Cliffs makes it official: Chapter 11

        The Cliffs Communities, under the official name Cliffs Club and Hospitality Group, filed for Chapter 11 bankruptcy earlier today in Greenville, SC, its headquarters city. The filing is the latest event in a tumultuous couple of years at the upscale group of communities in the hills of the Carolinas that were founded by former telephone lineman Jim Anthony. Anthony’s rags to riches to bankruptcy story will serve for a long time as a cautionary tale for others considering a dip into the wild world of upscale golf community development.

        The Cliffs empire has been built on a vision of upscale amenities, and lots of them. Six golf courses, an equestrian center, multiple wellness and fitness centers, nature trails, a mountaintop chapel, $1 million properties

on lakes and mountains, and even lodges in Patagonia and British Columbia…few expenses were spared in selling The Cliffs lifestyle -- including an annual advertising budget of $14 million during the high-flying years. The model depended entirely on an ever-increasing housing market and the continuing explosion of new wealth in formerly booming cities like Atlanta, just a few hours from the Cliffs’ gates.  When the boom went bust, so too did the execution of Anthony's vision.

        The specific story of The Cliffs includes a few elements some of us will recall from our readings of classic Greek tragedy; a hero blind, until it was too late, to the roiling external influences on his kingdom, as well as to his own flaws. Former Cliffs employees have told me that Anthony, whose residents spoke of him in almost divine terms during the good times, often disdained the advice of his senior staff, and then “openly criticized and belittled them” in front of others. But fate, as well as over-weaning pride, also worked against The Cliffs founder, in the form of a collapsing economy and a young golf star who was supposed to make his mark in the world of golf course design courtesy of Jim Anthony.

        To those of us -– and to some Cliffs residents -- who thought six golf courses, up to one hour’s drive from each other, were more than enough, the hiring of Tiger Woods to build a mountaintop golf course at High Carolina was a head scratcher, an unnecessary if daring attempt to take The Cliffs from its dominating position in the upscale golf community market

to somewhere over the top. To help justify a $150,000 club membership and sell $1 million plots of land at High Carolina, but also, perhaps, out of vanity, Anthony reportedly paid Woods a design fee in the $10 million to $20 million range, five to 10 times more than Jack Nicklaus is paid on his best day. Within days of erecting billboards around Asheville with giant renderings of Tiger Woods touting High Carolina, the star ran his car into a tree in a Florida golf community.  We know the rest of that story.  Now those of us who care about how The Cliffs story unfolds will wait for the bankruptcy court and trustee to sort things out and decide if Cliffs property owners Steve and Penny Carlile will wind up with the amenities.  What happens with the unsold real estate at The Cliffs may be a more complicated issue.

        When I first visited three of The Cliffs Communities in 2006 with a friend, we marveled at the array and lushness of the amenities. The housing market was roaring back then, and our guide at The Cliffs proudly pointed to a McMansion on the golf course, owned by an Atlanta family, and said: “It’s their third house. They plan to use it a few weeks each summer.”   Later, at dinner after our visit, I asked my friend, “How can that all be sustained?” “Beats me,” he responded.

        Hindsight is easy, especially when it involves someone else. But in retrospect, Anthony should have taken some of that $14 million in marketing money and hired a top-rank risk management expert -- and then taken his or her advice.