After selling two more large developments to Toll Brothers, WCI Communities announced Monday that it had paid off its $300 million senior term loan 15 months after emerging from Chapter 11 bankruptcy protection.
The move reduces WCI's total debt from when it exited bankruptcy by 68% and frees the company to concentrate on returning to profitability as a builder. To accomplish that, WCI's reorganization plan involved selling non-core assets to pay off its debt load. Toll Brothers has been a big customer.
On Thursday, Toll Brothers closed on Parkland Golf and Country Club, a decidedly upscale community near Coral Springs in South Florida, where WCI had stopped building after it filed for bankruptcy in August 2008. Toll paid WCI $27 million for the project, which has 385 homes still to be built of the 820 planned for the 790-acre development. Toll also assumed about $16 million in community development bond debt, said Doug Schwartz, vice president of asset management for WCI.
In addition to the lots, Toll got two on-site clubs: a completed 43,000-square-foot community sports club that includes a pool, a spa, a fitness center, and a dining area, as well as a shell of a building slated to become the golf clubhouse for an 18-hole Greg Norman-designed golf course, which also was part of the deal.
On the downside for Toll, the Pennsylvania-based luxury public builder also took over 25 speculative homes that need extensive renovations to replace Chinese drywall. WCI had offered to finish selling out and renovating the homes, but Toll said it preferred to take over the task, Schwartz said.
Toll wasn't the only buyer pursuing the premier South Florida property. Investor groups as well as other large national home builders were interested as well, according to Schwartz, but "none of them were as qualified to handle the whole community as Toll Brothers," he said.
Schwartz explained that WCI had been working with Toll on the purchase since about May, but the deal was complicated because WCI needed to gain some local government approvals that had stalled after the company stopped building there. The community development bond debt also had to be worked through. "It's a very complicated deal," said Schwartz. "There were a lot of moving parts and pieces."
On Nov. 1, Toll closed on another WCI development, The Hills at Rivington, in Danbury, Conn., for $23.5 million. The development, which has approval for more than 1,000 units, with 800 yet to build, was up for sale because of WCI's post-bankruptcy focus on Florida. And last February, Toll bought 102 home sites in WCI's Four Corners community in East Fishkill, N.Y., north of New York City, for $8.9 million.
WCI has been using the cash to pay back its post-bankruptcy debt. While the company shed roughly $2 billion in debt in bankruptcy, it still owed $450 million when it exited in September 2009. Connie Boyd, WCI's spokeswoman, said Monday that there more news soon about the progress WCI has made on its debts.
In the meantime, WCI returned to the business of building homes last summer. It has reopened two Florida communities, Pelican Preserve in Fort Myers and the Venetian Golf and River Club in Venice.
Boyd said the company's goal is to have three more communities open in the first quarter of 2011 and 10 total by the end of next year. Unlike other builders, WCI doesn't have to look for new land for communities. Despite all the land sales, WCI still has thousands of lots left in its "core asset" portfolio, said Schwartz.
Teresa Burney is a senior editor for BUILDER and BIG BUILDER magazines.