Lowcountry developer files for bankruptcy

The real estate developer behind the struggling Whitney Lake community on John Island has filed for bankruptcy protection.

Whitney Lake LLC, which ran into trouble after its financing dried up earlier this year, plans to reorganize its business and resume sales. More than one-third of the 236 townhouses the company has built are empty or partially finished.

The developer owes more than $18 million to banks and construction companies, according to court documents filed Thursday in Columbia. It listed about $22.8 million in assets, mostly in unfinished town houses, roads and underground infrastructure.

The company had said several months ago that it was planning to seek bankruptcy protection. Its financial problems stemmed from the slowing real estate market, which hurt sales and choked off the revenue it needed to keep operating.

"With the financial pressures associated with today's depressed economic and real estate environment,

Whitney Lake has experienced reduced sales and a loss of working capital, which has necessitated this filing," the company said in a statement.

The developer is mostly owned by SEVA Properties, which is registered to John D. Lisi, president of Whitney Lake LLC. Other financial members are Luis Tabares of Honea Path, Stephen Platt of Charleston, Sandra Adams of Greenville and Patricia Gregory of Charleston.

The company's reorganization plan has the support of most creditors, Lisi said.

But it hinges on the firm's ability to sell the finished vacant town houses. In recent months the company has been unable to consider sales of those units because various creditors had placed liens on the project. The hope is that the liens can be removed through the bankruptcy process, allowing the homes to be marketed and sold.

During the real estate boom, the company signed hundreds of contracts with buyers. It still has about 110 of those agreements, and sales of those units could be finalized once the liens are removed. Lisi said it's unclear how many of those prospective purchasers still are interested in buying at Whitney Lake.

And the neighborhood still will have to attract new buyers to succeed. Whitney Lake LLC bankruptcy attorney Kevin Campbell predicted the project will be able to get back on track quickly.

"Once a few units sell, I think confidence will be restored," Campbell said.

The company's reorganization plan requires court approval. Lisi said the company will seek to put any proceeds from the sales of the vacant units toward the completion of the nearly finished town houses, many of which just need flooring and a final touch of paint.

The company also plans to install a pool, a central part of the neighborhood's amenities that some current Whitney Lake property owners have said are long overdue. Lisi's said the amenities won't be built as originally planned "because the market has changed so much."

"We're still in uncertain times," he said.

If the U.S. Bankruptcy Court allows sales to resume, Carolina One Real Estate will market the community.

Lisi predicted that the local housing market could rebound next year. He said he opted not to sell Whitney Lake to another developer at a fire-sale price because he wanted to preserve the integrity of the project.

The neighborhood off Murraywood Road is projected to have about 900 residences, including some single-family houses. The developer estimates that town house sales over the next few years could generate $37 million in revenue. That would enable it to pay off its debts within three years, Lisi said.

In 2006 and 2007 — before and during the start of the real estate slowdown — the company took in nearly $24 million in income, according to court filings.

Campbell, the attorney, said creditors have been understanding, comparing the situation to what happened after Hurricane Hugo struck Charleston in 1989. He called the current real estate slump a "financial Hugo," saying that the cooperation of creditors actually will help them recover their money.

"You can be short-sighted and enforce your rights and get a little money now, but that doesn't help the project," Campbell said. "Farsightedness is what's going to make this project successful."

Reach Katy Stech at 937-5549 or kstech@postandcourier.com.