Owners at The Cliffs are on the horns of a dilemma or, more aptly, on the tines of Morton’s Fork. Sir John Morton, Lord Chancellor of England in the late 15th Century, figured out a diabolically brilliant rationale for collecting taxes from everyone in the kingdom. Subjects who lived in apparent luxury, Morton decided, obviously had the means to pay their taxes. On the other hand, all subjects who did not spend much money and appeared to live frugally, Morton reasoned, should have saved enough to pay their taxes. The term Morton’s Fork emerged to define those situations in which you have two choices, both bad.
I thought of Morton’s Fork today as I considered the dilemma Cliffs Communities property owners face. Founder and developer
Cliffs owners could get skewered no matter how they decide about the loan to their developer.
Jim Anthony is waiting to hear if they will front him a total of more than $60 million to complete two golf courses and other projects at his High Carolina (Tiger Woods design) and Mountain Park developments (Gary Player). The minimum individual bailout is $100,000, for which the return is 12% annually over seven years. In the world of investment, that’s a great rate, two points better even than what Bernie Madoff was paying. But Cliffs owners would gladly forgo the impressive interest income in lieu of those heady days of yesteryear when they considered Anthony a visionary able to pay for his vision.
Owners could be forgiven for thinking they might get skewered no matter what they decide. If they deny Anthony the loan, he has indicated he will go to “Wall Street” to borrow it at much higher interest rates. In the case of a default on the loan, the bankers would own The Cliffs, and you don’t have to be a visionary to understand what that could do to property values. Anthony’s case to the owners is that if they lend him the money and he defaults, the property owners’ will acquire a rich consolation prize, direct ownership of The Cliffs’ amenities.
Not to mix our metaphors, but becoming the owners of those lush and expensive amenities would be a Pyrrhic victory if ever
Do Cliffs residents really want to own the lush and expensive amenities?
there were one. The cost of maintaining such an inheritance would have the twin disadvantages of burdening Cliffs property owners with higher maintenance fees since Anthony has been subsidizing them himself, and lower property values, since the “most comprehensive club membership in the world,” as Cliffs advertising has touted, could very well become the most expensive.
The Cliffs property owners are smart people -- I know some of them personally -- but even they will have trouble choosing between the two alternatives their developer has presented. They are on the horns of a dilemma, between the devil and the deep blue sea, and in a predicament of which only Sir John Morton could be proud.
