Bluffton homeowners sue Palmetto Bluff, alleging it devised ‘deceptive and costly hoax’
More than a dozen property owners in one of Bluffton’s luxury communities alleges the developer devised a plan to “carry out a deceptive and costly hoax” on them, according to an 83-page civil action lawsuit filed last week in Beaufort County.
At its core, the plaintiffs’ main frustrations are overcrowded amenities, forced paid-membership in the Palmetto Bluff Club, and an attack on short-term rentals, according to the suit.
“The lawsuit is about the illegal actions of the developer of Palmetto Bluff, which is working with the other Defendants to carry out a deceptive and costly hoax on Palmetto Bluff property owners,” the suit says.
It alleges the Palmetto Bluff Development, LLC “constructed a house of cards, buttressed by deceptive and illegal governing documents — intending to exit before the cards collapsed.”
Crescent Communities, a Charlotte-based development company, purchased Palmetto Bluff in 2000, and it has since grown to become the town of Bluffton’s largest tract, with space for 4,000 residential dwelling units and 180 acres of commercial development.
The gated waterfront community features residential properties, including a number of multimillion-dollar homes, with amenities including swimming pools, fitness facilities, dining venues, clubhouses and courts for racket sports.
The master plan for the community calls for about 4,000 homes, of which “at least 800” lots have already been constructed and 400 more are underway, the suit says.
It’s also the location of five-star hotel and spa Montage Palmetto Bluff, which made national headlines in 2019 when Justin Bieber and Hailey Baldwin had their wedding there and again when No. 1 overall NFL draft pick Trevor Lawrence and his longtime girlfriend tied the knot there last year. Palmetto Bluff has never lacked for celebrity visitors.
Residents, who pay for the amenities, “frequently” find they are “overwhelmed” by hotel guests and events, who receive “preferential treatment” according to the lawsuit, adding owners no longer have access to the amenities that influenced them to purchase within Palmetto Bluff.
“There is no room in the dining venues; there is no room by the pools; there is no room on the courts; there is no room in the fitness areas,” the suit says.
The plaintiffs allege Palmetto Bluff passed the costs of the amenities onto the homeowners but kept the benefits for itself by prioritizing the resort guests.
Dozens of defendants targeted
The suit names 12 defendants — Palmetto Bluff Development, LLC; Palmetto Bluff Preservation Trust, Inc.; Palmetto Bluff Club, LLC; PBLH, LLC; Palmetto Bluff Real Estate Company, LLC; Montage Palmetto Bluff, LLC; Palmetto Bluff Preservation Trust Board of Stewards and four of its officers, and South Street Partners, LLC — and 25 “John Does,” which are “unidentified corporations, entities and/or individuals” who potentially will be added to the suit as it progresses.
The main defendant appears to be the Palmetto Bluff Development, but the lawsuit accuses the others of acting “in concert with one another” as Palmetto Bluff “orchestrated its fraudulent scheme,” the suit alleges.
A “catalyst” for the legal action was a change in ownership of the development in June 2021, according to the suit, where South Street Partners, LLC is now “making the day-to-day decisions” therefore “directly responsible for the current situation.”
South Street Partners is a private equity firm out of Charleston, which is a co-investor with London private equity firm Henderson Park. The suit alleges the companies “have a business plan to flip Palmetto Bluff within eight years ... after bringing from it as much profit as they can manufacture.”
“These profit-focused private equity executives see Palmetto Bluff as a lucrative short-term transaction on a manipulated spreadsheet,” the suit says.
It also alleges that homeowners being required to join the for-profit Palmetto Bluff Club, which requires a joining fee and dues, is unlawful because it is not a homeowners’ association. However, the suit says homeowners have no stake in the club.
Lastly, the lawsuit says although the developer originally allowed some designated homes to be rented out short term, it “later realized, to its irritation, that these rentals directly compete with its hotel business” and diluting the resort’s profits. Now, the developer is “weaponizing the community’s governing documents to propel business away from” these homes.
An internal document included in the suit states the firm’s goal is to “do away with” neighborhood amenities and short-term rentals besides their own.
No other actions or response from either the plaintiffs or the defendants have yet been publicly filed, but a Palmetto Bluff spokesperson released a statement Tuesday evening saying “the planned changes ... are designed to be in the best long-term interested of our residents.”
“We regret that a small handful of our existing property owners, who have elected to use their homes as short term rental properties, are dissatisfied with these planned modifications,” the statement said. “They do not impact the Bluffton resident access to visit and enjoy Palmetto Bluff, rather only impact a renter’s access to the private club component of the community and are in keeping with the governing documents. South Street Partners has a long term commitment to the Palmetto Bluff community, our members and the town of Bluffton.”
This story was originally published April 19, 2022 at 5:38 PM.
