The day before I moved into my new Florida house, the golf club closed. Now what?
- Bringing back a closed community golf course in Florida is almost impossible
- It’s hard to get a super-majority of an HOA to agree on anything
- Leadership skills got the job done
- The focus has to be property values, golfing gets in the way
- Homeowners have to protect their investments
- Business principles trump enthusiasts
- Only deal with people who have their own money, not investors
- Efforts to get political help was fruitless
- Our lovely course, Irish pub restaurant and mini-golf are now open
- My community is very happy and I hope we’ll never forget
What are the odds of reopening a Golf Course that has been closed for 2 ½ years in Florida? Probably about the same as winning the lottery. All through the last 2 decades developers in Florida built really fancy, private, gated communities around equally fancy golf courses. It was a no-brainer investment, put $2.5 million into a golf course, let it wind through a 750 – 1,000 home community and sell $400M – $500M worth of houses, asking substantial premiums for “golf course lots”. Once all the houses are built, sell the course to someone and move on. Duplicate this model all over Florida.
That’s what happened to our 821 household community, Plantation Palms in Land O Lakes, FL, north of Tampa.
Being newly retired, in late 2013 I began looking for our dream house in Florida. Leaving our 20 year home outside Philadelphia would be easy, especially after a few brutal winters. We really liked the gulf coast area, so I focused on Tampa where I had traveled to many times. My needs were simple, I wanted palm trees, a large caged-in pool, 3 car garage, gated community, on a golf course. I’m not a golfer, but thought it would be a good investment. After 6 months and multiple trips we found our house and bought it. The day before our moving truck arrived, the golf course/club house closed.
What went wrong? In less than 15 years there had been 3 separate owners. The then current owners, 3 partners had defaulted on the entire government backed loan for $2.2M. The course and restaurant had never been profitable and they had no golf course experience. Compounded by the fact that, there are less golfers today than in previous years and our course had followed many others into closure. Most former course were gobbled up by land developers who fight the legal zoning battles to put in multi-unit housing, retirement homes, small professional office parks and housing. This would obviously be the natural track in our community.
The month after I moved in I went to my first monthly HOA Board meeting to ask them what they would do to fix this problem, my view of the 8th fairway and green was already becoming obscured with tall weeds. The response was that the golf course was private property and the HOA Board couldn’t/wouldn’t do anything. The board did agree to appoint a committee to study “land options” and I would be part of that committee. The 4 of us on the committee held 3 community meetings, attracting a hundred or so people. We had ideas like a pet cemetery, park lands and so forth. But everyone really wanted the golf course back, somebody with lots of money to just buy it. To me it became really clear that this entire issue should become focused on our property values, not golfing. This was just an old fashion business problem, ardent golfers just complicated the logic. Our community property values totaled well over $250M, a 10% drop in values was a lot of money, far more than the cost of the course.
Being a retired CEO and having been involved in numerous acquisitions, this appeared to be a solvable problem. Maybe we should just have the HOA buy the course. Along with being retired I was a new resident and a lot of time on my hands. I just decided this would be an excellent project to keep me busy. I might have been a little naïve too!
So my journey began.
In the summer of 2015 I started a community initiative I called the BBOC, Bring Back Our Course. My first efforts were based on figuring the economics of buying and operating a country club. After a lot of meetings, calls and research I was able to develop a pro-forma for the purchase of the club and 5 year operating costs. Although I developed this plan and presented it to our HOA Board and community gatherings, it was primarily used to show that buying and running a golf club was not a highly profitable business. The cost of funds was a huge factor, if you tried to borrow the money, the interest expense would be a killer. At least the HOA could, in theory, get free money, just raise dues. I also discovered that the entire leisure golf market was falling. Whereas our club had 37,000 rounds of golf in 2007, by 2010 it had dropped to 26,000 and would continue to drop.
Here was my BBOC “business plan”:
- I had to drive the entire process, or nothing would get done under tight time constraints
- Form a small committee of helpers who could provide advise
- Find a close friend to be my partner, I did, thanks Simon Fitzpatrick
- Develop a “block captains” network that could go door to door
- Provide a weekly email newsletter and a blog site to communicate and engage the community
- Get HOA Board support, without becoming a Board member
- Become a trusted advisor to the real estate listing agent
- Deal directly with the Federal Government at all levels
- Work quietly behind the scenes, yet communicate with the residents
- Get the Board to pay for an independent feasibility study
- Find a buyer who was focused on long term ownership
- Find a method to have the community invest money in a final deal
- Get a deal done before the property went into foreclosure or to a tax deed sale
Here were the major financial issues:
- A $2.2M defaulted bank loan, backed by the Bureau of Indian Affairs
- Multiple years of unpaid back taxes to the county, tax deed sale pending
- Approx. $400k+ of commercial liens against the past owners
- $1.2M, the potential asking price for the sale of the property by the government
- $1 – $1.5M, cost to renovate and open the course approx.
After many false starts with “buyers” who in fact could never come up with financing, the government was getting frustrated. During the last half of 2015 and first half of 2016 I was in constant contact with the Bureau of Indian Affairs, Department of the Interior and then the Justice Department. The government was under pressure to dispose of this mess, they had a $2.2M defaulted loan and a “short sale” was challenging, compounded by the fact that the 3 defaulted owners had some protection as American Indians. They were structured as an LLC and we needed all 3 partners to approve a deal. The government was hoping to get $1.2M plus the payment of back taxes and liens.
It would costs more to buy this closed course and completely rehab it vs. just buying an existing successful course, with little risks. This was already a dead end.
To me this was just a money issue, a matchup between a really qualified buyer and the government’s ability to take a really big “hair cut”. So after months and months of efforts, sleepless nights and a lot of prayers, things started falling into place.
There was hope.
• I and two of my BBOC associates were voted onto our HOA Board of Directors, I became President. The Board would now fully support the BBOC efforts.
• A very qualified buyer, Ace Golf was willing to buy the course for a very low price of $700,000 cash, no due diligence and immediate close. This was a net number.
• Ace Golf would then invest about $1.5M in the club, adding a night driving range, 4,000 sq ft of planned new banquet rooms/larger patio, a Mini-golf course and a Mulligans pub. Ace Golf was locally owned and had a great track record of reopening other courses.
• The HOA community voted (70% approval) to sign a Services Agreement with Ace Golf for $625,000 over 5 years, giving all residents a Social Membership. This made the Ace Golf deal viable.
• The government would agree to pay all back taxes, settle all liens and take a large “hair cut”.
• We feared that the county was days from conducting a tax deed sale and sell the property on its court house steps.
With tons of drama and threatened law suits, the local Tampa Justice Department lawyer presented the entire package to the Department of Interior for final approval. As if a guardian angel was looking over the transaction, the final decision was made by a gentleman in the Department of Interior, who had been my main contact all along. He had taken my calls, put up with my emails and pleadings throughout the entire process. He had all along said he was not the decision maker, in the end he was.
With still more last minute drama and resurfacing older buyers, the deal with Ace Golf closed on Monday, May 16, 2016. Two months ago our Mulligan’s pub opened and this week our golf course opened. Our community has been celebrating almost non-stop for the last few months. Property values have rebounded and I can again see a lovely fairway and green from my back yard.