the cliffs Convertible Bonds

Jim Anthony still can't sell any houses, and he's way behind schedule on building his forthcoming "signature" golf courses. But he's been able to do something that's quite extraordinary for a developer: he's cashed in on the faith of the people he's been selling houses to.

Anthony has persuaded the residents of his Cliffs communities in North and South Carolina to invest $62 million into his future -- a financial cushion that virtually guarantees his company will emerge from the recession with its assets intact.

Anthony plans to spend the money on new amenities, in particular a Gary Player-designed course at Cliffs at Mountain Park in Travelers Rest, South Carolina and a Tiger Woods-designed course at Cliffs at High Carolina in suburban Asheville, North Carolina. Construction of the courses is expected to begin within the next month or two, and the courses could open in 2012.

This is a George Bailey moment for Anthony, who these days must be thinking that it really is a wonderful life. He'd tried to secure financing from the usual sources but came up empty, or at least without terms he could live with. So, with the help of some Cliffs residents, he put together a bond issue that will provide the bondholders with a 12 percent return over seven years.

For the residents, the funding is an insurance policy. By stuffing Anthony's wallet, they ensure that he'll continue to build the golf courses, clubhouses, wellness centers, and the other amenities that will, eventually, sell more lots at the Cliffs. And if Anthony does go broke someday, well, they'll have prevented the communities from being taken over by lenders or developers who don't share the Cliffs vision.

"If [the communities] go kaput, we wind up in the club business," a resident who bought into the bond issue told the Asheville Citizen-Times. "But at least we have control of the amenities."

About 600 Cliffs residents have reportedly chosen to join the program. The average investment is said to be $130,000.

“We think this is the most important thing we’ve ever done,” Anthony told the Greenville News.

It certainly is a breakthrough. Across America these days, residents of golf communities are more likely to stand on the sidelines and watch developers wither away and die. Out West, Lyle Anderson developed some primo golf communities full of conspicuously wealthy residents who didn't lift a finger on his behalf when times got tough. Adios, Lyle! Leave the key to those Jack Nicklaus golf courses!

And when residents do get actively involved, it's usually because they're out for blood. Just ask Bobby Ginn and David Lucas, the principals of Ginn Resorts and Bonita Bay Group. On their way to bankruptcy court, they were sued by the residents of their communities, who suspect that they've been defrauded.

By contrast, Anthony has been able to convert what amounts to good will into cash on the barrel. For a developer, it's a real achievement.

CliffsCommunities.com