Having spent a good part of our childhood in Georgia, we remember that Sea Island was the place you went for really special vacations. It was the THE resort for Georgians and had been for decades.
However, the founders and longtime owners, the Jones family—William “Bill” Jones III runs it now—had aspirations for much more. They wanted to be THE resort for the WORLD. And to accomplish that they had to do a massive expansion which has left them with a huge debt problem.
For a while it worked. In 2004, for example, the G8 summit was held there. But things aren’t looking too good lately.
Atlanta Business Chronicle: ….One of Sea Island’s problems, sources say, is the redevelopment of the resort ended up costing about a third more than originally projected. It also is estimated that the cost per hotel room ended up being at least $1 million. A typical five-star quality hotel can be built for around $400,000 a key depending on land costs, sources within the hospitality community say.
Even Jones, in talking to friends and business associates, has described it as a “perfect storm” — which he refers to as a downturn in residential sales and a decline in tourism.
As a result, the resort has had to lay off an estimated 500 to 600 employees in the past six months. And the Frederica residential development, whose lot sales were to help pay off the debt on the resort, has had few if any sales for months.
Synovus’ exposure on the Sea Island account is at least $100 million if not double that, sources say. As the lead bank, Synovus is responsible for managing the entire loan for the redevelopment of the resort and related facilities, which is estimated to be as much as $400 million. Other banks involved in the loan are thought to be both domestic and international lending institutions.
The Frederica residential development, financed by Wachovia Corp., is thought to have cost at least $100 million. Undeveloped lots cost an average of $1.5 million each, and of the 400 slated to be part of Frederica, only about a third have been sold.
The family, which led Sea Island through the Depression, is struggling with what to do with it now.
..the family is exploring a possible sale of equity in the company, perhaps even to overseas investors, so it can get a cash infusion to repay its debts. It is unclear whether the Jones family would be able to keep a controlling interest in the company and remain in charge of the resort and development.
The other option would be for the family to sell off part of its extensive land holdings along the coast, but this is a bad time to sell real estate because of the down market.
Because of the amount of debt, lenders are playing a critical role in determining the future of Sea Island.
The Sea Island story gets even more complicated because while Synovus could try to take over, they know that wouldn’t be so good for tourism considering that a big part of the attraction is the family’s ownership of and attention to the resort. Plus, this place is a source of pride for the state of Georgia.
But Bill Jones did step off the Synovus board and the retired Synovus CEO stepped off Sea Island’s and it’s speculated that the banks are pretty much “calling all the shots” at the resort anyway. Then there was that irksome problem of a nasty lien for unpaid payments to a federal pension benefit program filed against the property (though withdrawn a few weeks later).
However, we’re thinking you can probably negotiate a pretty good room rate for yourself nowadays.
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