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William Goodwin Acquires Sea Pines' Resort and Real
 Estate Operations for Approximately $23.4 million
By Peter Hull, The Island Packet, Hilton Head Island, S.C.
Knight Ridder/Tribune Business News

Mar. 17, 2005 - Shareholders overwhelmingly approved the sale of Sea Pines Associates to a Richmond, Va.-based businessman Wednesday -- 22 years after William Goodwin first tried to buy Sea Pines' resort and real estate operations.

The 64-year-old Goodwin's family-owned company, The Riverstone Group, paid $23.4 million to become the resort's fifth owner in almost as many decades. Goodwin assured about 250 shareholders who attended a meeting Wednesday at Harbour Town Conference Center that he won't betray their trust.

Sea Pines officials said 93.8 percent of Sea Pines Associates' common stock was voted in favor of the merger. Less than 1 percent of shares were voted against the sale, and 5.8 percent of votes were not cast and were counted as "no" votes. Goodwin needed approval from 80 percent of shareholders for the deal to go through.

"We'll try and do what's right," Goodwin said at Wednesday's meeting. "I'm beginning just as you are. We have no intentions to change anything right now - there's no hidden agenda." The deal means Goodwin's company will pay $8.50 per common share - or about $23.4 million for the 2,756,050 shares of common stock affected. Goodwin's company also will provide approximately $5 million to pay dividends owed on the company's preferred shares, as well as redeem the preferred shares and pay off outstanding trust securities and interest owed on the securities, according to a company filing with the Securities and Exchange Commission.

While Goodwin has said he plans no immediate changes, the sale signals the disbanding of Sea Pines Associates' board of directors.

"We're elected by the shareholders," board chairman Norman Harberger said, "and there aren't any shareholders anymore." But not all shareholders welcomed the sale. Thomas H. Hagoort, who had earlier written to shareholders and property owners with his concerns, addressed the meeting and urged shareholders to vote against the sale unless negotiations to revise the community's covenants were completed before the sale was approved.

Hagoort asked shareholders to vote "no" to keep the covenants in the hands of a locally controlled company. Hagoort said the board had bargained for "peace in our time." "But I believe there will come a time when the people of the Sea Pines community will say, 'Shame on the board for trading our governance for money.'" In response, Harberger said Charles Fraser's creating the covenants as he developed Sea Pines was a stroke of genius, and the board had no intention of giving them away.

"That's why Sea Pines remains as it is," Harberger said, "and I have every reason to believe it will remain so." The shareholders' vote was the final hurdle in a process that began last year.

The decision to sell followed a $7.8 million judgment against Sea Pines that arose from a breach-of-contract lawsuit over the development of the TidePointe retirement community. Sea Pines settled the case for $5.9 million and went on to report a loss of nearly $6.5 million in 2003, most of which was attributed to the judgment.

In outlining its reasons for the sale, the company said the most likely alternative to the Riverstone acquisition was to sell certain properties and development rights, resulting in fragmented ownership and the increased likelihood of overdevelopment in the community.

The company also cited the uncertainty that any other transactions would yield more value for shareholders, especially given that Goodwin could block a sale with his nearly 27 percent of the common stock.

The companies signed a merger agreement July 27 to close the deal by Dec. 31. Both parties agreed to extend the deadline until March 31 when the companies did not get the all-clear for its proxy documents from the SEC in time to meet the Dec. 31 deadline.

Goodwin said he first tried to buy Sea Pines in 1983 from Fraser, the community's founder. With a deal almost done, Goodwin came to Hilton Head to sign the contracts, he said - or so he thought. Fraser decided to sell Sea Pines to E.F. Heizer's Vacation Resorts for $10 million, beginning a period of turbulent ownership for the resort.

Sea Pines became a wholly owned subsidiary of Heizer Corp. after the deal was approved by shareholders. In 1985, Sea Pines Co. was sold to developer Bobby Ginn and was combined with the Hilton Head Co. to form Ginn Holdings Corp.

The following year, Hilton Head Holdings Corp. took control of Sea Pines and other island holdings from Ginn, only to file bankruptcy later that year, owing about $110 million to about 2,000 creditors.

In 1987, Sea Pines Associates, a publicly held company formed by a group of 25 Sea Pines property owners, bought the company's Sea Pines assets from the bankruptcy estate for $24.3 million.

The $8.50 per share paid by Goodwin is five times the $1.60 per share paid for Sea Pines Associates stock by the original 25 investors, Harberger said.

Goodwin graduated from Virginia Tech in 1962 with an undergraduate degree in mechanical engineering, and from the University of Virginia with a MBA in 1966. He and his wife of 38 years, Alice Tolley Goodwin, have five children and have been Sea Pines property owners for about 25 years.

The Goodwins perhaps are best known for their donations to cancer research and higher education. Their gifts are calculated in the hundreds of millions of dollars, with the University of Virginia among the largest benefactors.

Their philanthropic efforts include a $13.3 million unrestricted gift to the Darden Graduate School of Business Administration at the University of Virginia, $88.5 million to cancer centers nationwide, $25 million to Virginia Commonwealth University's Massey Cancer Center and $15 million to VCU's School of Engineering Foundation.

In 1996, Goodwin sold his bowling equipment and facilities firm AMF Companies for a reported $1 billion. After the sale he gave $50 million to AMF staff.

Goodwin's business successes, particularly at his other properties - Kiawah Island Golf Resort, The Hermitage Hotel in Nashville, Tenn., the Jefferson Hotel in Richmond and Colleton River Plantation in greater Bluffton - ultimately convinced Sea Pines Associates board members and shareholders that he had the foresight, and capital, to keep Sea Pines competitive.

Rival resorts, such as Amelia Island and Ponte Vedra in Florida and Sea Island in Georgia, have invested as much as $100 million into improvements, far more money than Sea Pines could generate from revenue alone, Sea Pines officials have said.

In February Sea Pines Associates recorded its best earnings in five years, rebounding from 2003's heavy losses to end its fiscal year in the black for only the second time since 1999.

Sea Pines reported a net income of $375,000 for the last fiscal year ending Oct. 31, posting gains in all business sectors. The company reported revenue of $65.6 million, up $8.7 million, or 15.3 percent, over 2003. In 2001, Sea Pines lost $2.6 million, and the company lost $389,000 in 2000. Before last year, Sea Pines had turned a profit once since 1999 $197,000 in 2002.

"I hope we can do what's necessary to turn this around," Goodwin said.

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To see more of The Island Packet, or to subscribe to the newspaper, go to http://www.islandpacket.com.

Copyright (c) 2005, The Island Packet, Hilton Head Island, S.C.

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