The developer for Tierra del Sol has filed for Chapter 11 bankruptcy protection this week seeking to restructure its debt so they can resume construction. The developer currently owes creditors a total of $184 million. The goal of the chapter 11 protection is help the developer restart construction and renegotiate terms with its current creditors. Tierra del Sol is located off of highway 27 in Davenport just west of the Champions Gate Resort.
Construction for Tierra del Sol halted last summer as the project fell victim to the housing slump as well as cost overruns from the county on permit modifications and an expansion of the community water park. The builder is hopeful that once they can start building and selling units that this will allow them to repay creditors. The goal is to have the resort fully completed within 3 to 4 years.
The developer’s troubles are far from over as many British investors who put down large deposits for un-built units are seeking refunds or are filing lawsuits for their deposits to be returned. The Chapter 11 filing is not good for any of these buyers as unsecured creditors (buyers) tend to get little or nothing from a bankruptcy filing. Most of these deposits were given to the developer during the housing boom years when home prices were high. Now the challenge for the Builder as well as the Buyers is whether the contracted prices during those boom years reflect the current market conditions. A $500,000 unit 3 years ago “may” only appraise at $350,000 in today’s market when construction resumes.
The real challenge is if the builder can secure loans to restart the project and if they do, can they sell vacation homes at the peak of a housing slump?