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(Carl Cronan is editor of Real EstateFlorida.)

BONITA SPRINGS, FL-No one can blame WCI Communities Inc. for coming down with a case of seller’s remorse after what it has been through the past year. Having built a stellar reputation as developer of luxury homes and high-rise condominiums, especially along prime Florida waterfronts, it resisted a fairly lucrative buyout attempt last summer, only to wind up filing for Chapter 11 reorganization this month.

Similar to once-soaring home values in the Sunshine State, WCI reached its own zenith Aug. 4 when it filed for protection from the US Bankruptcy Court in Wilmington, DE, a last resort after realizing it couldn’t cover $125 million in convertible senior subordinated notes coming due the next day. Chairman Carl Icahn, in announcing the move, stated that the company realized its entire $1.8 billion worth of debt was in danger of default.

Icahn, who owns nearly 15% of WCI and is its largest shareholder, made a buyout offer of $22 per share in June 2007 that the company’s board of directors soundly rejected. “The Icahn Group’s tender offer is inadequate and not in the best interests of WCI and its shareholders,” the board stated.

In hindsight, WCI should have taken the deal, observers say in the aftermath of the Chapter 11 filing, which left the company’s shares at around 30 cents by the end of the week. The board didn’t necessarily make a mistake, they say, since hardly anyone believed residential values could ever tumble as much as they have by now, with the Florida Association of Realtors showing a 16% decline in existing home values in the past year alone.

“They got caught up, like so many, in an environment that surpassed any of the fundamentals of the market,” Miami-based real estate consultant Lewis Goodkin tells GlobeSt.com. “The reality is that we had the most speculative market in the history of real estate.”

Goodkin, who discloses that Icahn consulted with him prior to last year’s bid, views current home price declines as a correction more than a crash and notes that the highest end of the market is still doing well. That actually bodes well for WCI’s attempted restructuring, he says, but “if they had been in more promising shape, they would have never gotten in this situation.”

After WCI dissolved a special committee last month that was formed to review and evaluate proposals regarding its future, observers also noted that its fate rested with its well-known chairman. “Icahn has always been the wild card in this,” Jack McCabe, CEO of McCabe Research & Consulting LLC in Deerfield Beach, told GlobeSt.com previously.

As it stands today, WCI has another date with destiny Aug. 27, when it will ask the bankruptcy court to approve a new debtor-in-possession credit line to keep the company running. Chief Judge Kevin Carey in Wilmington approved a relief package for WCI’s continued and uninterrupted operation Aug. 6, including an agreement with its senior lenders to immediately access approximately $50 million in cash on hand.

The relief package assures that not only will WCI’s current and prospective homebuyers be protected from any risks associated with Chapter 11 proceedings, but the company’s 3,000 employees don’t miss a check, either. “For this process to succeed as it should, we need to make sure that our team receives all required payments and ongoing benefits,” stated David Fry, WCI’s interim president and CEO who succeeds Jerry Starkey in both those positions.

Starkey, who was relieved of duties with the Chapter 11 filing, has agreed to stay with WCI as a consultant over the next two years, according to Securities and Exchange Commission documents. He will receive a lump sum of $700,000, including unused and accrued vacation time as well as the balance of an automobile lease through January 2010, plus paid COBRA healthcare coverage for a year, according to the documents.

The day before the bankruptcy, Charles E. Cobb Jr., a member of the WCI board of directors and chairman of its nominating and governance committee, resigned “due to potential conflicts of interest that could arise from pursuing business opportunities that may be competitive with WCI,” the company told the SEC in a Form 8-K dated Aug. 6. The form clarifies that Cobb’s stepping down was not caused by a disagreement with WCI or its policies.

WCI’s woes unintentionally became part of one of this year’s biggest sports stories when golfers Rocco Mediate and Tiger Woods were in a nationally televised one-day playoff for the US Open championship on June 16. Mediate, who wore the WCI logo on his shirt as part of an endorsement deal, lost by a single stroke. Besides that, the community where Mediate lives, Tuscany Reserve in Naples, had previously been sold by WCI.

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