay debt taken on by Bill
Jones III, the company’s CEO and the fourth generation of his family to lead Sea Island, as part of a $395 million renovation and expansion in 2006 and 2007. The deal shows how some banks are increasingly willing to get rid of distressed assets at a steep loss as they slog through their commercial real-estate problems. Many financial institutions have been reluctant to sell troubled loans and foreclosed property to preserve capital while values have plunged.
By Carrick Mollenkamp and Lingling Wei, August 11, 2010 WSJ
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