The company and homeowners are close to a deal in which Lennar would pay off millions before homeowners take over the development district.
By JOSH ZIMMER
Published May 2, 2003
LUTZ - Shortly after moving into Heritage Harbor three years ago, Rick St. Pierre noticed something terribly wrong with the community development district.
It was awash in millions of dollars of debt, and the financial hole was only getting deeper.
For a long time, St. Pierre and several other residents made little progress in convincing the developer to respond. But in a remarkable turnaround, homeowners and Lennar Corp. now are close to sealing a deal that would vastly improve the financial picture for current and future residents.
After months of intense negotiations, Lennar has agreed in principle to spend millions of dollars in company money to clear up the CDD's debt load, St. Pierre said. Lennar would write off at least $8-million in debt, for which residents would have been responsible once the company ceded control of the district, he said.
Some of the basic measures were approved at a CDD meeting last week. While loose ends must be tied up with outside investors, St. Pierre said Lennar, a $7.3-billion company with a nationwide presence, wants to implement the new financial arrangement by June.
"Sounds like a pretty good deal to me," said St. Pierre, the only homeowner representative on the five-member CDD board. "I'm hoping I don't have any trouble selling this to the residents."
The CDD is responsible for the debt because of the 1980 state law that created these special districts. Vested with the power to issue tax-free bonds, these little government entities are a popular tool among developers who would rather not invest their own money.
U.S. Home got permission to form the district in 1997, ceding control three years later when it was bought out by Lennar. Since state law gives majority voting rights to the developer, Lennar also took control of the CDD.
The Heritage Harbor CDD ran into trouble when it relied on golf course revenues to pay off a $7.9-million recreation bond debt. An overabundance of golf courses in the area hurt play; the course wasn't making enough money to meet the bond payments.
A little more than $7-million is owned on the recreational bond.
According to St. Pierre, the proposed deal would split the amount as follows:
Lennar would purchase $5.15-million of the debt from outside investors.
The rest - $1.96 million - would remain the responsibility of the CDD. Both sides calculated that current golf course revenues should be enough to make those payments.
In addition, Lennar is willing to take a loss of up to $5.2-million that the developers borrowed to complete the recreational facilities and to make bond payments without sufficient golf course revenues. Since the developer used up a special $1.3-million reserve fund, Lennar will compensate the CDD for that amount, as well as another $500,000 in operational expenses for the rest of the year.
Taken together, the deal will relieve Heritage Harbor of more than $8-million in debt, St. Pierre said.
Neither St. Pierre nor Lennar would discuss other aspects of the deal. They are scheduled to be revealed in a May 10 meeting with residents who paid $200 apiece to retain the Tampa law firm of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, PA. About 120 people wrote out checks, St. Pierre said.
Lennar refused to comment for this story. But St. Pierre praised Lennar for addressing the debt situation - at a steep price.
Relations between residents and the CDD were frosty until top-ranking Lennar executives got involved, he said.
"Even after Lennar took over I was dealing with the same players (from U.S. Home)," St. Pierre said. "They just weren't even admitting to some of the problems we have here or some of the residents' liabilities."
- Josh Zimmer covers Keystone/Odessa, University North and Citrus Park. He can be reached at 269-5314 or zimmer@sptimes.com
