Ford's Colony Country Club Files for Bankruptcy

By Kimberly Lenz Saturday, April 03, 2010

Ford's Colony Country Club on Friday filed for protection under Chapter 11 of federal bankruptcy code in cooperation with its main lender, Prudential Financial. The company hopes to reorganize the debt in a way that is least disruptive to residents and members: by keeping its three, 18-hole golf courses well-maintained and open, along with its fine and casual dining spaces.

In an email sent to members Friday evening, Ford's Colony Chairman Richard Ford described an economy that continues to wither, particularly with the real estate and golf businesses that drive the community's financial well-being. He cast the bankruptcy plan as a "new beginning" for members, residents and employees.

His notice, Ford wrote, was to inform members and residents of business decisions, but also "to minimize rumors and concerns." Ford said he anticipated immediate media interest, but added, "None of us can control those opinions and assumptions. The Club will communicate with its Members and the Ford’s Colony community in a factual and frequent basis over the next several months."

Ford said a failure to recruit new members hurt economic activity at the club with a loss of initiation fees and dues. Other recent factors include the "wet and colder weather of 2009 and 2010," which "severely impacted golf revenues. Golf revenues are mostly straight to the bottom line," Ford told members.

But beyond the vagaries of weather was the failure of the Ford's Colony developer Realtec to weather the economic storm that hit.

In his email to members, Ford noted those issues.

"The delays in Realtec’s ability to sell an approved CCRC [continuing care retirement community] parcel to a health care partner and subdivide new inventory in Westport were very costly and ultimately resulted in missing the remains of the 2007 market. Consequently, Realtec had to withdraw its 23-year financial support of the Club in 2008 due to the lack of those land sales. As you know, Realtec also forfeited ownership of certain real estate parcels due to its inability to refinance real estate assets in this economy," Ford wrote.

In August, Realtec's failure to pay Citizens and Farmers Bank on the notes for 36 Ford's Colony parcels triggered a trustee’s sale. That sale cost C&F Bank $3.5 million; the parcels were assessed at over $6 million.

In February, 179 acres that Realtec had intended to develop as a continuing care retirement community with 38 townhomes, 558 other independent units, 83 assisted living units, and 60 skilled nursing beds went on the block. Although Realtec had purchased the property in 2007 for $6 million - when it was assessed at $3.15 million - its sale at auction attracted $3.15 million. Again, the purchaser was the lender, this time SWR Hockaday, LLC and Martha McMurran.

Ford wrote that the decision to restructure the debt with Prudential Financial was "made in the best interests of the Club, its Members, and Prudential." He said that while a "lean but viable" 2010 operating budget without dues increases had been adopted, revenues in the golf and restaurant business had failed to meet the company's debt obligation in the first quarter of 2010. "Our financial forecasts do not anticipate a reliable recovery, under the current debt, until well into 2011," Ford wrote.

"Decisions facing Prudential and the Club were generally forbearance, foreclosure, liquidation, refinancing or reorganization of the debt. A structured bankruptcy will be one of the least disruptive alternatives for the Members, ensure continuous operations, be less costly, and give ownership time to establish new investors or simply operate under less onerous debt."

The reorganization comes with a price, Ford wrote, "including the temporary stigma this creates."

Membership status is unaffected by the bankruptcy filing, Ford wrote, and golf and restaurant operations will continue as usual.

Those who will be affected, Ford acknowledged, are the club's creditors. "The Club already submitted a cash flow proposal for the court’s approval, and will follow with a 3-month and 6-month plan," he wrote. "Again the support of our principal lender, in terms of its debt receivable, is a key component to our plan."

Ford called on the support of members and residents to take active roles in preserving the value of the club and, by association, residents' property values.

"Membership, golf, restaurant and resident lifestyle normalcy are critical. Member and Homeowner Association support are very important to protect property values and promote a sense of calm. We trust that all of us will be a part of the solution," Ford wrote.

Ford's Colony as a brand has struggled elsewhere recently. On Thursday, the golf course at Ford's Colony's 1400-acre golf community in Rocky Mount, North Carolina, was reopened after being shut down in mid-January. According to the Rocky Mount Telegram, the course closed when Citizens & Farmers Bank foreclosed on the property after Realtec failed to make payments for course maintenance. The course opened under new management that has local connections: Traditional Golf Properties in Toano.

Eleven months ago, Ford’s Colony Rocky Mount LLC had gone into default on a loan taken out with BB&T bank in June 2008 for $7.2 million, also according to the Rocky Mount Telegram. The newspaper said between 20 and 30 undeveloped lots were used as collateral for the loan, which was made for sewer, water and roads in the development.