Nov. 24 (Bloomberg) -- Wells Fargo & Co. took the deed to Sea Island Co.’s 3,000-acre Frederica community in Georgia, adding to the list of developments caught in the commercial property crunch.

Under the accord, disclosed by Wells Fargo yesterday, Sea Island transferred the deed on Nov. 19 to the residential and golf complex at the north end of St. Simons Island, 320 miles southeast of Atlanta. The community has a 400-acre lake, a Tom Fazio-designed golf course favored by St. Simons resident Davis Love III, river frontage and 600 home sites.

“As the lender to the Frederica development, Wells Fargo has been working closely with the Sea Island Company to explore options for the property that would serve the needs of both parties and the community,” the San Francisco-based bank said in an e-mailed statement.

Lack of credit, falling prices and waning occupancies forced borrowers to forfeit stakes in assets ranging from Boston’s John Hancock Tower to Sheffield57, a New York condominium conversion project. Last week, Morgan Stanley agreed to settle a $2 billion debt to Barclays Capital by giving up Crescent Real Estate Equities, which owned Canyon Ranch spa and resort residential developments.

Frederica was intended to be a “Pebble Beach of the East,” said Peter Capone, an architect who was Sea Island’s chief designer. Lot sales at Frederica, which reached more than $2 million a parcel in 2005 and 2006, were supposed to help finance the rest of Sea Island’s expansion, Capone said in an interview in October.

“That thing was positioned to make several hundred million dollars in land sales,” Capone said of Frederica.

Undeveloped Land

In addition to the Frederica development, Wells Fargo is taking title to about 400 acres on St. Simons Island called Cannon’s Point, an undeveloped area with old oaks and deepwater access, according to the Nov. 19 deed transfer.

Merry Tipton, spokeswoman for Sea Island, said the firm had no comment on the Frederica transaction. Sea Island is based on St. Simons and its chairman is Alfred W. “Bill” Jones III. He owns The Cloister, a five-star resort that hosted the G-8 in 2004 and was the honeymoon spot for President George Bush and his wife Barbara Bush.

A $500 million expansion that began earlier in the decade left Sea Island indebted to several banks, including Wells Fargo and Synovus Financial Corp., based in Columbus, Georgia. Wachovia Corp. financed Frederica’s development with a $140 million to $150 million loan before Wells Fargo bought the bank in 2008, according to an Oct. 29 letter from Reg Murphy, chairman of a committee of Frederica property owners that is in talks with Sea Island and lenders.

New Terms

Synovus renegotiated its loan of about $220 million to Sea Island in April and designated it as non-performing. The bank told analysts in a January conference call that Sea Island was its largest customer. The bank loaned the company $220 million to finance the renovations of several Sea Island properties including the Cloister.

Synovus shares hit a 52-week low of $1.56 Nov. 19, the day the deed transfer was filed. The stock, which sold for more than $14.60 in February 2007, closed at $1.61 yesterday on the New York Stock Exchange.

Federal Deposit Insurance Corp. Chairman Sheila Bair and Comptroller of the Currency John Dugan told Congress last month souring commercial real estate loans pose the biggest threat to the U.S. banking industry.

To contact the reporters on this story: Peter Waldman in San Francisco at pwaldman@bloomberg.net; Laurence Viele Davidson in Atlanta at lviele@bloomberg.net.

Last Updated: November 24, 2009 00:01 EST