Agenda • Background and History • What is the new proposal? • Why this route? – Why for us? – Why for SOA? • Alternatives- Decision Tree • Frequently Asked Questions- FAQ’s – Timeline, How is it implemented etc.
History and Background • Lease Agreement with SOA for 2012-14 • SOA Board Elected in Nov 2012 • Attorney General requested hearing in early summer of 2013 • AG agreed to allow result of ongoing negotiations to be voted on by Homeowners. Deadline to have vote completed 10 months from Aug 13. See attached “Agreement to stay investigation.”
History and Background • Club has been profitable in 2012 and 2013 with SOA as a customer • Without SOA access and amenities agreement 2013 would have resulted in a loss
Structural Challenges for SGC and SOA The Somersett community was built with a Private Country Club inside it that is vitally important to • the aesthetics, the property values, the demographics of the people who choose to live here, the reputation of the community, the community standards and more. Country Clubs typically have the following • Golf, Pro Shop, Restaurant/Bar – Tennis – Workout Facilities – Locker Rooms – Swimming Pool – Banquet/Wedding Facility – Office/Conference space – Somersett Residents have access to most of that without joining the Club. A “golf only” business • model is more challenging Our Club was left without facilities for Banquet/Weddings or any permanent facilities traditionally • associated with a Private Club So what happens when a private entity, such as the Country Club that is so vital the overall • community, has structural business challenges that threaten not only the Club but the community as a whole? It would be irresponsible for both the SOA and the SGC not to seek solutions to these structural • realities
What is the new proposal? • You are likely not to like it at first • No one has at first • Most everyone has liked it after a week • Take a deep breath. Hold your fire until the end of the info session • Wait a few days • Ask questions then make a decision. There will be an Equity Member vote • We are in this together either way
What is the new proposal? • Sale/Lease back to the SOA • Lump sum check for $2.75 million – Everything except the 6 acres where parking and Clubhouse facilities sit • We lease the land back for $1,000 per year – 50 years with two 20 year options
What is the new proposal? • We maintain operational control – Staff, Membership Options, Budgets, Programming, Elected Board etc. No changes day to day • Homeowners have permanent access: – 4 paid rounds per year, driving range, restaurant and bocce access
Why would we do this? • Current SOA Agreement will end either way • SGC operating deficits are improving, but remain • Lump Sum allows us to build permanent facilities and increase reserves – Board consensus is that we have a higher likelihood of achieving business goals with a permanent Clubhouse facility. This is not a liquidation event.
Why would the SOA do this? • Permanent protection of homeowner values – Lease agreements are temporary in nature • Eliminate the possibility that we could ever become Northgate or D’ Andrea without homeowner approval • Obtain water rights • No increase in current SOA assessments needed
Why would the SOA do this • Permanent addition of SOA access to amenities – 4 paid rounds per year – Driving Range – Bocce Courts – Restaurant Access • Northgate purchase was for $2.4 million – After it was brown • Developer agrees to eliminate “Reverter” clause
Decision Points Go it alone Sale/Lease Back • Continue on current course • Lump Sum to the business without SOA revenue of $2.75 Million for a cost of $1,000 per year • Approx $400k in reserves • Increase Reserves • Further cost reductions and/or revenue increases to • Capability to build break even Clubhouse • Maintain autonomy and • New revenue possibilities in future potential gain Weddings, Banquets etc. • No scenario in near future • Retaining the 6 acres with to permanent facilities Clubhouse and Parking lot
Key Club Stats • Membership info- 376 Total Members – 116 Equity, 72 6D and 168 1D Members, 20 other – 11 6D and 78 1D have not pre-committed to renew in June 2014. Still anticipate retaining the majority of those. • Profit and Loss Projections • The unknown – Can we get more people to pay more money? – We will need to do so either way we vote
Frequently Asked Questions • Why not just do another lease agreement? – SOA not interested in temporary arrangement • Why not sell the 6 acres and keep the course? – SOA potentially can’t build due to NRS restrictions • Biggest risks of going it alone? – Never getting enough traction to move forward, perpetual survival mode, risk of reserves not being sufficient at some point. • Biggest risks of sale/leaseback? – Future SOA Board or Residents attempting to meddle with the contract
Frequently Asked Questions • Biggest Benefits to Going it alone – No potential SOA hassle, autonomy, ability to build future equity value • Biggest Benefits to sale/leaseback – Leverage $2.75 million for $1,000 per year while still maintaining operational control • Who pays for Maintenance repairs etc…? – In short, we pay inside the boundaries of the course. No change. SOA pays outside the boundaries. 4 year warranty.
Frequently Asked Questions • If we don’t do this now, we will look back in 10 years and think one of the following: – A. We made a good business decision to go it alone. – B. We missed an opportunity and have remained stymied in our business. • Only you can answer the above for yourself and no one knows the future for sure
Summary • Win/Win Scenario • Club leverages $2.75 million and retains operational control. • Path to permanent facilities to increase business viability • SOA gains ultimate control of the land, water rights etc. • Should the Club not be able to remain solvent in the future SOA has final say as to outcome. – SOA would vote at that time to continue to run or not. • Northgate/D’ Andrea/ ArrowCreek scenarios eliminated.
Timeline • Informational meetings Nov 23, 24, 26 • Follow up informational meeting Dec 7. • Club Vote completed in early 2014 • SOA timeline tentatively April 1 to begin the vote
Closing agenda • Take a few days and ask questions • Read the attached Attorney General “Agreement to stay investigation” • Read the attached Letter of Intent • Make a decision and vote. • Your vote will be to approve or disapprove the contract and if approved, the use of funds to build facilities and increase operational reserves. • We’re all in this together either way
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