Rock Creek Residents –
Since the outcome of the vote last September, Golfco has quietly pursued operating its golf business. In November, we were approached by a subset of residents and asked if we would consider a different proposal to renovate the clubhouse as to what was presented last Fall.
We were open to the idea and worked jointly with a subset of residents and prepared an enhanced version of what you saw last Fall. At the heart of this approach is a simple monetary exchange of value. For a $30 per month increase in POA dues, residents would receive $30 in credit to use anywhere at the club (golf, dining, pro shop/merchandise) as part of a project to renovate the clubhouse into a modern community center for the community and additionally provide long term security that the golf club would remain a golf club and preserve/protect/enhance property values.
This approach was provided to the POA Board in the form of a Draft Lease Structure in December. The lease is a tactic proposed by your POA Board to satisfy requirements in your community bylaws to raise dues to lease the clubhouse as qualifying as POA property. Residents would agree to a $30 per month dues increase for a term of 30 years with some periodic adjustment for inflation over the duration of the term. In return –
- Golfco would take the full responsibility and risk to embark on a project to renovate the current clubhouse and provide a deed restriction and other contractual commitments to ensure Rock Creek Golf Club remains a golf club through our or any future ownership of the club
- Golfco would bear the risk and cost of the project
- Golfco would secure and be responsible for the debt in its own name and provide the necessary personal guarantees to lenders
- Golfco would return every dollar of the $30 dues increase back to the residents as credit that can be utilized anywhere at the club (restaurant, bar, shop, golf, etc.)
- Additionally, and most importantly, Golfco would amend our deed for the property and restrict the golf club from being anything other than a golf club during the time frame of the lease
- Residents would be encouraged and invited to participate and provide input into the final design of the renovation
- Under no circumstances would the community have any obligation for the financing Golfco would undertake to do this project
- The community’s only financial obligation would be to fulfill the basic lease agreement with Golfco
Recently, we received what we would describe as counterproposal and a very different approach from the POA Board. The Golfco Board convened and took time to review, digest, and discuss the material. Below summarizes our high-level observations
- The POA Board proposed a radically different approach for consideration as compared to the approach and draft lease that was submitted to the POA Board. The POA Board concept does not incorporate any of the key features that were submitted. As an example, the Golfco/resident approach provided for $30 in reward credits for use anywhere at the club was replaced by a POA Board “coupon” approach which would exclude their use in the restaurant and bar. In addition, and surprisingly, the POA Board approach does not require any kind of deed restriction to protect the club as a golf club in the event of resale/change in ownership
- The POA Board document is incomplete. There are missing terms such as delinquencies, default, termination, insurance requirements, etc. All such items are standard language in any commercial lease type of arrangement. The Golfco/Resident draft lease document provided detailed content with respect to all such components of the draft lease agreement
- The POA Board document contains some unusual features. One primary example being the POA’s intention to sublease the food and beverage operation to another operator. In essence that would put the POA Board in an oversight and management role of the food and beverage operation
- In general, most of the other business terms in the POA Board document are not acceptable to Golfco. Some terms are irrelevant
- Finally, and of primary importance, the POA Board approach falls far short with respect to the proposed duration of the lease to a lender to support financing of the clubhouse renovation. This point is the very same point that came up in advance of the community vote last year that undermined this approach from being presented as our proposal to the community. This alone makes this concept put forth by the POA Board of no value for a lender to consider financing the project.
Frankly, in summary, this approach by the POA Board is entirely unworkable for Golfco and would put us at greater financial risk should we entertain it. Indirectly that introduces property value risk to the community. We do not think that is a positive outcome for either party.
At this point we do not see spending time with your current POA Board as a good investment of our resources. We believe what we have proposed would stand the test of a vote in the community. The only obstacle preventing the community reviewing and voting is your current POA Board. This is not a difficult transaction to complete and what has been presented is what we believe to be a Win/Win solution the overall community, and one the community would support given a fair chance to review and vote on what has been submitted.
For the record and the community’s information, we will be posting this communication as well as the jointly prepared Golfco/Resident document that was provided to the Board to our website. We will encourage residents to review the document, make their own judgement, and provide important feedback to your POA Board.
From our perspective, this is a community matter. We encourage you to engage with your POA Board and focus on the finalizing the previously submitted Golfco/Resident model/terms and get it out for a community vote. As part of this process, Golfco can play a support role and sounding board to provide feedback. When that process is completed, we would secure approval from the Golfco Board and expect the proposal to go to the community for a vote.
In the meantime, we will continue to conduct our golf club aligned to our business plans.