A complaint filed in behalf of property owners at now bankrupt Florida golf communities Tesoro and Quail West and reported today at the web site GoToby.com alleges that Credit Suisse and controversial developer Bobby Ginn essentially colluded to provide the bank with enormous transaction fees and the developers with up-front profits, at the expense of investors in the properties.  Famed institutions like Harvard College and the MacArthur Foundation have been named as defendants in the complaint as well.

        According to the filing by Drew M. Dillworth, the Chapter 7 Trustee for the Tesoro & Quail West bankruptcies, Credit Suisse, the

        Later, the lawsuit alleges, Credit Suisse and Ginn-Lubert-Adler arranged for the bank to provide $675 million in funds through a “new financial product” that gave the defendants in the suit an opportunity to take their profits up front by mortgaging their golf communities “to the hilt.”  Credit Suisse took $15 million in fees from the transfer, according to the complaint, and Ginn/Lubert-Adler split $323 million among themselves and their investors (including the universities, foundation and pension funds).  The remaining $158 million was used to replace third-party debt with new debt. 

        Meanwhile, the development’s property owners unknowingly wound up with all the risk.  The communities were “too thinly capitalized to survive” once the loans were made, according to the filing.  Other Ginn/Lubert-Adler projects in the “recapitalize and take profits” scheme, according to the complaint, were the Hammock Beach River Club and The Gardens in Palm Beach, FL; Laurelmor in the North Carolina mountains; and Ginn sur Mer in the Bahamas.  Yellowstone Mountain Club, the huge Montana community that also went bankrupt, is mentioned as an example of another development in which a similar Credit Suisse loan was used to the detriment of property owners there.

        According to the Tesoro and Quail West trustee’s complaint, less than a quarter of the total Credit Suisse loan was earmarked for capital developments

        Ginn/Lubert-Adler filed Chapter 7 bankruptcy on the developments named in the filing in December 2008 after a series of defaults and attempts to restructure the loans, at which time Mr. Dillworth was named trustee by the U.S. Trustee Office.  Ginn/Lubert-Adler investors Harvard, the John D. and Catherine T. MacArthur Foundation as well as the University of Michigan, the Maryland State Retirement and Pension System, the Ohio Police and Fire Pension Fund, and the retirement systems for state employees and teachers in Pennsylvania received proceeds from the alleged fraudulent loan.

        The complaint also alleges that, in order to value the developments highly enough to qualify for the large Credit Suisse loan, real estate giant Cushman & Wakefield appraised the properties as if all lots had been developed and were ready for sale to builders “without deduction or discounting for pertinent risk factors or the time value of money.”  In effect, according to the filing, the appraisal significantly inflated the value of the Tesoro and Quail West projects.  Ginn/Lubert-Adler, the complaint alleges, provided Cushman & Wakefield with sales projections that had no basis in reality.

        Trustee Dillworth, of course, is asking for all loan transfers from Credit Suisse to Ginn/Lubert-Adler for Tesoro and Quail West, and payments to the developer’s investors to be recovered ("avoidance" is the legal term in the document).  This Ginn debacle may not have the overall impact of the credit default swap mess, but try telling that to the owners at Tesoro and Qual West.  For them, it’s personal.

        You can download a copy of the trustee’s complaint from GoToby.com.

        The Reynolds family, as in Reynolds Plantation in Georgia, had a sweet thing going -- a large and, by all accounts, well-organized community in the upstate lake region of Georgia, buttressed by six manicured and excellently reviewed golf courses and a Ritz Carlton hotel.  That sure seems like a complicated enough operation for any management team, even one as well regarded as Reynolds’.  But like a newbie in Las Vegas who wins a few quarters on his first pull of the one-armed bandit, Reynolds may have figured it was both good and lucky, and that managing someone else’s mess was no harder than building a community from scratch.

        Unfortunately, they had never managed a Bobby Ginn mess before; a Ginn mess tends to leave in its wake so much bad feeling

        Perhaps drunk on the reputation it built at its namesake community, the Reynolds Group, along with financers Lubert-Adler, picked up a number of Ginn communities at distress sales, figuring that if they couldn’t make a go of them, then no one could.

        Well, maybe no one can.  At Hammock Beach, arguably one of the more complete and well regarded of the former Ginn communities, residents are at odds with each other over just how much Reynolds is accomplishing.  No less than Toby Tobin, the sage real estate blogger from the Palm Beach area, has been roped into the middle of the tug of war.  The always-balanced Tobin admitted in his most recent blog that perhaps he had been a little unfair to Reynolds in a prior characterization of the company’s “gorilla” tactics at Hammock.  That won’t sit well, Tobin admits, with many of the homeowners at Hammock who, as he puts it, are “trapped by the requirement to pay club dues and association fees on a vacant lot, the value of which has plummeted as much as 95%.”

        When things get this confused and messy, there are always bargains to be had.  Of course, that is what Reynolds thought.

        You can read Tobin's latest article at GoToby.com.

        It is not exactly breaking news, but Forbes magazine has run a piece on the troubles in Tiger Woods’ golf design business, repeating much of what we already know -– that the Woods course in Dubai, with only three holes built, is on hold, with no definite plans to restart; the course at Punta Brava on Mexico’s Pacific coast, located a little more than an hour south of San Diego, is bogged down with permitting issues; and, closer to home, the Woods course at High Carolina for Jim Anthony and The Cliffs Communities won’t be ready before 2012.

        “One doesn't know whether to believe the stated intention to push back the opening date (originally slated for the fall of 2011) by only six months,” writes Forbes reporter Kurt Badenhausen.

        What is particularly interesting about the Forbes piece is a cryptic comment attributed to Cliffs developer Anthony, who recently landed more than $60 million in loans from more than 500 of his residents in order to complete the Woods course and other promised amenities.

        "He is not a partner,” Anthony said of his business relationship with Woods, “but our long-term interests are shared."

        Anthony and Woods both need a highly regarded golf course at High Carolina -- Anthony to appease his creditors, most of whom will be members, and Woods to overcome skeptics who may believe that great players do not necessarily make great -– or even good –- golf architects.  On the other hand, Anthony’s comments may mean nothing more than that Woods has taken a nice plot of land as part of his reported $10 million+ design fee, with plans for a personal mountain getaway where the gates will keep away the prying eyes of the National Enquirer.

        You can read the article at Forbes.com.

        I spent Friday at the TPC of River Highlands golf club in Cromwell, CT, watching the PGA tour pros tackle one of the most interesting and popular courses on tour.  Although the likes of Tiger Woods and Phil Mickelson were not there, such major titleholders Harrington, Cink and Goosen brought out the crowds.  In the crowd and wearing the red shirts of the hundreds of Travelers Championship volunteers were residents of the surrounding community, a combination of traditional neighborhoods and a planned group of homes adjacent and above some of River Highlands’ fairways.

        Across the nation, some excellent golf courses in planned communities play host to annual pro tour events.  Some residents are not crazy about having their course closed for a couple of weeks – and trampled by spectators – but most appreciate the opportunity to rub elbows with the pros and see how they perform on the course the members play all the time.

        In the case of River Highlands, the pros are doing quite well.  Justin Rose leads at 14 under par after two rounds.  You can follow the action on CBS this weekend.  In the coming weeks, I'll have more to say about golf tour events inside golf communities.

PGA Tour player Bill Haas (right) and a tour rules official begin their descent from above and beside the 15th green at TPC River Highlands.  Haas hit his tee shot on the driveable par 4 into the weeds, declared his ball "unplayable," and elected to take a drop at the top of the hill, in a resident's backyard (the normal out of bounds line did not apply during the tour event).  Haas wound up with a double bogey 6 and missed the cut.