Never Before has the Health of the Golf Industry been so Closely Tied to the Real Estate Market.
The golf industry and the real estate communities which surround them are sharing the pain of the real estate recession.
Palm Coast, FL – September 30, 2009 – Although previously thought to be so, the golf industry is not recession proof. Perhaps the change is due to real estate developers’ twenty-year love affair with golf communities. Over the past two decades, nearly two thirds of all new golf course construction was tied to real estate development. The number of rounds played is declining and new course construction is practically at a standstill. According to an industry insider, there are only seven U.S. courses actively under construction. All others are "on hold." Never before has the health of the golf industry been so closely tied to the real estate market.
Luxury resort developers are in various stages of financial stress. Some have or will face bankruptcy. Others are seriously hunkering down. Among several high-profile golf-centric developers is Bonita Bay Group near Naples. A recent letter from the developer to its members highlights the link between cash flow from real estate sales and the underlying financial health of their golf operations. Bonita Bay’s situation is shared by scores of other developers of luxury communities countrywide.
Developers, as well as private and public courses everywhere, are discovering that the relatively fixed cost of running a golf operation is facing a declining revenue stream caused by:
-
Reduction in the number of rounds played. [Golf Datatech Report]
-
Declining membership with the accompanying demands for "refundable deposit return"
-
Financially distressed members who are not paying their dues
-
Inability cash flow from real estate sales to fund club operating deficits
-
Limited access to debt financing resulting from the current banking crisis
The following letter obtained by GoToby.com was addressed to Bonita Bay members by the developer. It naturally represents the developer’s viewpoint. It also exposes the growing gulf between members and developers. Negotiations have since deteriorated. Yesterday, the developer suspended negotiations with the member turnover committee.
GoToby.com has highlighted text which could apply to nearly all developer-operated golf facilities.
August 25, 2009
Dear Bonita Bay Group Residents and Members,
I am writing to you today to set the record straight about the status of the clubs and the membership deposits. You have likely seen the allegations of fraudulent business practices related to our decision to suspend membership deposit refunds on November 7, 2008. Those allegations are so baseless that initially, we didn’t feel they merited a response. Now we realize that we should have responded immediately and we are taking this opportunity to provide you with the facts.
First, the company is in an extremely difficult financial position due primarily to the deteriorating economic conditions we all have endured in recent years. Our land sales – the main cash source of the company – have declined from $91.5 million in 2006 to less than $30 million annually in 2007 and 2008 to less than $2 million during the first seven months of 2009. Our key customers for land sales are home builders and sub-developers, and those companies continue to have no appetite for land.
Another factor that has made us vulnerable to the extended slowdown is the strategy that we adopted early in the life of the company to re-invest the profits back into the business. This strategy worked for the first 21 years of the company’s existence, we grew from $4 million in revenues in 1985 to $413 million in revenues in 2005. Unfortunately the price of raw land has dropped and our estimated land values have declined dramatically. This drop in value severely hampers our credit and liquidity. Any profits generated in earlier years have been completely wiped out by the losses sustained in recent years. In total, the shareholders have realized a cash deficit of more than $100 million from their investment in Bonita Bay Group to date.
The unforeseeable and unprecedented economic conditions facing Southwest Florida and the country as a whole are the primary factors contributing to our deteriorated financial situation. As did many other businesses, we underestimated the length and depth of this recession.
We have concluded long and arduous negotiations with our bank group and have succeeded in amending our credit line, one component of which included the release of funds to continue our operations for the near term. In exchange for this liquidity, we have had to agree to a very stringent operating budget.
With those facts as background, allow me to discuss the allegations related to the company’s use of membership deposits. The total cost of the clubs owned by Bonita Bay Group, including the land at cost, is more than $340 million. The cost of subsidizing the losses of the clubs over the years is another $106 million, for a total amenity investment of more than $448 million. Membership deposits collected account for $243 million, so we have invested more than $200 million to create and sustain the clubs for the membership. In each and every one of our clubs, our investment in club assets plus operating deficits exceeds member deposits. Unlike our profits, which are gone, the clubs and the courses remain as tangible assets for the membership.
[GoToby.com note: The existence of the golf courses enhanced the value, hence the selling price, of hundreds of building lots. The resulting aggregate profits are not mentioned in the developer’s argument.]
Following the suspension of refunds of deposits in November 2008, we engaged in six months of extensive negotiations with the club advisory boards. We expended enormous effort to reach an accommodation between the demands of resigning and continuing members to develop alternative refund plans that would have provided refunds to resigned members on a gradual basis. Unfortunately, the alternative deposit refund plans required further depletion of the company’s limited cash position, which our lenders ultimately did not support. As a result, we, working with our bank group, determined that the best course was to offer the clubs for sale to the members. It was always contemplated that the clubs would be turned over to the members, and that upon such turnover, the refund obligations would be converted into equity positions in the newly formed club. We are now involved in this turnover process and we believe it offers the best prospects for resolving the issues arising from the deposit refund controversy because it offers the club members control over the club resources. I hope that this process will continue at each of our clubs until a successful conclusion is reached.
Certain members have argued that the membership deposits should have been placed in escrow. That was never contemplated nor promised. No club that I know of has a separate escrow account for membership deposits. We have had three sources of money to use to refund membership deposits. First and foremost is land sales revenue. We are a real estate developer, and our primary business is the sale of improved land to third parties. As indicated, land sales revenues have virtually disappeared. Second is the cash generated by the clubs from dues revenue, membership deposits, and sales of golf rounds, merchandise and food. The third source of funds is equity from the owners or additional indebtedness. Contrary to rumors and speculation, our investment in Bonita Bay Group has been anything but financially rewarding. During the past three years alone, the company’s shareholders have contributed an additional $115 million to support the company and are not contemplating making additional contributions at this time. Likewise, the bank has declined to put any new money into club operations. These revenue sources are not sufficient to meet all deposit refund obligations.
This leaves us with very difficult choices. If we refunded all the membership deposits to those persons on the resigned list, we could not operate the company, and bankruptcy would inevitably ensue.
I hope these facts answer some questions that have been raised and give you a better understanding of our past and current financial condition. We, along with many other reputable businesses, have fallen victim to unprecedented low levels of business activity. In retrospect, we certainly could have done things differently, but there was absolutely no fraudulent activity or intent to deceive anyone; to allege otherwise is irresponsible and harmful to our residents, our members and to us. The continuing spreading of these falsehoods only contributes to the lack of sales in your communities and hurts your property values. We have been committed for the past 25 years to delivering the best possible experience to our customers. It hurts me to have to curtail certain services temporarily but we have no choice – it is a matter of survival. I hope you can see your way clear to work with us in the coming weeks and months to achieve a mutually beneficial solution.
Sincerely,
David Lucas
Become a Member of GoToby.com: Receive email notices of news, rumors, newsletters, and articles. [click here] It’s free.
The Greediness of all the Florida Developers
You know Toby, it serves these fools right, tying the golf course business to these high end developments. No longer do we see the development of mid-range public courses thereby depriving the average golfer the chance to play golf at a more reasonable price. For an area the size of Palm Coast, there ought to be 3 or 4 public options. I’m hearing rumors that a lot of the members from the Grand Club and another of the pricier private clubs are considering giving up their memberships and going over to Palm Harbor when it opens in November. Between the women’s leagues and the influx of the private club members, in no time the Palm Harbor club will be so busy, you’ll have trouble getting a tee time. That’s a slap in the face for those average golfers who have looked forward to finally getting golf at a reasonable rate in Palm Coast rather than having to pay through the nose at some of these high end semi-private clubs. And it’s all due to these greedy developers thinking they had the bait to lure lots of folks from the rest of the country to Florida just by tying their developments to a golf course.
Reply to Mr. Brunton
Reply to Richard Brunton:
**************
FEE STRUCTURE Effective June 1, 1989
Pine Lakes Country Club Annual 1670 Semi Annual 1300 for Family; Single 1300 / 1015, Student — , New Member Initiation 2000 / 1000.
18 Hole Golf Course, Fibbers Private Restaurant and Lounge, Golf Shop, Tennis Courts and Seasonal Pool. Champions Restaurant and Lounge, a public facility, is located at the Pine Lakes Country Club Food and Beverage Minimum.
Social Membership includes Fibbers Private Restaurant and Lounge. Pine Lakes Tennis Courts and Seasonal Pool. Food and Beverage Minimum.
Palm Harbor Golf Club Annual 1370 Family, Single 1100, Student 400, New Member Initiation 1500.
18 Hole Golf Course, 19th Hole & Golf Shop.
Matanzas Woods Golf Club Annual /Semi Annually 1455 / 1135, Family Single 1185 / 925 , Student 400 / 315 , New Member 1500 / 750
18 Hole Golf Course, 19th Hole & Golf Shop.
Dual Clubs: Membership in any two SunSport Golf Clubs Annual 1895 Family, 1550 Single, 400 / 315 Student, New Member 1500 / 750.
Gold Card: Membership in all three SunSport Golf Clubs Annual: 2250 Family, 1800 Single, –Student, New Member 3000.
SunSport Beach Club Seasonal Pool: Sun Deck with Chairs and Lounges, Towels, Dune Walkover to Beach; Restrooms, Snack Bar and Refreshments; Fishing Equipment Rentals, Retail Beach Supplies. Annual 250 Family, 215 Single — Student, New Member Initiation 200.
Belle Terre Swim and Racquet Club Tennis Courts, Sauna Pool, Locker & Shower Facilities, Natuilus Gym, Sauna, Shuffleboard and Volleyball Annual/ Semi Annual 305 / 240 Family, 225 / 175 Single, 160 / 125 Student, 200 / 100 New Member Initiation.
Palm Coast Players Club: 18 Tennis Courts ( Hard, Clay & Grass), Pro Shop, Luonge & Cafe, Locker & Shower Facilities, Aerobics Room, Racquetball and Seasonal Pool. Seasonal Pool: ( April – October) and Locker & Shower Facilities Seasonal 200 Family, 155 Single, 100 Student, 200 New Member Initiation.
In addition to the above fees, members shall be subject to Use Fees as set forth on the Use Fee Schedule, attached.
All Fees are subject to change without notice. A 6% sales tax will be addded to above fees, excluding initiation fees.
Palm Coast Golf Course Rate Schedule
Palm Coast Golf Club
Membership Classifications
Freens Fee Members.
Class A Individual, Regular 60., FullFamily, Regualr 0-.,
Class B Individual, Week Days Only 25., Full Family Weekdays Only, 25., Full Family, Week Days Only 40.
Class AA Individual, Unlimited 3000
Full Family , Inlimited 400.
Class BB Individual, Week Days Only 200., Full Family, Week Day Only 275.
Greens Fee Schedule
Members of Class A & B Only:
Weekdays 18 Holes 3.50
WeekDays 9 Holes 1.00
Sat., SUn. & Holidays
18 Holes 5.00
9 Holes 3.00
Guests and Non Mmebers
Weekdays 18 Holes 4.50
9 Holes 3.00
Sat., Sun, & Holidays
18 Holes 6.00
9 Holes 4.00
Though Palm Coast Golf Club year runs from April 1 to March 31 1971. , New members may join after January 1 with no increase to their regular dues.
Payable: 3 Equal Installments : April 1 , May 1, June 1.
Palm Coast Golf Course Rate Schedule
Palm Coast Golf Club
Membership Classifications
Freens Fee Members.
Class A Individual, Regular 60., FullFamily, Regualr 0-.,
Class B Individual, Week Days Only 25., Full Family Weekdays Only, 25., Full Family, Week Days Only 40.
Class AA Individual, Unlimited 3000
Full Family , Inlimited 400.
Class BB Individual, Week Days Only 200., Full Family, Week Day Only 275.
Greens Fee Schedule
Members of Class A & B Only:
Weekdays 18 Holes 3.50
WeekDays 9 Holes 1.00
Sat., SUn. & Holidays
18 Holes 5.00
9 Holes 3.00
Guests and Non Mmebers
Weekdays 18 Holes 4.50
9 Holes 3.00
Sat., Sun, & Holidays
18 Holes 6.00
9 Holes 4.00
Though Palm Coast Golf Club year runs from April 1 to March 31 1971. , New members may join after January 1 with no increase to their regular dues.
Payable: 3 Equal Installments : April 1 , May 1, June 1.
The Date for Greens Fees for Palm H.G.Club
The above POST was our rates for Palm Coast Pioneers and early Purchasers. These rates were for 1972. We shared it because we thought the Golf Enthusiasts would enjoy seeing early rates here and the availability of our ‘Four Sisters’ Courses here. We Palm Coast Pioneers tho’ had free Golf for I think 10 years and a feature of the ITT Levitt Showcase Golf Course Neighborhood could use their own Golf Carts. You can still see a ‘Golf Cart Garage’ on Cerrudo Lane just up from the First Bible School House in P.C. FL 00819 on Cerrduo Lane.We also had FREE Membership for the P.C. Yacht Club, ( the first one at the Marina Complex on Clushouse), free membership to the P.Harbor Swim Club, Free membership at the Palm Harbor Tennis Club and Free membership to our Palm Coast Beach Club and use of the Recreational Areas at our Palm Coast Motel Oceanside
RE: Golf Carts use – Sadly,we could no longer use our own Golf Carts in the early 2000’s due to ownership changes.
Since the Daytona Beach Mus. made January 23rd Palm Coast Day, we just asked Kemper if they would re-instate these Fees for people on that Day if they came in Palm Coast Colours, BLUE jeans, WHITE shirts, ORANGE Capr,Ties or Visors. This way people who LOVE Golf but are on a fixed income can have an opportunity to enjoy the game and can become lifetime Golf Players. We hope January 23rd idea will be implemented by Kemper sometime. It was the ‘Palm Coast Spirit’ and Way not to leave anyone out from Golf or our other Recreational Amenities. That is what the ‘Palm Coast Project’ was all about. We really miss enjoying Matanzas G.C, We called it the ‘Beautiful Monster’ – the finest Golf Course in Florida.