The $500 million-plus bankruptcy of Georgia’s exclusive Sea Island Co. resort marks an important turning point in the real estate crash: Lenders have faced up to the reality that the market will not recover for their most upside-down projects.

The popular view is that lenders are avoiding the steep write-downs on the poorly timed real estate projects they financed, ones that were conceived in a period of unreasonable expectations of soaring values and undermined by the Great Recession.

But, in recent months, there has been a true sea change among lenders.

The days of reckoning are here.

Columbus, Georgia-based Synovus Financial Corp., the bank that helped finance the expansion of the tony resort, offers a high-profile example that lenders believe they can’t get healthy until they stop babysitting poorly performing assets and purge themselves of bad real estate decisions.

In a financial statement included in the bankruptcy filing, Sea Island Co. said it lost almost $78 million in 2009 and nearly $97 million in 2008. It posted 2009 revenues of $267.6 million and $287.4 million in 2008.

What happened to Sea Island might portend similar fates for real estate projects across the country, where lenders decide it’s time to blow up such projects, take the write-down, and get back to the business of making loans.

“I think without a doubt that the banks are being forced to deal with the issues of problem loans,” said Mike Elting, who oversees the Southeast for commercial real estate brokerage Cushman & Wakefield of Georgia Inc. “It’s taken a lot longer than we thought for things to be resolved, but I think this is probably a precursor for more activity of this kind. The reset is going to be good for everybody, I think.”

Synovus and some of the big-money-center banks have all shown more of a willingness to do this, market insiders said. The message from their executives is clear: They have the capital resources now to write down the loans, absorb the losses, and start looking for new lending opportunities.

Among big real estate failures, Sea Island was in a class of its own.

The resort was founded in October 1928, highlighted by the construction of the Cloister hotel. After it survived the Depression, the resort grew and prospered.

By the mid-1980s, Sea Island faced competition from The Ritz-Carlton Co., Four Seasons Hotels and Resorts, and other developers. So, it launched a multimillion-dollar renovation and expansion that lasted from 1998 to 2006.

By 2007, everything at the resort was either brand-new or completely refurbished. The company also began to focus on its real estate business. Among other projects, it developed Frederica, a 3,000-acre community limited to 400 to 500 single-family homes on the north end of St. Simons Island.

It used long-term financing and cash flows, primarily from real estate sales, to fund expansion and renovation. It believed it would have “sufficient resources” to repay its debts, based on profits from its new luxury real estate resort and sustained real estate sales, according to the bankruptcy filing.

The expansion, however, proved more costly than expected, and the resort failed to generate the profits once projected, its bankruptcy filing said.

In 2008, Sea Island management “took aggressive steps” to deal with operating losses, but “because the debtors’ business model was predicated on the ongoing development and sale of residential real estate in and around their resort communities, the historic collapse of the global financial and real estate markets had a dramatic negative impact on both the debtors’ resort and real estate businesses,” according to the filing.

The fallout of the Great Recession ravaged the storied coastal Georgia five-star resort, which laid off hundreds of employees over the past two years.

Sea Island was targeting the wealthy, second-home buyers who wanted to escape to a resort on the weekend for golf and shopping, “but what that audience was looking for, was not what they built,” said Clark Gore, market leader with the Atlanta office of international commercial real estate brokerage Jones Lang LaSalle Inc.

“I don’t think the people behind it paid attention to the fundamentals,” he said.

Sea Island went into default on at least $400 million in debt outstanding from the massive renovation of its Cloister and Lodge hotels and residential developments, including Frederica.

Sea Island tried to restructure, and as early as July 2009 reached an agreement with lenders, led by Synovus, to restructure the debt. In November, the company reached an agreement with Wachovia to give the Frederica development back to the lender. It also recently sold more than 17,000 acres for $57 million.

Despite those moves, the real estate markets did not recover enough. In late 2009, Sea Island determined that selling its assets would offer “the best recovery for all of their shareholders,” the filing said.

Sea Island retained Goldman Sachs & Co. to market the assets.

It was “the perfect storm of missing the market at the same time the market was cratering,” Gore said. “That combination put the project in a position from which it could not recover.”

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Douglas Sams is a staff writer for the Atlanta Business Chronicle.