Cape Gazette
http://capegazette.villagesoup.com/p/13039

Peninsula asks for more time to build clubhouse

By Ron MacArthur | Dec 09, 2010
Residents of The Peninsula at Long Neck expected a clubhouse would be built at the development in 2006. Ground has yet to be broken, and a county-imposed extension, issued in 2008, ran out this week.

ABOUT THE PENINSULA
One of the largest subdivisions ever approved by Sussex County Council with more than 1,400 lots/units on 787 acres in Long Neck.

Lot/home sales begin in May 2004; 425 lots/units are sold over the next four years.

Nearly $50 million is spent on amenities, including a Jack Nicklaus signature golf course, but the clubhouse is not completed by 2006 as presented

in marketing materials and required by the county.
Sales slowdown begins in 2007 and sales slump dramatically heading into 2008 with no developer sales for the past two years.

In mid-2008 developer defaults on more than $50 million in loans to Wachovia Bank, which has merged with Wells Fargo.

In December 2008, the county grants the developer a two-year extension on start of clubhouse construction; extension expired Dec. 9, 2010.

In October 2009, Land Tech Receiver Services LLC is appointed as receiver by Court of Chancery to oversee management of the development. Land Tech has applied for a one-year extension to receivership.

Homes are listed for sale from $300,000 to $600,000.

Now, it appears that most residents are in no hurry to see the project completed.
The development is in foreclosure after developer Peninsula at Long Neck LLC defaulted on more than $50 million owed to Wells Fargo Bank.

Instead of taking the matter to sheriff’s sale, the development was placed under court-ordered receivership managed by Land Tech Receiver Services LLC.

It’s Land Tech that is now asking county officials to amend one of the conditions placed on the original 2002 approval to give the developer more time to build a $5 million clubhouse.

Jim Fuqua, attorney representing the applicant, said Land Tech wants the county to tie construction to the number of golf memberships and not to a specific date. All residents are required to join the club at one of three levels.

During a Sussex County Council public hearing Tuesday, Dec. 7, resident John Gee said an unofficial survey showed 205 residents in favor of the amendment and five against.

Council voted to defer a decision pending a recommendation from planning and zoning commissioners. In addition, council voted to keep the public record open to allow more time for a legal review of the community’s covenants and an escrow account established to provide funding for clubhouse construction. The record will remain open for 60 days starting the day planning and zoning commissioners vote and record a recommendation.


Golf memberships, not time frame

The community offers $48 million in amenities including a Jack Nicklaus signature golf course; fitness center; restaurant; tennis courts; indoor, outdoor and wave pools; spas; 10 miles of walking trails; and several docks.

A second amenity still missing is a nature center, expected to be open by the end of May 2011, Fuqua said.

Land Tech is asking for more time to establish financial stability before beginning clubhouse construction. “Land Tech is working to stabilize a very sick patient and get it past recovery. If we wait until the memberships can support the cost of operation, the funds will be available. This is very critical to the continued success of The Peninsula,” Fuqua said.

He said dues would double if the county does not grant the proposed amendment to the condition, which would place a hardship on current Peninsula landowners and also hurt future lot and home sales in a slumping market.

Richard Abbott, an attorney representing residents Dennis and Carolyn Silicato, who are opposed to the amendment, disputed that claim. “It’s a threat that dues will be increased – an extortion,” he said.

He said the bank has an obligation to cover the additional costs. “They should be members,” he said.

County legal staff is in the process of reviewing The Peninsula’s covenants to see if the development owner has that obligation. J. Everett Moore, county attorney, said the developer is normally not required to pay dues during the construction phase of a project.

The current operation is losing about $2 million a year, Fuqua said, although changes made by Land Tech should drop that by half in 2011.

Fuqua said Land Tech estimates it will take 750 members with 250 full golf memberships at $47,000 each or 950 members overall to cover clubhouse operating expenses. Today, there are 475 members at three membership levels.

Fuqua said an escrow account of initiation fees has been set up to ensure funding is available to construct the clubhouse.


Resident wants strict time line

Abbott presented several reasons why the county should reject the application. He said without a deadline, construction might never take place.

He suggested county officials put a time deadline on construction of no more than a few years. In addition, he said, the county should require a $7.5 million letter of credit from the developer as well as a site plan for final approval.

“If they don’t comply, then the county can pull the letter of credit and it will be built,” Abbott said.

Abbott said the bank holds the key to the success of the community. He said the bank is keeping the development in a holding pattern because it doesn’t want to take foreclosure to its conclusion, which would require paying the county $800,000 to $1 million in foreclosure commission fees.

He contends the bank owns two-thirds of the undeveloped lots in the development and should be contributing funds to the operation of the club. “Wells Fargo needs to step up to the plate,” he said. The bank should cut the price of lots and begin an aggressive sales campaign, Abbott said.

“It’s time for Wells Fargo to make a call and meet its obligation or dispose of it so this community can prosper,” Abbott said.

Silicato said the clubhouse has already been scaled down from a $17 million facility to the current proposed $5 million building. “I’m not opposed to that, but based on past experience, the county should demand a time frame and have surety in place,” he said.

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