HomeMy WebLinkAboutPalmieri Reorganization Report to CourtUNITED STATES BANKRUPTCY COURT
RECEIVED DEC 2 6 1990 SOUTHERN DISTRZCT OF FLORIDA
In re: )
GENERAL DEVELOPMENT )
CORPORATION, et al., )
Debtors. )
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CASE NO. 90-12231-BKC-AJC
CHAPTER 11
JOINTLY ADMINISTERED
REPORT OF THE PALMIERI COMPANY
PURSUANT TO COURT ORDER
DATED SEPTEMBER 20 1990
I. BACKGROUND AND INTRODUCTION
On April 6,. 1990, General Development Corporation
("GDC") and five of its subsidiaries filed a petition seeking
reorganization under Chapter 11 of Title 11 of the Bankruptcy
Code in the U. S. Bankruptcy Court in the Southern District of
Florida (the "Court"). The Debtors continue to operate their
businesses and manage their properties as Debtors in Possession.
As a result of the planned retirement of Mr. Charles J.
Simons, Chief Executive Officer of GDC, on September 1, 1990, an
Executive Search Committee (the "Committee") was formed to select
an appropriate replacement for Mr. Simons. The Committee was
established with three members of GDC's Board of Directors and
four creditor representatives. In addition to its primary
function, the Committee also determined that it would be
beneficial to the Estate to retain an experienced reorganization
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expert to assist GDC's senior I management in the reorganization
process.° After review and consideration, the Committee
recommended to the Board that it retain The Palmieri Company
("Palmieri") to provide reorganization expertise.
Under the provisions of the Consulting Agreement, as
amended, we are to work with executives of the- Company and
bankruptcy counsel in developing a plan of reorganization and
meet with and provide reports to the Executive Committee of the
Board of Directors and the official Committee of Creditors. Our
responsibilities include managing the planning process; working
with executives of the Company in developing a business plan and
attempting to structure a reorganized company; coordinating the
planning process with bankruptcy counsel; communicating,
negotiating and generally working with creditors and other
constituents of the bankruptcy proceedings.
At a hearing before the Court on September 18, 1990,
the Application For Authority to Retain Palmieri, as modified,
was approved until December 15, 1990. The order approving the.
Application included the following modification to the Consulting
Agreement ..."Palmieri shall prepare and file with the Bankruptcy
Court and serve on the official Committee of Creditors a written
report of their progress and recommendations on or before
December 5, 1990, which shall be a subject of discussion at the
Status Conference before the Bankruptcy Court on December 13,
1990".
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This report is in response to the above modification.
II. PURPOSE OF REPORT AND LIMITATIONS
The purpose of this report is to indicate our progress
to date and present our recommendations in connection with our
responsibilities under the Consulting Agreement. It is intended
that the report will focus the various constituents to this case,
in a preliminary manner, on the basic elements of the estate
including estimates of the asset values that are potentially
available, claims and the resulting recoveries to claimants. In
addition, this report can serve as the basis for a concerted
effort by management and other constituents in the bankruptcy to
expedite a reorganization planning process now that management
and bankruptcy counsel have designed and are implementing the
Homesite Purchaser Assurance Program and have completed other
critical matters confronting them since the April 6 filing. It is
essential that the bankruptcy be conc.ivaea az Lilt-- CCil ts.co
possible time to minimize the substantial costs of a bankruptcy
of GDCCIs size and to maximize ultimate recoveries. Finally,. the
report includes our recommendation as to the direction the case
should take from this point forward.
The report should be read in the context of its
limitations. Estimates of values, the timing of their
realization and other projections into the future require more
work to confirm that they are sufficiently accurate to be used in
a plan of reorganization. Operating projections and other data
• •
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were provided by GDC management and personnel based on available
information. Values assigned to asset dispositions are rough
estimates intended for planning purposes only. All projections
will be updated and refined during the on-going planning process.
While the assumptions underlying the various projections were
tested to the extent practical within the timing of the
preparation of the report, adequate sensitivity analyses have not
yet been performed to completely test the validity of certain
critical assumptions.
Notwithstanding these limitations, we believe that the
data presented and the conclusions reached are sufficiently valid
to be used as the basis to begin the process of developing a
consensual plan in an expedited time frame.
III. PROGRESS AND RECOMMENDATIONS
A. PROGRESS
1. Approach - In formalizing the planning process, we
have engaged in a range of activities including:
• Familiarizing ourselves with certain relevant
documents and other data for purposes of
background information including: the various
bankruptcy filings; financial statements of the
Company and its subsidiaries; the Homesite
Purchaser Assurance Program; the reports produced
by the Examiner; debt obligations of the Company;
creditors and their status; creditor committee
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structure; DIP financing arrangements; cash status
and reports; personnel counts and expense running
rates; statements of operations by business
segments; status of the Grand Jury indictments and
related plea agreements; and other data.
■ Consulting with Mr. Hutchison, the newly appointed
Chief Executive Officer, to determine his view of
the status of the case and his outlook for the
future.
■ Meeting with the Executive Committee of the Board
and the full Board of Directors to discuss our
work and provide status reports.
■ Discussing the planning process and the program
for the future with Ms. Graff, the newly appointed
Sr. Vice President, Corporate Planning and
Treasurer, and Mr. Perlstein, bankruptcy counsel.
■ Conferring with Mr. Rutherford, the newly
appointed Executive Vice President, Operations,
and Mr. Andolsek, the Chief Financial Officer, and
other key management personnel to familiarize
ourselves with the operating entities and staff
functions.
■ Meeting with the Examiner.
• Meeting with the Creditors' Committee.
■ Reviewing the activities and responsibilities of
the various professionals involved in the case as
they related to planning matters.
■ Visiting representative GDC communities and
operating companies including Port Charlotte, Port
St. Lucie, Port La Belle and the Vistana Resort
operations and reviewing their facilities,
operations and personnel.
■ Participating in various management staff meetings
to become acquainted with the day to day problems
facing the Company.
• Analyzing GDC's assets and businesses.
• Receiving and reviewing business plans from
various GDC operating entities. In this process,
we analyzed the plans, tested the assumptions,
made recommendations for ' changes, made
recommendations for structuring and developing the
land plan and consolidated the plans.
• Establishing a weekly strategy planning meeting
with GDC's senior management to develop a
strategic basis for a business plan that would
ultimately be included in a plan of
reorganization.
2. Status
We have completed a preliminary review of the
personnel, assets, businesses, claims and general
status of GDC. This report includes the results
of that review and is intended to serve as a basis
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for development of a more specific plan and
process that can lead to an expedited confirmed
plan.
B. RECOMMENDATIONS
Although major cases vary considerably in the length of
time required to achieve a confirmed plan, it is not uncommon for
cases the size of GDC to take two years or longer.
Notwithstanding typical timing, it is our view that this case can
proceed with an expedited timing schedule designed to achieve a
confirmed plan that will minimize cost of the bankruptcy and
ultimately maximize values for the benefit of creditors. In this
regard, we recommend a timetable that would result in a confirmed
plan by June 30, 1991 -- approximately 15 months from the date of
filing. To achieve this objective, the following key dates would
have to be met.
■ Filing of disclosure statement and plan by March 31, 1991.
■ Approval of disclosure statement by May 15, 1991.
■ Approval of plan by June 30, 1991.
This timetable assumes that all claims will not be
settled by confirmation or consummation of the Plan but will be
negotiated or litigated to resolution over a two year period. It
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also assumes a cooperative, consensual planning process. Major
disagreements could result in delays .in achieving the above
timetable.
In arriving at our recommendation, we studied two basic
alternatives. Refined variations of these alternatives also
should be studied but are not necessary at this time for purposes
of establishing the general direction the case is most likely to
take.
The first basic alternative is a reorganized public
company that would include the following businesses:
■ Vistana Resort Development, Inc.;
• a new homebuilding company;
• the operations of General Development Utilities until
the systems are sold through condemnation proceedings
or otherwise;
■ Florida Home Finders, Inc.; and
• GDC's golf courses and country clubs.
Under this alternative, a trust would be established to hold and ,
manage the following assets for purposes of paying creditors:
• All land assets
• Contracts Receivable portfolio
• Proceeds from utility systems condemnations or sales
after pay -down of GDU debt
• Proceeds from sale of Glen Ivy
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The second basic alternative is a non-public entity
that would hold all of the businesses and assets of the estate
for purposes of managing these assets in a manner that would
maximize their values. The entity holding the assets would be a
trust or other form that would minimize tax implications and
maximize recovery distributions. The specific form of the non-
public entity requires additional analysis.
It should be noted that either alternative approach to
realizing maximum values would be long-term and management
intensive, taking from 8 to 10 years to realize aggregate values.
With ownership of approximately 90,000 acres throughout its
communities, GDC's land holdings are its most valuable asset.
The real estate market, the general economy, absorption rates and
other factors require a relatively long-term horizon to maximize
values. In addition, GDC's contract receivables, another
substantial asset of the estate, require creation of a favorable
community environment for the lot owners and an intensive
collection effort over the next ten years. it should also be
noted that under either alternative approach, the most valuable
assets of the estate (land, contracts receivable and proceeds of
utilities systems condemnations) would be held in some type of
trust or other non-public entity for distribution to creditors.
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EVEN THOUGH THE POSSIBILITY OF A PUBLIC COMPANY SHOULD
CONTINUE TO BE ANALYZED, WE BELIEVE, AT THIS TIME, THAT THE VALUE
OF THE ASSETS AND BUSINESSES OF THE ESTATE ARE LIKELY TO BE
MAXIMIZED BY A LONG-TERM ORDERLY AND STRUCTURED SALES PROGRAM.
This program could include a homebuilding activity that would
operate as a vehicle for disposition of certain of the land
assets and would create the type of activity and marketing
environment in the GDC communities that would support the land
sales program generally and create a more favorable environment
for the contracts receivable collections process. The additional
marketing dollars that would be expended by a homebuilding
activity could be an important factor in market response.
Additional analyses will be completed to confirm the conclusion
that the incremental benefits of the homebuilding activity will
justify the start-up investment. In addition, the trust or other
non-public entity should be structured to' allow flexibility to
consider alternative ways to maximize the value of certain land
assets in the future through land development programs and to
potentially create additional value by some future public entity.
Of course, any individual program would require specific economic
justification on a case-by-case basis.
We do not believe that a public company can be
structured that would create sufficient value to be more
desirable than the recommended approach. This is principally
because adequate on-going operations do not remain at GDC other
than the Vistana time-sharing operation. Prior to filing for
bankruptcy, more than 650 of GDC's recent annual revenues came
from its homesite sales and related homebuilding activities. For
GDC, the off-site lot installment and homebuilding sale programs
have been terminated and are not currently feasible. vistana has
been operating profitably for years and given continued financing
availability should be profitable into the future. However,
other operating entities do not present the same potential. For
example, trying to create a major new homebuilding program rather
than structuring a building company focused primarily on
supporting the land sales program would require substantial
investment risks (approximately $30 million line -of -credit with
initial advances up to $20 million in the first year of
operations) and would not produce sufficient profits in the early
years. Although General Development Utilities, Inc. presently is
major systems are in various
operating profitably, its three
stages of condemnation proceedings. Therefore, the utility
company is, in effect, in a disposition mode. Glen Ivy presents
unique problems to the GDC system and does not present a feasible
on-going operating alternative. As discussed later in section
IX -A2 a sale of Glen Ivy at the earliest time appears to be in
the best interest of the estate. Florida Home Finders and the
golf and country clubs, while profitable, ,do not have sufficient
profit mass to be incrementally significant to a public company
valuation.
Without additional profitable operations to compose a
public entity, we believe that the value of vistana can be
maximized by continuing to operate it, restoring it to its
historical profit levels and selling it at the appropriate time.
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Because of the preliminary nature of much of the
information we have and because of the significance of the
issues, we recommend that the public company alternative continue
to be studied in the on-going planning process to confirm the
above conclusion.
We also recommend that a separate claims resolution
process be established distinct from business operations under
the trust or other non-public entity. It is important that the
management and sales program be free of bankruptcy related
matters upon consummation of the Plan.
We finally recommend that GDC immediately begin
negotiations with its creditors to develop a consensual plan
based on the above analysis.
IV. MACRO ASSUMPTIONS
The following significant assumptions have been
made in developing and testing the estimates and
projections included in the planning alternatives:
The general economic recession will be mild to
moderate. Should a more severe downturn be
experienced, cash receipts would be delayed.
The real estate markets in the communities in
which GDC owns substantial land assets will not
deteriorate further in the short term and will improve
in the longer term. Cash receipts would be delayed if
a further decline is experienced.
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Approximately 90,000 acres of land owned by GDC,
which is principally raw land, can be absorbed in the
various GDC markets over an eight to ten year. period.
■ The value of the land inventory ("PRESENT land
use") can be substantially increased by a relatively
modest investment in re -zoning, permitting, acquiring
DRIB, etc. ("PROPOSED land use").
All projections of proceeds from sales of land
assume cash transactions, although 'it is likely that a
portion of the land sales will be seller financed at
market interest rates. It is further assumed that any
such paper could be sold for specific cash needs.
Further refinements of the plan will include the impact
of this variable on cash flows.
■ The contract receivables collections are projected
based on the ,most Probable Case" values from the
Homesite Purchaser Assurance Program model.
• Condemnation proceeds from utilities systems will
be awarded to General Development Utilities at rough
estimates of values based on our discussions with GDC
management.
■ As.a general matter, it would not be feasible to
attempt to reorganize a public company around a set of
operating entities that would require substantial new
up -front financing.
GDC's severance and retention program will be
approved to help assure retention of key personnel
necessary to realize values projected -in the plan.
For purposes of this report, an attempt has been
made to include all substantial assets and claims in
the GDC system (unless otherwise noted), however, no
assumption is made about substantive consolidation of
all debtor entities. Decisions about this matter will
affect relative recoveries to different debtor entity
creditors.
V. ESTIMATES OF CLAIMS ASSET VALUES AND RECOVERIES
A. EXECUTIVE SUMMARY
The financial data used in the following exhibits
are estimated as of June 30, 1991. Based on
information presently available to us, our estimate of
the aggregate allowed claims is approximately $1.2
billion as detailed in Exhibit V -B. of the aggregate
amount, approximately $119 million is composed of
claims that require payment in full including: the DIP ,
loan balance estimated to be approximately $40.9
million; provision for a claims resolution fund of $4
million; and the revolver bank lien against Vistana
assets assumed released for $27 million; estimated
administrative expenses of approximately $24.1 million;
and estimated priority claims of approximately $23
million. The remaining claims are classified as
unsecured and are estimated in the aggregate amount of
approximately $1.1 billion.
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It should be emphasized that claims that will be
allowed by analysis of filings, negotiations,
litigation and ultimately determined by the Court are
estimated on a ver preliminary basis for purposes of
this report. It also should be noted that no attempt
is made to classify the subordinated debt as it relates
to other potentially senior unsecured claims or to
classify the relationship of the various issues of
subordinated debt to each other.
Under our recommended alternative, an orderly and
structured sales program of all of GDC's assets,
(Exhibits V -C and V -C1), we estimate, at this time,
that the estate can realize nominal net proceeds of
approximately $861 million (assuming the PRESENT land
use of its land assets) or approximately $986 million
(under a PROPOSED land use program) over an eight to
ten year period. The present values of the projected
nominal proceeds are approximately $497 million and
$547 million, respectively, discounting the land
proceeds at 20o and all other asset proceeds at 150.
As shown on Exhibits V -D and V -D1, based on the
above projections, estimated recoveries for unsecured
claims would be 33.3 and 37.7 at PRESENT and PROPOSED
land uses, respectively. Accordingly, absent the
consent of all classes of creditors, no distribution in
respect of existing equity interests is anticipated.
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Exhibit V -B
Page 1
General Development Corporation
CLASSIFICATION OF CLAIMS
ESTIMATED AS OF JUNE 30 1991
(Dollars in Thousands)
DIP LOAN
CLAIMS RESOLUTION FUND
REVOLVER BANK LIEN AGAINST VISTANA ASSETS
ADMINISTRATIVE EXPENSES (UNCLASSIFIED CLAIMS)
Accounts Payable
Payrolls & Pension Plan
Real Estate Taxes
Customer Deposits
CLASS A - PRIORITY CLAIMS
Accrued Salaries & Wages
Accrued Vacation
Accrued Severance
Commissions Payable
Pension
Real Estate Taxes 189
(Incl int & penalties
not on balance sheet)
$ 3,000
726x)
19,286b)
1,102a)
70
500
1,200a)
2,000
1,000
18,243a)
$ 40,879
4,000
27,000
24,114
23,013
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Exhibit V -B
Page 2
CLASS B - UNSECURED CLAIMS
Bank Debt - 8/88
Revolver Banksc)
$137,000
Subordinated Debtd)
Debenture Issue (Bankers Trust)
152,572
Debenture Issue (U.S.Trust)
125,000
Prudential
75,000
352,572
11,026a)
Accrued Interest
Trade Accounts Payable
18,283a)
Restitution Program
160,000
Letter of Credit Banks
Outstanding
87,550
18,780
Drawn
CR Purchasers
20,000
Community Obligations
85,000
Finance Company Guarantees
111,410
4,678a)
Capital Leases
Provision For Litigation
3,000
Provision for Homesite Purchasers Claims
84,600
Other Pre -Petition Liabilities
7,500.
Advances from GDU
33,000
TOTAL UNSECURED CLAIMS 1,134,399
TOTAL CLAIMS $1,25405
Balances from GDC Balance Sheet at 9/30/90. Assumes balances
remain same at time of plan confirmation with interim activity
running through DIP loan.
b) Estimated total year 1990 and three months of 1991 property taxes
with related interest and penalties.
c) Assumes release of revolver bank lien in return for $27 million.
d) For purposes of this report, no attempt is made to classify the
subordinated debt as it relates to other potentially senior
unsecured claims or to classify the relationship of the various
issues of subordinated debt to each other.
General Development Corporation
GDC ASSET VALUES
PROJECTED PROCEEDS
BASED ON PRESENT LAND USE
(Dollars in Thousands)
YEAR
1 2 3 4 5 Residual Total
ASSETS
Land
$ 38,705
$ 71,176
$ 85,235
$ 85,657
$ 87,279
$ 91,644
$459,696
Contract Receivables
29,440
29,769
29,037
26,740
24,462
77,066
216,514
General Devel
Utilities Inca)
35,791
60,162
68,273
20,000
0
0
184,226
Sales Proceeds From
3,720
541965
450
0
0
0
59,135
Operating Companies
Sales Proceeds before
Gen &Adm Exps
$107,656
$216,072
$182,995
$132,397
$111,741
$168,710
$919,571
G&A Exps
( 10,000)
( 10,000)
( 10,000)
( 10,000).
( 7,500)
( 11,000)
( 58,500)
Net Proceeds
$ 97,656
$2061072
$172,995
$1224397
$104,241
$157,710
$861,071
Present Value - Land
Proceeds at
20%; all
other proceeds at 15%-
$497,113
a) Utilities proceeds are net of operating cash flow, capital requirements, debt and interest
payments and rough estimates of condemnation proceeds.
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a) Utilities proceeds are net of operating cash flow, capital requirements, debt and interest
payments and rough estimates of condemnation proceeds. x
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General Development Corporation,
GDC ASSET VALUES
PROJECTED PROCEEDS
BASED ON PROPOSED LAND USE
(Dollars in Thousands)
YEAR
1
2 3 4
5
Residual
Total
ASSETS
Land
$ 25,756
$ 80,278 $120,185 $114,882
$ 87,382
$156,247
$584,730
Contract Receivables
29,440
29,769 29,037 26,740
24,462
77,066
216,514
General Devel
Utilities Inca)
35,791
60,162 68,273 20,000
0
0
184,226
Sales Proceeds
3,720
54,965 450 0
0
0
59,135
From Operating
Companies
Sales Proceeds before
Adm Exps
$ 94,707
$225,174 $217,945 $161,622
$111,844
$233,313
$1,044,605
Gen &
G&A Exps
{ 10,000)
( 10,000) ( 10,000) ( 10,000)
( 7,500)
( 11,000)
( 58,500)
Net Proceeds
$ 844707
$21�5,17�4 $20 $151,622
$1044
$222,313
$ 986,105
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Present Value - Land
Proceeeds
at 20%; all other proceeds at 15%
$54 6,688
a) Utilities proceeds are net of operating cash flow, capital requirements, debt and interest
payments and rough estimates of condemnation proceeds. x
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Exhibit V -D
General Development Corporation
ESTIMATED ASSET VALUES, CLAIMS
AND RECOVERIES
BASED ON PRESENT LAND USE
(Dollars in Thousands)
ESTIMATED AGGREGATE ASSET $ 497,113a)
VALUES AVAILABLE FOR CLAIMS
ESTIMATED SENIOR CLAIMS
■ DIP Loan
$40,879
■ Claims Resolution Fund
4,000
■ Revolver Bank Lien Against
27'000b)
Vistana Assets
■ Administrative Expenses
24,114
■ Priority Claims
23.013
119,006
ESTIMATED ASSET VALUES
AVAILABLE FOR UNSECURED CLAIMS
$ 378,107
$1,134,399
ESTIMATED UNSECURED CLAIMS
ESTIMATED RECOVERY FOR 33.3,t
UNSECURED CLAIMS
a) All future values discounted at 15% except land values which are
discounted at 20%.
b) Assumes release of revolver bank lien in return for $27 million.
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Exhibit V -D1
General Development Corporation
ESTIMATED ASSET VALUES, CLAIMS
AND RECOVERIES
BASED ON PROPOSED LAND USE
(Dollars in Thousands)
ESTIMATED AGGREGATE ASSET $ 546,688a)
VALUES AVAILABLE FOR CLAIMS
ESTIMATED SENIOR CLAIMS
■ DIP Loan $40,879
• Claims Resolution Fund 4,000
■ Revolver Bank Lien Against
Vistana Assets 27,OOOb)
• Administrative Expenses 24,114
■ Priority Claims 23,013
119,006
ESTIMATED ASSET VALUES 427,682
AVAILABLE FOR UNSECURED CLAIMS $
ESTIMATED UNSECURED CLAIMS .$1,134,399
ESTIMATED RECOVERY FOR 37.7
UNSECURED CLAIMS
a) All future values discounted at 15% except land values which are
discounted at 20%.
b) Assumes release of revolver bank lien in return for $27 million.
0 0 22
VI. LAND SALES PROGRAM
A. EXECUTIVE SUMMARY
In recent months, GDC's land management personnel
have inventoried and compiled important data relative
to the estate's vast land holdings. Presently
information about these land assets is maintained in a
mainframe or PC based computer system. Systems are in
the process of being developed to centralize all
relevant information for each parcel with real-time
maintenance capability. As a result of this work, GDC
can now manage its land holdings as a discrete asset
management function facilitating its ability to
maximize value for each parcel.
Presently GDC has complete information on a land
inventory of approximately 90,000 acres located
throughout GDC communities (including Tennessee) broken
down into the following general categories:
Approximate
Acres
• Developed Lots 1,500
■ Developed Platted Tracts 10,000
• Undeveloped Plat Units 39,000
• Unplatted Parcels 40,000
TOTAL ACRES 90,500
For purposes of developing a plan to dispose of
the land assets of the estate, GDC. land personnel
developed a sophisticated planning model that enabled
them to project a year of sale and value for each
parcel utilizing various adjustment factors from a pre-
determined base for size, shape, frontage, roads,
utilities and other factors. Incorporating estimated
inflation and discounting factors, sales projections
were developed for a ten year period based on the
PRESENT land use status of each parcel. Also, an
additional ten year projection was made assuming a
PROPOSED land use program that would maximize the value
of each parcel with a relatively modest investment in
soft costs to re -zone, acquire permits, acquire DRIB
and other similar value enhancing activities.
In summary, as shown on Exhibit VI -B, based on
PRESENT land use status, the land disposition program
is projected to generate approximately $573 million in
gross proceeds and approximately $460 million in net,
proceeds after costs over a ten year period. These
projections equate to a net present value of
approximately $234 million utilizing a 20% discount
rage.
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Assuming a PROPOSED land use status for each
parcel, Exhibit VI -C shows projections over the ten
year period for gross proceeds at approximately $709
million and net proceeds after costs of approximately
$585 million. The PROPOSED land . use program,
therefore, projects incremental gross proceeds of
approximately $136 million on incremental costs of
approximately $11 million. The aggregate program
projections equate to a net present value of
approximately $284 million using a 20% discount rate.
Gross Proceeds _
Costs to Realize
Proceeds
General Development Corporation
LAND SALES PROGRAMa)
BASED ON PRESENT LAND USE
(Dollars in Thousands)
Year
1 2 3 4 5 Residual
$61,025 $93,252 $105,265 $102,943 $101,980 $108,134
Total
$572,0
Personnel
1,950
2,048
2,150
645
2,257
677
2,370
711
3,582
1,074
14,357
4,306
Payroll Taxes teampl Bene
Personnel Related
1,000
614
1,000
1,000
1,000
1,000
1,450
6,4 50
Property Taxes
Commissions
Selling Programs
Closing Costs
Eng & Other Consulting
Maintenance
Total Costs
Net Proceeds
Present Value at 20%
14,900
1,525
500
610
250
1,000
22,320
$3870505
13,400
2,331
500
933
250
1,000
22,076
$71
10,800
2,632
500
1,053
250
1,000
20,030
8,000
2,573
500
1,029
250
1,000
17,286
$85,657
5,300
2,550
500
1,020
250
1,000
14,701
$87,279
a) Based on sales planning model developed by GDC land planning task force
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4,700
57,100
2,703
14,314
600
3,100
1,081
5,726
300
1,550
1,000
6,000
16,490
112,903
9$ 1�,�644�
$459Y_696
$234,384
Gross Proceeds
Costs to Realize
Proceeds
Personnel
Payroll Taxes & Empl Bene
Personnel Related
Property Taxes
Commissions
Selling Programs
Closing Costs
Eng & Other Consulting
Maintenance
Total Costs
Net Proceeds
Present Value at 20%
General Development Corporation
LAND SALES PROGRAMa)
BASED ON PROPOSED LAND USE
(Dollars in Thousands)
Year
1 2 3 4 5_ Residual Total
$48,903 $103,980 $142,778 $134,006 $102,863 $176,480 $709,(`'
1,950
2,048
.2,150
2,257
677
2,370
711
3,582
1,074
14,357
4,306
585
1,000
614
1,000
645
1,000
1,000
1,000
11'450
6,450
14,900
13,400
10,800
3,570
8,000
3,350
5,300
2,571
4,700
4,412
57,100
17,726
1,223
500
2,600
500
500
500
1,340
500
1,029
600
1,765
3,100
7,091
989
1,500
1,040
1,500
1,428
1,500
1,000
1,000
1,000
1,650
1,000
8,150
6,000
1,000
1,000
1,000
1,000
23,147
23,702
22,593
19,124
15,481
20,233
124,280
2 5756
$80�, 278JUL
$11
8
15
$5841.73.1
a) Based on sales planning model developed by GDC land planning task force
28-959
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VII. CONTRACTS RECEIVABLE COLLECTIONS
A. EXECUTIVE SUMMARY
The portfolio of contracts receivable (amounts due from
approximately 38,000 homesite purchasers) is one of the most
valuable assets of the estate. The majority of these
receivables presently
are delinquent with payment being t
received at approximately.20% of the amounts due. The Homesite
Purchaser Assurance Program, approved by the Court on October
26, 1990, is expected to improve substantially the collection
rate of the portfolio. In addition, we believe that active
operating involvement of GDC in the communities, free of the
bankruptcy environment, will be important to improving the
collection experience.
As shown in Exhibit VII -B, collections are projected based
on the ,most Probable Case" values from the Homesite Purchaser
Assurance Model. It is important to emphasize that the
ultimate value of the contracts receivable portfolio is
directly related to the results of the Homesite Purchaser
Assurance Program and the improvement of GDC's image by
immediate implementation of a process that will result in GDC's
emergence from bankruptcy in an expedited time frame.
Exhibit VII -B shows collections of principal and interest
totalling approximately $253 million projected to occur over a
twelve-year period. Net proceeds after deducting estimated
post-petition refund obligations and collection costs total
approximately $216 million which has a present value of
approximately $121 million discounted at 15%.
General Development Corporation
PROJECTION OF CONTRACTS RECEIVABLE COLLECTIONSa)
(Dollars in Thousands)
Year
1 2 3 4 5 Residual
Principal Payments $ 19,553 $ 21,149 $ 22,274 $ 22,168 $ 21,984 $ 79,504
Interest Payments 13,165 12,091 10,699 8,773 6,961 14,604
Total Contract
Payments 32,718
Post Petition Refunds ( 1,334)
Collection Costs ( 1,944)
Net Proceeds
Present Valueb)
33,240
( 2,056)
( 1,415)
32,973
( 2,451)
( 1,485)
229 X440 29,769 $ 29,037
0
Total
$186,632
66,293
30,941
28,945
94,108
252,925
( 2,881)
( 3,096)
(10,042)
(21,860)
( 1,320)
( 1,387)
( 7,000)
(14,551)
26,740$
•
24 _462
77,066
$216,514
$121,160
a) Based on "Most Probable Case" projections included in Homesite Purchaser Assurance Program
b) Discounted at 15%
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VIII, GENERAL DEVELOPMENT UTILITIES, INC. ("GDU")
A. EXECUTIVE SUMMARY
GDU is a non -debtor subsidiary of GDC..
Currently GDU provides utility services in eight
GDC communities. Water and waste water services
are provided in Port Charlotte, North Port, Port
Malabar, Silver Springs Shores, Port La Belle,
Vero, Sebastian and. Julington Creek. St. Lucie
County has acquired, through condemnation, GDU 's
utility operations in Port St. Lucie and made an
initial deposit of. $45 million against the
ultimate price. Local governments in Port
Charlotte/North Point/Desoto and Port Malabar have
taken action to acquire GDU's utility operations
in these areas. In addition to the above
services, GDU provides LP gas in Port Charlotte,
North Point and Port Malabar.
In our recommended approach, utility
operations are assumed to continue until each of
the facilities is transferred by condemnation
process or by outright sale and that all such,
transfers will be completed by 1994. For purposes
of this report, assumptions about operating cash
flow, capital requirements and GDU debt and
interest payments are based on the operating plan
developed by GDU management. We have made rough
and conservative estimates of condemnation
proceeds based on discussions with GDC and GDU
management.
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• • • 30
IX. COMPANIES HELD FOR SALE
A. EXECUTIVE SUMMARY
As shown on Exhibit IX -B, the aggregate projected
proceeds from companies held for sale are approximately $81
million which have a present value of approximately $60.3
million discounted at 15%. The individual sales values are
based on our rough estimates. For purposes of this report,
only aggregate values are discussed and shown on Exhibit IX -
.M
1. Vistana Resort Development,
Inc.
Vistana's operations include real estate
development, marketing, resort management and
financial services. Vistana commenced business in
1978 and has developed Vistana Resort, a 722 villa
timeshare resort in Orlando, Florida and Vistana's
Beach Club, a 48 villa ocean front property on
Hutchinson Island near Stuart, Florida.
Approximately 36 acres of the total 126 acres in
Orlando are yet to be developed. The undeveloped
land (if appropriate approvals are obtained) could`
provide approximately 33,000 saleable weeks with
an estimated gross value of $345 million. in
addition, there are approximately 1,500 saleable
weeks with an estimated gross value of $13.5
million available for sale at Vistana's Beach
Club,
• • 31
Vistana has historically operated at
acceptable levels of profitability but is
currently being adversely affected by factors
associated with GDC's bankruptcy. It is
anticipated that the emergence of GDC from
bankruptcy will facilitate Vistana's ability to
restore its profit performance to its previously
achieved levels. A sale of Vistana is projected
at the end of 1992 based on a price/earnings
multiple of 1992 projected profits.
In the on-going public company analysis,
Vistana will continue to be analyzed as a possible
core company because of its earnings history and
capacity.
2. Glen Ivy Financial Group, Inc.
Glen Ivy also is a marketer of timeshare
weeks. it has successfully developed, marketed
and managed 12 resorts with sales to 35,000
timeshare owners. It has resorts in Texas, Utah,
Arizona, California, Colorado and Hawaii.
Negotiations for the sale of Glen Ivy
Financial Group, Inc. are presently in.
process. Due to the nature of its operations and
its substantial financing requirements,
consummation of such a sale appears to be in the
best interest of the estate. Although nc
32
agreement on price has been reached, we have
assumed a sale. in year one at approximately the
inter -company balance due to GDC by Glen Ivy with
all other debt between the parties forgiven.
3. Florida Home d
Finers Inc. ("FHF'q)
FHF has filed a disclosure statement and plan
of reorganization with the Court on October 19,
1990 as amended on November 16, 1990.
Historically, FHF's operations were profitable but
heavily dependent on transactions related to GDC.
Future FHF operations are planned to be less
reliant on GDC transactions and to emphasize its
property management and real estate brokerage
services. Based on FHF's projected performance,
we have assumed a sale of FHF at the end of year 2
of the plan. As discussed previously in the
report, we do not believe that FHF, while
profitable, can achieve a sufficient profit level
to be incrementally significant to a public
company valuation. The company, however, must be
aggressively managed and operated until sold.
33
4. Golf Courses and Country Clubs
GDC owns and operates four golf clubs and one
inn. The golf club operations are in the North
Port Country Club (18 holes) in Sarasota County;
the Oxbow Country Club (18 holes) and Port La
Belle Inn in Hendry County; the Country Club at
Silver Spring Shores (18 holes) in Marion Country;
and the Julington Creek Country Club (9 holes) in
St. Johns County. These properties also generate
modest profits which are not incrementally
significant to a public company valuation. We
have projected that these properties can be sold
over time and in the interim must be aggressively
operated and managed.
f
General Development Corporation
PROJECTED PROCEEDS FROM
COMPANIES HELD FOR SALE
a)
(Dollars in Thousands)
Year
1 2 3 .4 5 Residual Total
Vistana Resort
Development, Inc.
•
Glen Ivy Financial
Group, Inc.
Golf Courses & Country
Clubs
NET PROCEEDS SHOWN IN AGGREGATE ONLY
Florida Home Finders
" '200 2 100 $1,450 $81103540
Net Proceeds $8720 6 $5 $22
6
Present Valueb)
a) Based on rough estimates of disposition proceeds by Palmieri.
b) Discounted at 15%
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X. OTHER ASSETS
A. GDC owns other assets that have not been included in
the estimated asset values contained in this report.
For example, among these assets are certain receivables
from purchasers of commercial real estate, property tax
receivables from homesite purchasers, home mortgages,
deposits collateralizing certain letters of credit and
other miscellaneous assets. Values related to these
assets were excluded because of the uncertainty of
realization of certain receivables and to provide a
contingency factor for the projections. In addition,
no consideration is given to possible preference and
fraudulent transfer recoveries, since analyses of these
issues are ongoing.
B. The GDC tax department estimates that GDC will be
entitled to substantial federal tax Net Operating Loss
Carryforwards ("NOLs") as of the end of 1990. However,
it is not certain that a material amount of these NOLs
will ultimately be available to the Company. Detailed
analysis of this issue is necessary to determine the
1
exact status of this potential asset.
XI. SUmKARY
The contents of this report are intended to initiate a
process that will lead to an expedited confirmation of a GDC
plan. It is emphasized that the data included in the report are
preliminary and considerable additional work is required to
formalize and solidify the data for a plan to be confirmed.
We appreciate the help and cooperation of GDC's
management and other. personnel, its professionals and its Board
of Directors in preparing this report. We also appreciate the
cooperation of GDC's Creditors' Committee.
Respectfully submitted,
THE PALMIERI COMPANY
By. . (�
Peter A. Mart sella
.Managing Dir ctor
December 5, 1990
36