Homeowners support debt relief deal
Article Courtesy of the St. Petersburg Times
Published May 23, 2003

LUTZ - Organizers of an $8-million-plus debt relief plan for Heritage Harbor have the stamp of approval they wanted. 

As of Wednesday, 290 homeowners - more than two-thirds - signed papers saying they support the proposed deal, said Rick St. Pierre, a member of the community development district board and the lead negotiator with subdivision owner Lennar Corp. The Miami-based company wanted at least that much backing for the plan.

Under pressure from residents, Lennar recently agreed to spend at least $8-million to rectify a mounting debt situation created by developers. The $7.3-billion company will absorb most of that money as a loss. Some will go toward paying operational costs at the golf course, which failed to meet revenue projections. As a result, the community development district borrowed money to make principal and interest payments on millions in recreational bonds.

Under the deal, homeowners would take out a loan to purchase the clubhouse and lavish swimming pool. Recreational fees would jump to $95 a month in 2006 to pay off the loan.
 


 
Heritage Harbor should take offer, observers say
Lennar Corp.'s plan to ease a dire debt load
makes good business sense, they say.
ARTICLE COURTESY of The St. Petersburg Times
Published May 11, 2003 
By JOSH ZIMMER

LUTZ - Instead of merely using the elegant clubhouse and theme-park-quality swimming facility, Heritage Harbor residents may soon own the whole kit and caboodle.

The transfer of control is just one of the dramatic changes envisioned under a proposed deal between homeowners and Lennar Corp., developer of the 420-home subdivision. In an offer that impresses some industry watchers, the Miami-based home building giant would spend at least $8-million to resolve a financial crisis that threatened homeowners with large, unexpected debt payments.

"That's really a smart business practice," said Jim Nicholas, a professor of law and urban planning at the University of Florida. They "want their customers happy."

On Wednesday, a complete picture emerged of the millions Lennar would absorb to keep Heritage Harbor solvent.

Although residents stand to gain financial security, their recreational fees would double in three years - from $50 a month now to $101 in 2006, said the homeowners' lead negotiator, Rick St. Pierre. But they would own the clubhouse and swim facility, build up a reserve fund, and have a realistic chance of paying off the recreational bond for the first time.

Both sides want residents to vote on the deal within two months. St. Pierre, the only resident member of the Heritage Harbor Community Development District board, said he would be surprised if they rejected it.

"I think it's fantastic because it solves all the problems," he said. "You're not held to a bond problem where the fees could go out the roof."

The developer-controlled CDD board has overseen construction in Heritage Harbor since 1998. Florida law gives the increasingly popular CDDs the power to issue tax-free bonds to finance many types of projects.

Heritage Harbor, however, differs from most CDDs. Instead of using more reliable sources of revenue, U.S. Home, the former owner, hoped to pay off the recreational bond with golf course revenues. But Heritage Harbor could not attract enough players in a market oversaturated with golf courses. 

Initially, U.S. Home borrowed millions to complete construction of the golf course, swimming pool and clubhouse. Later, Lennar started borrowing to make the bond payments.

The deteriorating debt situation eventually drew top Lennar executives to the table, said Bill Kouwenhoven, communities manager for the company's North Florida Land Development Division. Those executives included Mark Shevory, Lennar's regional vice president.

"If we don't do this now, three years from now, who knows?" said Kouwenhoven, who participated in the negotiations. Lennar was concerned about preserving its reputation, he said. "From a business point, we missed our mark. I think the golf industry ... had been overbuilt."

St. Pierre, who worked closely with several other residents, repeatedly praised Lennar for addressing concerns that U.S. Home officials had ignored.

The deal would split the current recreational debt of $7.1-million.

The CDD would remain responsible for $1.96-million of that. Both sides determined that current golf course revenues could cover those payments.

The fate of the remaining $5.15-million is more complicated.

Of that, $4-million is to become a loan to the homeowners association, St. Pierre said last week. To pay it off, both sides agreed to a schedule of additional recreational fees.

For the first two years, the additional fees would be interest-only - $25 a month next year and $35 a month in 2005. In 2006, the new fees would top out at $45 a month.

Some of the money would go toward a reserve fund, St. Pierre said. In addition, the annual homeowners association fee would be divided into monthly payments of $6.25. By 2006, residents would pay $101 a month, compared with $50 now.

As for the remaining $1.15-million recreational bond debt, Lennar, a $7.3-billion company, will absorb it as a loss, Kouwenhoven said.

Lennar agreed to write off more debt, including $5.2-million the CDD borrowed to make bond payments and finish the facilities, as well as a $1.3-million reserve fund used for construction, he said. Lennar also would pay the CDD's operational expenses for the next three years.

Lennar also agreed to make a one-time $85,000 payment into the reserve fund, he said.

Kouwenhoven could not say whether Lennar would recoup the $8-million on future home sales. What's more important is protecting Lennar's name in Florida's competitive housing market, he said.

Once Heritage Harbor's issues are resolved, the company will begin talks with Heritage Isles, a golf course community that faces similar debt issues, he said.

"Part of the reason people continue to buy (in Heritage Harbor) is people have faith in Lennar," Kouwenhoven said. "We're not going to disappoint them."


 
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