Callaway completes first land deal, puts 2,500 more prime acres up for sale

$8 million purchase of 4,500 acres by Waffle House CEO's land company completed on Friday CEO Edward Callaway says moves won't affect gardens operations, will make debt 'manageable'

tadams@ledger-enquirer.comJuly 7, 2012 

Callaway Gardens has completed the sale of 4,500 acres of land to help pay off what once was a mountain of debt. At the same time, it has just put another 2,500 acres on the market -- prized property that includes Pine Mountain Ridge and Mountain Creek -- to ultimately get a firm grip on the $38 million the resort owed just a year ago.

"Our preference is to find a single buyer. We would like to find somebody who likes the timber and the hunting and would hold it opposed to developing it," Callaway Gardens Chairman and Chief Executive Officer Edward Callaway said Friday of the new land sale, which is part of his strategy to position the Harris County resort and gardens for better days after a decade of struggles.

"It doesn't touch the gardens or resort, the Butterfly Center, the Sibley Center, the chapel, the golf courses and beach -- all of those things we love about the gardens," Callaway said of land sales that should leave the resort with $3 million to $5 million in debt, a load he said can easily be carried with existing cash flow from its daily operations.

Callaway, in a lengthy interview, said the first step -- selling the 4,500 acres of land -- was completed Friday afternoon in Atlanta, with Lands' South Ventures LLC paying $8 million for the property and its timber value. The acreage includes the site of The Steeplechase at Callaway Gardens, an annual fall fundraiser for the area's arts community.

Lands' South is headed by Joe Rogers Jr., chairman and CEO of Norcross, Ga.-based Waffle House. His father, Joe Rogers Sr., co-founded the chain with Tom

Forkner in 1955.

"It's got good stands of timber on it and it's in a good location. All I was looking for was a nice timber investment," said Rogers, who was reached by phone before a flight home from Colorado.

The restaurant executive, who said he doesn't hunt deer or turkey, explained the property will probably be leased out for those who do enjoy that sport. He doesn't plan to develop it in any way, he said, although he confided joking with Edward Callaway that he might build a large water-slide attraction on it to complement the man-made beach attraction inside the gardens.

Rogers, who has never been to The Steeplechase, a horse-racing gala held every November on 200 acres of the land, said he isn't sure yet if he will attend this year. But he does plan to talk with its organizers before it rolls around in 2013

"They've got some nice facilities sitting there," he said. "I kind of just scratched my head and I thought, who owns those? I think I do now," he said. "I'm not sure what to do with a steeplechase facility. … I'm sure it's for a worthy cause. So hopefully I can get by there and find out what a steeplechase is all about. The only thing I've heard is that they wear interesting hats."

Rogers also said there's not much chance he will build a personal ranch or lodge on the property. And he's not interested in the 2,500 acres that the Callaways now have up for sale because its steep topography has more hardwood than pine and would not be as profitable to harvest.

Still, the Waffle House executive said he plans to be a good neighbor and was happy to help out Callaway Gardens.

"Callaway's a wonderful deal, it's a wonderful family, it's got a wonderful legacy," Rogers said. "It looks like financially they're going to have a good future now. That thing was in jeopardy, and that would be a shame."

It's taken months just to get to this point. Last December, Waffle House investment company Yellow Sign Inc. -- also controlled by Rogers -- agreed to purchase a $22 million debt note that Callaway Gardens owed Columbus Bank and Trust, an affiliate of Synovus Bank, which is headquartered here in Columbus.

The real-estate wheels began turning and by March everything started falling into place for an acquisition by Lands' South. A property survey hitch delayed the transaction through June.

With the sale behind Callaway Gardens, the resort will still owe Yellow Sign $3 million. But Callaway said that's not much of a burden on the operation, which is overseen by its nonprofit parent organization, the Ida Cason Callaway Foundation.

"We're just going to operate; $3 million is a very low level of debt on that resort. It's very manageable," he said.

The 2,500-acre property now on the market will go to pay off $8 million more owed to Columbus Bank and Trust by the foundation itself. Synovus has repeatedly declined to discuss the matter, saying it doesn't disclose customer relationships or transactions because of privacy laws.

Callaway said he can't imagine the latest property sale fetching less than $2,000 an acre, which would generate at least $5 million. It is being listed by David Blanchard, an agent with Columbus real-estate firm Coldwell Banker/Kennon, Parker, Duncan & Key.

"This is for somebody who wants trophy property ... and it's the best deer and turkey hunting in the Southeast," Callaway said of the land, whose neighbors already include Aflac Chairman and CEO Dan Amos and actor/comedian Jeff Foxworthy. "This whole thing has got that rich single-owner legacy of letting the trees grow and plants and animals abound. This is Pine Mountain and Mountain Creek. It's got them both. Those are the two major geological features of the entire county."

Aside from the land sales, there have been other moves made by Callaway Gardens in the last year to raise capital and pay down debt, Callaway said. They include selling the resort's conference center to Atlanta-based Noble Investments Inc. for $12 million, along with 40 cottages for $4 million. Noble also owns and operates the lodge and spa at Callaway, which it built and opened in 2006.

The upscale hotel's debut came just as the U.S. economy was preparing to spiral into a downturn that would lead to the so-called Great Recession. That financial storm also helped push the nation's housing market over the edge and left banks teetering on the brink.

Suddenly, a joint venture with developer Cousins Properties was in jeopardy, with a housing development near the 175-acre Robin Beach Lake inside the gardens stalling, causing more financial bleeding. It was a stunning turn of events for the Callaways, considering that a 138-home subdivision inside the park, called Longleaf Pines, had sold out after being launched in 2003.

Edward Callaway, now 57, returned from Colorado eight years ago, where his family had operated and sold the Crested Butte Ski Resort. He refers to the hotel and housing development moves he made to shore up the struggling resort as "strategic blunders." He also insists the current land deals are the best option now to secure the gardens' future.

"There's a good and a bad part of this," he said. "And the bad part, the part that makes me sad, is I sold 7,000 of my grandfather's acres that he put together for the purpose of letting the people of Georgia have a natural environment in which to play."

Callaway Gardens was founded in 1952 by Cason and Virginia Hand Callaway, with the couple amassing 45,000 acres in Harris County and the Pine Mountain area. One of the biggest swaths of personal property the family still controls is about 7,500 acres near the piece of land now for sale.

That acreage is now owned by Howard H. "Bo" Callaway, Edwards' father, who suffered a severe brain hemorrhage in early June at age 85 and is now undergoing rehabilitation at Hughston Hospital in Columbus. Edward Callaway said his father, before his illness, had given his stamp of approval on both land sales because he knew they would help save the gardens for future generations.

"He was ecstatic and eager to see it all come to fruition," Callaway said of his dad, a former U.S. Secretary of the Army, U.S. congressman and one-time gubernatorial candidate in Georgia.

As the elder Callaway recovers, the survival scenario for the gardens is now playing out, but with a steep price.

Callaway Gardens itself, which once encompassed 13,000 acres, will be sliced more than in half with the two land sales, bringing it down to 6,000 acres. About 3,300 of those will be the gardens and resort operations, while there is a separate parcel of about 2,700 acres called Cason J. Callaway Memorial Forest. Cason Callaway died in 1961.

The Memorial Forest, which is best known for allowing area schoolchildren to visit and become acquainted with Mother Nature in an educational setting, is off limits for any type of acquisition by anyone, Callaway said. It was bequeathed to the family by his grandmother after her death in 1995.

"That was given to us by my grandmother under the condition that we run it as a forest," he said. "And if we can't run it as a forest, we've got to give it to somebody else. And if no one will take it, give it to the state of Georgia. So it has a condition on the ownership that says this is going to be a forest."

Recalling the resort's financial past, Callaway said it took the last 20 years of Callaway Gardens' 60 years of existence to run up the huge debt and force management to make painful decisions. That included slashing its workforce from 800 full-time equivalents in 2004 to about 500 today. Management staff has dropped from 150 to 70.

Now, with the final piece of the puzzle in place for getting the gardens back on track, he would much rather look to the future. It already includes spending money freed up from debt payments on repairing and maintaining the resort. Remodeling of rooms, fresh coats of paint and repaving bicycle paths are part of that effort.

There also are plans for a "Renew the Gardens" campaign at some point in the future, possibly this fall. Callaway has previously thrown out a figure of $25 million that he would like to raise from donors. It's money that he would use to make the gardens -- well known for its colorful splash of spring azaleas -- more of a year-round destination, with something always blooming.

Callaway Gardens, which has seen its annual attendance drop to under 400,000 -- from a one-time peak of 1 million visitors -- already is seeing some improvement on that front, he said. There were about 6,500 people at its recent Fourth of July celebration, up 20 percent from the year before, while overall attendance so far this year is 10 percent higher than in the first six months of 2011.

Amid so many major changes in recent years -- with the new hotel, spa and houses, followed by the disposal of prime Harris County property -- there are no new attractions planned for Callaway Gardens, the CEO said. It's time to keep it simple, he said, and focus on improving and perfecting the natural experience that was his grandparents' original wish.

"We have basically given ourselves a new start at the gardens and resorts and the Memorial Forest to fulfill our mission. And I'm excited about it," Callaway said. "It's what we ought to be doing, sticking to our knitting and giving the public what we have said we'll give them."

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