Love It and Leave It:  The Best Way for Golf Community Owners to Execute Their Vision Is to Let Others Do It 

    hubris –- an excess of ambition and pride
      The true genius of visionaries is to know when to get out of the way and let others execute their visions.  I learned this when I worked for the J. C. Penney Company in New York City in the 1970s.  I never met James Cash Penney, who founded the company in 1902 in the small Wyoming mining town of Kemmerer and passed away in 1971, seven years before I joined the company.  But within weeks of becoming a Penney “associate,” I knew a book’s worth about the founder’s business accomplishments and philosophy.  For example, before business experts gave them names and wrote entire books about them, Mr. Penney used the devices of “profit sharing” and “employee ownership” to motivate his store managers to perform.  And he referred to all his employees as “associates” well before modern age industrial psychologists recognized that respected employees are productive ones.  
     But one thing about Mr. Penney’s legacy especially stood out for me, and that was the fact that he turned over the day-to-day operation of his company to others in 1917, when the organization was still in its infancy and when his vision of a truly national retail chain was far from realized.  He would spend the next half-century as a mostly uninvolved chairman.  He would write in explanation of his decision to exit the stage so early that he was mindful that his own attitudes, such as not accepting credit in his stores, would hinder the growth of his entire retail operation.  Whatever is the opposite of hubris –- perhaps selflessness –- that was James Penney.  Sometimes stepping away takes a lot more courage than the alternative.
     Some former high-flying upscale golf community developers might have saved themselves a lot of heartache if they had followed Mr. Penney’s path rather than betting the ranch, literally, that they could somehow execute as well as they had conceived.  A visionary needs to know when to fold ‘em and leave the driving to others.

Reynolds wrapped up in problems

     I recalled the Penney philosophy a few weeks ago after I heard that yet another upscale golf community was in financial trouble -- and not just any golf community, but one that seemed rock solid in so many regards.  The announcement by family scion Mercer Reynolds that Reynolds Plantation was going to have to shed its vaunted amenities came as a blow; I hadn’t visited Reynolds but its reputation among developers, realtors and its own residents had been unassailable, at least publicly.  So solid was the perception of Reynolds’ operating company, Linger Longer, that when the firm took over some of the failed Bobby Ginn projects, like Cobblestone Park near Columbia, SC, and the nascent Laurelmor property in the mountains near Blowing Rock, NC, many observers read it as a financially successful and competent developer making a bold and timely move to purchase beautiful properties at bargain prices.
      In retrospect, the Reynolds buying binge could have been seen as a signal of over-leverage or over-confidence or, worse, an attempt to obscure some problems at the home base.  Whatever it was, it did not add luster to the Reynolds reputation.  Sales at Laurelmor have floundered.  In Columbia, local realtors have complained quietly about Linger Longer’s unnatural price manipulations in Cobblestone Park where, in Ginn’s wake, some lots had been priced at less than $20,000 (during Ginn’s short reign, the same properties sold for up to 10 times that).  When I visited the area in February, one realtor told me that Linger Longer was insisting that any buyers of available properties in the community join the golf club at a fee of $19,000, even though the clubhouse is unfinished and the club is not private.  That seemed to the realtors that Linger Longer either was adding the club membership fee as a way to supplement the low property prices or the developer wanted sales to, literally, linger longer, until the market prices made a comeback.  It did not look to me as if Linger Longer was trying too hard to sell properties; when I made an unscheduled stop at Cobblestone on a Saturday morning, the guard at the gate told me the sales office was closed and, no, I could not drive around the community.
      It is tough to divine Reynolds’ motives for the buying spree and, as a privately held company, they owe no explanation to shareholders or the media -- although their residents are another story and, to Reynolds’ credit, they sent a note to property owners a few weeks ago indicating trouble ahead. (Some would argue, with justification, that it was way too late in coming.)  The events of the past few months must be humbling for the once high-flying Reynolds family, and things may not get better in the coming weeks.  Earlier this month, the family began soliciting the votes of property owners to purchase the Reynolds Plantation amenities, including the six designer golf courses, for $44 million.  Results are due April 29, but already some residents are reportedly grousing that the price exceeds its market value.  Bank of America, the chief lender on the amenities, could foreclose a few days after the vote, which is not good news for anyone involved except, perhaps, bottom fishers looking to scoop up six excellent golf courses in a beautiful rural Georgia development.

Precipices at The Cliffs

     The Reynolds implosion is just the latest in a series of upscale communities that have reached, as the late sportscaster Howard Cosell once described a teetering professional football team, “the precarious precipice of precipitous decline,” words that seem particularly apt in the case of Jim Anthony, founder of the group of communities known as The Cliffs.  Over a couple of decades, former telephone lineman Anthony has parlayed a few hundred inherited acres into a development empire that is reportedly the largest private collection of land in South Carolina.  Anthony’s vision was to build a string of communities across the uplands of the Carolinas that would offer every conceivable lush amenity to well-heeled buyers, from equestrian centers to nature trails (with naturalists in residence) to “wellness” centers with the latest hi-tech workout equipment and spas.  Oh, yes, and designer golf, with names like Nicklaus and Fazio attached.  
     When I first visited The Cliffs with a friend in 2005, we marveled at the tens of millions of dollars in amenities and wondered how they could possibly be sustained over time, even with a steady stream of buyers willing to pay up to $1 million and more for mountain lots.  Furthermore, in the years before the market plunged, The Cliffs organization spent more on marketing than did some international corporations -– for multi-page glossy magazine ads (occasionally deceptive, see sidebar in left-hand column), elaborate trade show booths, lavish outings and parties for prospects…you name it.  You could say they spent like drunken sailors, if you wanted to slander drunken sailors.  (The other side of the coin, equally dangerous:  If an owner is a skinflint, who believes his vision should sell itself, he authorizes very little investment for marketing, and brand identity languishes.) 
      Now, despite a cash infusion by a Dallas development company, Anthony is left to explain to a local Greenville newspaper that he is behind on a $20 million note from an Atlanta investment firm and that 100 of his properties may be foreclosed on; and he has to endure such comments from his bankers as, “None of this is personal.  It’s just business,” as related at the Greenville News’ online site.  When your bankers start talking like the Godfather, look out.
    

Tiger, Tiger burning blight

    By all accounts, Jim Anthony is a humble man, a spiritual man who turned over the best piece of land at his Cliffs at Glassy for the construction of a chapel when he could have earned a few million dollars selling it.  Yet even humble visionaries may have moments of extreme hubris, and Anthony could forever be known for his, the decision to invite Tiger Woods to design the proposed eighth golf course in The Cliffs Communities’ portfolio, and to pay the utterly inexperienced designer a reported $10 to $20 million, five times more than Jack Nicklaus typically receives for his layouts.  Sure, Anthony and The Cliffs were dealt a rotten hand when Woods’ peccadilloes came to light, and those who do not believe in casting stones are right to applaud Anthony for sticking by the fallen star through his post-Thanksgiving crash notoriety.  But make no mistake about it; the community surrounding Woods’ High Carolina layout was in trouble before the first tabloid headline, with just a few dozen properties sold in a paroxysm of activity after Woods helicoptered in to press the flesh and walk the property.  
     With creditors at his door and his residents reluctant to authorize funds from their loan to complete the Woods layout, High Carolina and its golf course may become something significantly different than what Anthony conceived -- and ultimately without his involvement.  It may be Tiger Woods’ turn to stand by a friend in need.

Lessons learned from The Cliffs and Reynolds

      The communities that the Reynolds family and Jim Anthony conceived have a lot going for them, despite their delicate financial conditions.  It is way too early to assess appropriately the opportunities or shortcomings at Reynolds Plantation, where a major American bank is poised to acquire the golf courses and other amenities if the Reynolds family defaults.  We will keep our eye on developments there but any buyers contemplating a purchase at Reynolds Plantation, where uncertainty could have a downward effect on short-term pricing, should ask a lot of tough questions and insist on evidence of the answers.
     At The Cliffs, a smart group of residents have protected themselves from possible lender ownership of the amenities, including the golf courses, by providing a $60 million loan to Anthony, with the amenities as collateral.  If he defaults, they own the golf, clubhouses, fitness and wellness centers.  In the long run, The Cliffs residents and other developers could very well be the ones to execute Jim Anthony’s vision.