Following six months of court filings, LakePoint Sporting Community — more specifically, LakePoint Land LLC and seven other subsidiaries — officially emerged from Chapter 11 bankruptcy proceedings on Dec. 21.
The end result of a half-year of debt restructuring, according to documents filed in the United States Bankruptcy Court for the Northern District of Georgia last year, is an "opening" balance sheet with total assets at about $57.6 million and equity around $54.6 million.
"This compares favorably to the pre-petition balance sheet," a Chapter 11 disclosure statement dated July 31 reads, "which had total assets and equity of approximately $2.8 million and negative $28.4 million, respectively."
GlassRatner Advisory & Capital Group LLC Senior Managing Director Dan Berman was brought in by Rimrock Capital Management — a California-based hedge fund that obtained legal ownership of LakePoint Land's property and other related assets in 2016 — to assist in LakePoint's recapitalization.
"We satisfied and finalized in all respects what was required by the process," he said. "That was finalized amongst the various parties to their satisfaction."
The eight entities — LakePoint Land, LakePoint Land III, LakePoint Land IV, LakePoint Services, LakePoint Sports South, LP Housing, LakePoint Hospitality and LakePoint Merchandise — all survived Chapter 11, Berman said.
"It's a reorganized entity … you emerge with a clean balance sheet, you're opening and you're doing business. That was a choice to reorganize through LakePoint Land."
That balance sheet restructuring, he said, was essentially an exercise in converting debt to equity. Operationally and organizationally, he said few things changed "behind the scenes" at LakePoint during the bankruptcy proceedings.
"In terms of our facilities, they're the same facilities, the sports assets at LakePoint," Berman said. "The real estate's the same real estate, the people on the ground managing the assets are the same folks continuing to manage and service … so there's really no changes."
The rise and fall of LakePoint Sports
Court documents detail LakePoint Sports' slow descent into bankruptcy — including the ouster of the founders of the $1 billion Emerson complex.
From the outset, LakePoint Land had difficulties acquiring "bank or other traditional financing" for horizontal site development — indeed, the organization failed to obtain the funding needed for such development from the acquisition of the property in August 2011 all the way up until October 2013.
It was then that LakePoint Land procured a $52 million loan from Rimrock, which was "secured by all or substantially all of [LakePoint Land's] assets, including property comprising the project."
Covenant defaults started in early 2015 and a modification to the Rimrock loan agreement required LakePoint Land to raise "at least $10 million in the form of a capital call or capital raise." That modification also established a new "redemption amount" for the loans — how much was required to repay the loans in full — of about $64.9 million, along with an "amendment fee" of $1 million plus any "interest that may accrue and be due and owing after Oct. 2, 2015."
By that date, LakePoint Land reported that it had raised about $7.65 million — a sum high enough to extend the "redemption date" to Dec. 31, 2015. A series of loan modifications resulted in that due date for the remaining $4 million owed to Rimrock being pushed back to March 31, 2016.
LakePoint Land sold roughly 21.2 acres of land to LakePoint Pavilion Center, LLC for $9 million on March 11, of which approximately $8.1 million was given to Rimrock. Alas, that wasn't enough to repay the total loan agreement — then tabbed at about $54.9 million — due Aug. 1, the "final redemption date."
The next day, Rimrock sent LakePoint Land's management and guarantors a notice of default. That set into motion a forbearance agreement on Sept. 23, in which Rimrock established Dec. 23 as the deadline for LakePoint to refinance its debts.
LakePoint Land's management was unable to do so and Rimrock became the legal owners of the property and its assets. "As a result of the transfer," court documents state, "$6,394,041 of accrued, unpaid interest, fees and expenses under the loans was satisfied and the aggregate principal balance of the loans were reduced from $54,905,389 to $16,299,430."
LakePoint Land Chief Executive Officer Earl Ehrhart resigned on Jan. 16, 2018. Then co-CEO Neal Freeman's employment agreement with LakePoint Land was terminated Feb. 28 — LakePoint Sporting Community Chief Financial Officer Robert Zurcher was elected LakePoint Land's new manager in March.
On June 11, LakePoint Sports formally filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Northern District of Georgia in Rome. The ensuing proceedings, Berman said, revolved around $30 million in claims — $22 million in Rimrock "secured debt" and an additional $8 million in "unsecured claims" belonging to insiders and miscellaneous "belated parties."
The post-bankruptcy ballgame
"We have the same operating entities at LakePoint Land, which owns the assets and it has various subsidiaries that do operate the businesses," Berman said. "And then you have an ownership entity that owns LakePoint Land … it's virtually identical to what we had before."
Rimrock continued to invest in LakePoint throughout 2018. "It's nearly $8 million invested in real estate around the campus, with respect to various parcels we thought were important to the overall development and overall future development," Berman added.
Court documents state that Bartow County — which, via its Development Authority, signed off on a $36 million bond to finance construction on the Champions Center indoor pavilion — entered into an agreement last year for LakePoint Indoor Pavilion LLC (LPIP) to continue managing the roughly 170,000-square-foot facility.
"In order for that agreement to stay in place through its third year, the agreement contemplated that the Rimrock investor would make a minimum investment of $10 million into the project," bankruptcy proceedings detail. "In addition, as part of the agreement, LPIP terminated its agreement with [Sport Parks of Georgia, LLC] and entered into that certain operating agreement with the Rimrock investor dated as of March 27, 2018."
As of May 2018, Bartow County Administrator Peter Olson said the county still had about $6 million remaining on the bond.
"We're having to kick in some money on the debt services over the next five years," he told The Daily Tribune News. "We've reached an agreement with Rimrock, the current operators, that they're going to ramp our contribution requirements down, from about $2.5 million [in 2018] to about $500,000 five years out."
With its stronger balance sheet, Berman said he's optimistic that LakePoint is poised for both short-term and long-term growth.
"Capital is generally attracted to businesses that are financially strong, and in this case, we are a financially strong business," he said. "Whether it's investors or partners, they want to do business with folks they believe [and] businesses they believe are going to be in business for the long-term."
And with its "all-equity" balance sheet, Berman said LakePoint now has both the opportunity and flexibility to grow.
"Whether that's through new real estate development, whether that's growth through new business operations, whether that's growth through partnerships or joint ventures," he said, "you can do a number of things with a strong and healthy financial outlook."
A new game plan?
"Things actually went according to plan through the filing and forward, all the way through the exit," Berman said. "The facilities, the assets that were built at LakePoint are just premium — they're best in class, they're recognized nationally … so we feel very good about the assets at LakePoint. They've been preserved and maintained, they're in premium condition."
Looking back on the financial failures of LakePoint Sports' previous management, Berman said the core problem was that the complex just didn't grow fast enough to be able to refinance its debts.
With that in mind, Berman said LakePoint aspires to grow, but in a more strategic manner that will ensure future success for the complex, the community and its customers.
"We will make choices about capital structure in terms of what makes prudent sense for the organization, in terms of the right blend of debt and equity, but also, for purposes of growing and growing at a pace that is thoughtful [and] healthy for the organization," he said. "It's important for organizations to make good decisions about pace of growth, but also to grow. You need to be innovative. We feel like LakePoint has done a good job of being at the front of the curve, doing things that people in businesses across the country pay attention [to], that they want to be here because of the experience and because of the assets of the service they receive."
Operational changes are already underway in 2019. Late last year Iowa-based Perfect Game, Inc. announced it was ending its partnership with LakePoint. Weeks later, Rimrock announced that it had made a "sizable investment" in Illinois-headquartered scouting service Prep Baseball Report.
"That's part of our vision of integrating the sports operation with real estate, capital and strategic partners," Berman said. "That's really what we're looking for. Our plan in '19 is about continuing to service and continuing to make some thoughtful decisions and plans about growing our campus in a way that is in keeping with creating an overall vacation experience for the families that come and is consistent with sports operations, with convenient amenities such as hotels and restaurants."
LakePoint's partnerships with other big name brands and major tournament operators — among them, Nike, Under Armour and Adidas — will continue. Berman also said he expects several new tournaments to come to Emerson later this year.
"We hope to be sharing some news later in 2019 with some of the activities that we're actually bringing online," he added.
Furthermore, Berman said he expects to see substantial development on LakePoint's northern campus over the next 12 months.
"The bridge and road project is on schedule. We're expecting completion in May," he said. "We're certainly on the move, we're evaluating and planning around the entire campus about our next sort of growth effort, and harmonizing that with our sports operations."
While sports will remain the anchor of what LakePoint is about, Berman also said that, moving forward, there may be an increased emphasis on the development of other attractions and amenities.
"Real estate is a supportive element, whether it's hotels or restaurants," he said. "You try to have an ecosystem that works together that creates an experience where people are talking about it and they want to come back. So absolutely real estate is an important component, so when we talk about our vision of integrating the sports operation with real estate, capital and strategic partners, it's about growing in a way that creates [an] unparalleled experience."
Berman, however, remains mum on concrete details about what specific developments could be coming to LakePoint. With its debts behind them, however, he nonetheless said that he expects great things emerging at the complex in the years ahead.
"We hope that in a few years — five years, 10 years — it's a major development, it's a major investment and it's generational," he said. "We will continue to pursue that in '19 and the years forward — we're really super-excited about what lies ahead."