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HomeMy WebLinkAboutLot Exchange Program - Exhibit• Exhibit IV -A LOT EXCHANGE PROGRAM BASED ON INFORMATION PROVIDED BY THE DEBTOR AS OF JUNE 81 1990 Introduction The Debtor has currently identified the following 6 issues to be addressed in its development of the framework of the. Lot Exchange Program. 1. Background and status information. 2. Analysis of individual lots within the developed lot category 3. Community -wide development 4. Utility services 5. Specialty lots 6. Customer transfer implementation 7. Other obligations. The information included herein has been provided by the Debtor to the Examiner as the purpose for addressing each issue as part of the Lot Exchange Program, the Debtor's current status of the work it intends to do and the Debtor's timing for the completion of its planned work. The Examiner has not determined whether all issues which should be addressed are being addressed, or whether the approach being taken is the most appropriate under the circumstances. In addition, during the course of this analysis, the Debtor may identify other issues or change approaches to these or additional issues. Therefore, this information should be regarded as preliminary and tentative. • 11 Issue 1 -- Background and Status Information • Purpose --Accurate information on the current status of customer commitments and the physical status of the lots involved must be compiled in order to: • Determine the scope of the Debtor's customer commitments, • Determine the physical status of the undeveloped lots, including estimates of costs to complete, and • Develop a baseline of information upon which all remaining analyses will be based. • Status -- As part of this process, the Debtor is analyzing all lots and customers, including lots which have been previously deeded. The Debtor is identifying all outstanding - customer commitments, such as the commitment to provide utility services to a customer who has received a deed to his homesite but has not yet built a house. At the May 18, 1990 status conference, the Debtor presented its initial assessment of the number of customers who were purchasing developed lots versus the number of customers purchasing undeveloped lots. The term "developed lot" was defined by the Debtor to mean that hard surface roads and drainage systems were installed. The Debtor also presented a comparison of the number of lots under contract to the number of lots previously deeded. The Debtor has been expanding this inventory project to cover utility commitments, as well as other special issues (see below). • Timing -- This inventory project is reportedly substantially com- plete. The Debtor is in the process of improving the accuracy level of the information. This process is anticipated to continue through the month of June. 2 Issue 2 --Analysis of Individual Lots within the Develop Lot Category -Purpose -- Within the broad classification of "Developed Lots" are lots where the local government has not accepted the adjacent roads and drainage systems for continuing maintenance. The condition of these unaccepted roads and drainage systems is not uniform. Therefore, each lot must be analyzed and categorized to determine whether the lot can be considered as "buildable" for purposes' of the Lot Exchange Program. • Status -- The Debtor is in the process of analyzing the physical condition of the roads and drainage systems which have not been ac- cepted by local government. To analyze the physical condition of these roads and drainage systems, the Debtor is physically inspecting the 1,220 miles of roads which have not been accepted by local government. The improvements are being classified into four categories, ranging from excellent to very poor. After classification, the Debtor may decide to temporarily exclude some plat units from the "Developed" category pending further analysis and discussion of road and drainage acceptance with the relevant governmental units. • Timing --The physical inspection of the 1,220 miles of unaccepted roads is in process. The Debtor expects a preliminary report to be completed by June 12, 1990. Issue 3 -- Community -Wide Development • Purpose -- In addition to unaccepted roads and drainage systems, there may be other local government and / or regulatory agency is- sues which impact whether a lot may be used in the Lot Exchange Program. These issues range from missing street signs to much larger issues. The Debtor believes that resolution of these issues will facilitate implementation of a more comprehensive and efficient Lot Exchange Program. • Status -- The Debtor is in the process of evaluating these issues, and estimating the potential cost related to each issue. 3 • Timing -- The Debtor expects to complete its initial evaluation of these issues, and the development= of the cost estimates by June 12, 1990. After that time, the Debtor may begin 'discussions with cer- tain local government units. Issue 4 -- Utility Services • Purpose -- Customers were sold homesites under one of three basic utility service conditions: 1. No Central Utilities -- Customer is responsible for installing a well and septic tank. 2. Central Water / Septic Tank -- Customer is responsible for installing a septic tank and paying approved connection charges for central water supply. 3. Central Water and Sewer -- Customer is responsible for paying approved connection charges for central water and sewer. Where central service is contemplated, according to the Debtor, the "commitment" is to provide such service within 60-120 days of the time that the customer requests service in order to build a home on his / her deeded lot. The Debtor believes that customer contracts do not require installation of utility service as a pre -condition to deeding. Analysis of the utility commitment also includes consideration of when particular customers will decide to build on which lots. In the past, service requests have spanned a period of twenty years or more. Other issues, such as density restrictions on well and septic tank usage, would also be addressed. The impact of any possible condemnation or sale of certain of the Debtor's utility systems must also be considered. The Debtor is analyzing utility commitment issues in order to: • Determine their scope, considering commitments to both deeded and undeeded customers, • Define the commitment to the customer -- i.e., delivery of a buildable lot or a lot with central utility service, 0 • • Determine whether these commitments can be addressed within the confines of the Lot Exchange Program, and • Develop an approach(es) for the utility issues. • Status -- The Debtor is in the process of evaluating and classify- ing all the lots (both in inventory and previously deeded) as follows. 1. Nature of the utility commitment. 2. Existing condition at each lot. 3. Analysis of the number of lots which are currently needed to meet the 60-120 day service requirement provided for in the contracts. The Debtor may then consider developing a Utility Service Plan, which may address the customer utility service requirements through one of several methods, including extending the utility to the lot, funding the extension through utility escrow funds, trans- ferring the customer to a lot currently meeting utility requirements and / or providing further funding to customers whose commitments cannot be met through any other approach. • Ti m i na -- The Debtor's classification of lots by commitment is expected to be generally complete by June 12, 1990. The Debtor ex- pects to complete the development of a framework to address the utility service requirements by late June. Issue 5 -- Specialty Lots • Purpose -- Generally, homesite contracts involved a standard 10,000 sq. ft. lot; however, there are exceptions. These exception lots and customers with commitments for exception lots need to be identified and may need to be handled as "special cases" under the Lot Exchange Program. • Status -- The Debtor is in the process of reviewing lots and cus- tomers which are under this issue. Once these exceptions have been identified and classified, the Debtor plans to develop a procedure for appropriate treatment. 5 • Ti m i na -- The Debtor expects to complete preliminary identifica- tion of these exceptions by June .11., 1990, and to develop a plan to handle them by the end of June. Issue 6 -- "Customer Transfer Implementation" • Purpose -- Once the detailed framework of the Lot Exchange Pro- gram is formulated, an approach to offer the exchange to the cus- tomer must be developed. This issue includes consideration of how the exchange will be offered, development of the exchange process and consideration of any incentives to customers. Any approach considered must include a thorough analysis of the cost / benefit to the estate, encompassing the probabilities of customer retention with and without the incentive, and the cost of making the incentive available to customers who would have continued to pay nonetheless. This analysis will be important to determine any potential benefit the estate may realize through the offering of incentives to lot purchasers. Some of the issues the Debtor is currently considering under this process include: 1. Customer priorities for offering transfers. 2. Number and type of transfer options offered to each customer. 3. Time frames for extending offers and receiving responses. 4. Trades intra- and inter -community. 5. Timing and priority of transfer offers to customers who have contracted to buy lots that are included in plats which may be built at a later date. 6. Offering customers incentives, and if so, what type of incentives. 7. Cancellation policy to be applied to contract receivables post-petition and the handling of delinquent accounts. 8. Staffing- required to implement the plan. • Status -- The Debtor has hired U.S. Communications to assist in developing an effective plan for handling customer relations, eval- uating transfer plan alternatives and implementing the final trans- fer plan. The Debtor does not regard this retention as requiring ap- proval of the Bankruptcy Court. Among other work, the Debtor plans 0 to have U.S. Communications assist in the performance of the cost / benefit analyses of any customer.- incentives offered. • Timing -- The Debtor and U.S. Communications estimate that they will have completed their development of the framework of the "Customer Transfer Implementation" by early to mid-July. Issue 7 -- "Other Obligations" • PurpQse -- The Debtor has identified other potential obligations related to the customer contracts, such as provisions for credit against the purchase of a house and rights to transfer within or among communities. The Debtor intends to review these potential commitments to determine if they can be met and whether they can be addressed through the Lot Exchange Program. • Status-- The Debtor is in the process of reviewing these issues with the assistance of U.S. Communications. • Timing-- The Debtor intends to complete this review by early July. rA Exhibit IV -B FEASIBILITY OF THE LOT EXCHANGE PROGRAM PRELIMINARY WORK PROGRAM 1. Analyze the Debtor's inventory of the number and status of lots, by development, within the following categories--- • contract status - sold - unsold - deeded - under contract - payments completed, but not deeded • development commitment and status - roads and drainage - utilities - time commitment for development (both roads I drainage and utilities) - specialty lots • identification of "packaged" homesites, and related plans for development as a housing package • community restrictions and issues - differences between GDC and community definitions of "developed" - impact of density restrictions - moratoria imposed by communities 2. Analyze the Debtor's identification of community wide issues and road and drainage acceptance issues • review the Debtor's assessment of the condition of the unaccepted roads and drainage systems • analyze related cost estimates • monitor situation on an on-going basis and revise analysis if the situations change • meet with selected community officials, independent of the Debtor • 3. Analyze contract receivables, by development • delinquency status - (i.e., pre- vs. post-petition) • age (i.e., paid off, 1 year left, 2 years left, etc.) • other demographic considerations 4. Compare information historically provided to Florida Division of Land Sales to information currently used by GDC regarding the number and status of developed lots 5. Identify the issues which may be raised once the Debtor determines its commitments to the various categories of customers 6. Analyze the Debtor's calculations of historical cancellations and projected and actual delinquencies 7. Review future development expenditures and prioritizations • analyze the Debtor's estimates of work to be completed, and the cost estimate of performing that work • analyze the incremental value to be added to the estate if the work is performed • compared the cost / benefit of performing the development work 8. Analyze the Debtor's plan • identification of development issues • identification of customer and related community issues • plans to address currently unmet development commitments - development of roads and drainage systems - utility and other commitments • plans to exchange lots with similar characteristics • process by which the transfer would be offered to the customer 9. Analyze the Debtor's customer research, including the validity of the statistical approach employed 2 10. Meet/contact randomly selected customers, independent of the Debtor, to discuss .the proposed Lot Exchange Program 11. If proposed by the Debtor as part of the "Customer Transfer Implementation", analyze other means of potentially addressing contract receivables. Such analysis must include the probabilities of the customer being retained, with and without the incentive, and the cost-benefit/impact to the estate, if the incentive is implemented. 3