This is Neal Freeman, a partner in LakePoint, in 2014. (J. Scott Trubey/AJC)
Credit: J. Scott Trubey/STAFF
Credit: J. Scott Trubey/STAFF
LakePoint was the creation of the Georgia House's longest-serving conservative firebrand, Rep. Earl Ehrhart, R-Powder Springs, and Neal Freeman, the president of Watkins Retail Group and builder of 50 Publix shopping centers throughout the southeast.
“At some point they got in too deep with the lender … and they took a deed in lieu of foreclosure,” said Peter Olson, Bartow’s county administrator.
As it was described to him, the concept of LakePoint was: “We’ll build the ocean and then the beach will become valuable.”
Several of the entities that make up the complex filed for Chapter 11 bankruptcy, which means LakePoint will stay open but face reorganization. An affiliate of Rimrock Capital, a California-based investment adviser, will take control of the entities.
“It exceeded my wildest expectations,” said Ehrhart, who retired as CEO of the company in January but continues to serve as a consultant. “I couldn’t be prouder of what we accomplished. They are doing a great job. It is the biggest economic engine in Northwest Georgia.”
From 2014 | Sports complex near Lake Allatoona coming to life
Ehrhart, who is retiring from the House after three decades, said he was not authorized to talk about financial specifics. But he added, "This a prepackaged restructuring that is amicable."
Freeman could not be reached for comment.
The project, which was expected to cost $1 billion, was first pitched to Cobb County in 2010. But Cobb decided not to issue the requested bonds.
Rimrock was just a lender initially, but became the venue’s landlord almost two years ago because LakePoint couldn’t make its payments, said Dan Berman of financial advisory firm GlassRatner, which is managing the restructuring.
“ When a company that you’re doing business with doesn’t have the means, you try to work through those issues,” Berman said. “This is the culmination of those alternative solutions.”
He explained it on a small scale: “The lender either takes the house and moves the person out of the house (or asks for the money back),” he said. “Here we tried to keep the person in the house. And we’re going to move into the house with them.”
Tom Fooshee, team member at Terminus Wake Park in LakePoint, tries out one of the jumps. (BOB ANDRES / BANDRES@AJC.COM)
Credit: Bob Andres
Credit: Bob Andres
What went wrong?
LakePoint was made to have something for everyone. It has 12 basketball courts, eight baseball fields, 10 beach volleyball courts, 24 indoor volleyball courts and a cable-powered wakeboarding lake. There’s also space for home-schooled students to have physical education and room for seniors activities like pickleball inside a 170,000-square-foot indoor pavilion.
A 2015 study was done to prove LakePoint could pay off its bond debts for that indoor expansion. But in some spots, revenue estimates were off by as much as three times, said Olson, Bartow’s county administrator.
“The feasibility study wasn’t good in retrospect in anticipating revenue streams,” he said.
It appears simple elements were not considered in the projections. For instance, although plenty of tournaments hosted by Nike and Adidas are bringing in people, much of the pricey entrance fee goes to those big-name brands instead of LakePoint as apparently assumed, Olson said.
The facilities now draw an estimated 1 million people per year and have an economic impact of about $100 million, but LakePoint itself just wasn’t making money fast enough to keep up with its debts.
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In 2015, Ehrhart was day-to-day operations manager of LakePoint when he and Freeman, who was the master developer, got the Bartow-Cartersville Joint Development Authority to give them a $36 million bond package to build the indoor pavilion. Having room for indoor sports let them market LakePoint as a year-round destination. But that influx of cash, no matter the season, didn’t come quick enough.
Bond documents required to update investors show trouble started at the end of 2017 when payments started to go unpaid. Bartow County picked up the tab, which will cost taxpayers $6 million over five years. After that, Olson said, LakePoint managers feel it will be financially steady enough to make full bond payments without taxpayer help. Bartow has a general fund of $80 million this year, Olson said.
The county paid $500,000 at the start of the year, and will pony up about $700,000 this month. Those payments are justifiable compared to all that the county’s largest recreational facility brings, Olson said.
“(Freeman and Ehrhart) were running the show, but I don’t know if circumstances were beyond their control,” he said. ” … We’re optimistic about the future. It’s unfortunate for Neal and Earl.”
State Rep. Earl Ehrhart, R - Powder Springs, watches debate of a bill he sponsored in 2017. (BOB ANDRES /BANDRES@AJC.COM)
The Ehrhart Effect
The bankruptcy filing shows a company Ehrhart is associated with is owed just over $1 million. Those are management and consulting fees, said Berman, who is helping with the restructuring.
Early on, the project benefited from tax break legislation Ehrhart’s colleagues passed on the final day of the 2011 legislative session.
A tax break for big “tourism projects” was attached to another bill continuing a break for customers of companies like Gulfstream that refurbish high-priced jets. The tourism tax break bill had stalled in the House before the Senate Finance Committee attached it to the jet bill. Ehrhart made a point of not voting on it because he acknowledged it would benefit his project.
The measure passed at a time when the state was struggling to overcome the Great Recession in poor financial shape. Lawmakers, meanwhile, were trying to show they could do something, anything, to create jobs.
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At the time, the sponsor couldn’t say how much the tax break would cost the state despite the fact that any such bills are supposed to have a written price tag attached to them. If approved by the Georgia Department of Community Affairs, a “tourism attraction project” can get millions of dollars a year in tax refunds over 10 years.
The Atlanta Journal-Constitution filed an Open Records Act request for documents on such projects in 2016. LakePoint was approved for the tax break in 2015, one of few to get the go-ahead by DCA for the tax refunds. In the documents, the state agency blacked out estimates of how much taxpayer money was expected to be refunded to LakePoint developers. State officials said that was private information.
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Over the past three years LakePoint has received between $100,000 and $200,000 per year in tax breaks, Berman said through a spokeswoman. The AJC couldn’t confirm that number.
“The State guards its tax information like it’s a state secret,” Olson said.
Roads are being laid on the yet-developed north side of the property, which Ehrhart said is about 800 acres. It’s unclear what Rimrock will do next with that empty acreage. More hotels? A mixed-use project? More sporting venues?
That’ll be easier to say after the bankruptcy goes through the courts. Once that’s finalized — possibly before the end of the year — the ball is in Rimrock’s court.
Ehrhart said LakePoint will continue to grow.
The complex has 47 out of the next 52 weeks booked, officials said.
“Look, Delta Air Lines didn’t go out of business during their restructuring,” Ehrhart said. “(LakePoint) is full of people.”
Lakepoint's new indoor facility opened to the public on Wednesday.