Ridgewood Country Club and The Depression

[Mike Policano]

I happened to be looking at the Ridgewood 100th anniversary book by William Quirin, issued in 1990.  There is a brief section on The Depression.  Given the current depressing times, I paused to read it over.

The current site of the Ridgewood CC was opened for play on May 30, 1929, just five months before the onset of The Depression.  Ridgewood was faced with some daunting problems at the start of its new Tillinghast course and new clubhouse which was designed by Clifford Wendehack, a premier clubhouse architect of the '20's.

Paraphrasing from the book, the 1930 balance sheet was not a pretty thing to look at nor were the problems presented easy to solve.  The situation at the time was wholesale member resignations, the decline of the price at which memberships could be sold, a large debt burden for the new facilities and an absolutely new property begging for its grow-in period.

The lion's share of the credit was given to Bob Strong who was the club President from 1931-1940.  (Bob's brother was Rex Stout, author of the "Nero Wolfe" novels.)  Somehow Bob ran the club at a profit each year.  He would undertake one new capital project each year that would enhance the club's facilities.  So efficiently was the club run that the dues were actually decreased from $200 to $180 in 1936.

Bob himself wrote in the 50-year book in 1940 that the credit went to the Board of Directors for running a very tight ship, to the management sticking to a tight budget and a small group of enthusiatic members who spent countless hours bringing in new members so that the membership rolls did not decline.

I wonder what stories will emerge over the next few years with many clubs facing difficult times.

[Tom_Doak]

Mike:

We are in a different age now.  So many of the courses built in the last twenty years were built to sell housing, and those will be lucky to find a benefactor from golf ... most of the developers will simply declare bankruptcy and leave them to fate.

[Mike Policano]

Tom,

Your point is well taken.  First, I wonder what the memberships of the "real estate" golf courses will do about a developer-owned course going under.  Will a small group try to rally the members living at the development to buy the course?  Will a small group of members buy the course in other cases?

And second, how will the "non-real estate" clubs fare?  Especially the older clubs who have seen the local demographics change over time and the newer general/limited partnership owned clubs that haven't filled their member rosters and may be looking at net resignations?

It will be interesting to see where leaders like Bob Stout emerge to save clubs.

[Tom_Doak]

Mike:

I agree.

There is a similar story about Pasatiempo ... a local golfer bought it out of bankruptcy late in the Depression and kept it going, as I recall.

[Matt MacIver]

Banks "OREO/Other Real Estate Owned" portfolios are already bulging with golf course assets and this spring many, many more housing-based course developments will become bank-owned.  Banks will look to sell them but no one will bite until prices stabilize.  Ultimately it could provide buying opportunities once the banks become truly motivated - I'm thinking 2010+.  But who will have deep enough pockets by then?  I'm guessing maybe real estate investors and only in rare instances, homeowners/neighborhoods. 

[Jed Peters]

Mike:

We are in a different age now.  So many of the courses built in the last twenty years were built to sell housing, and those will be lucky to find a benefactor from golf ... most of the developers will simply declare bankruptcy and leave them to fate.

Tom,

That's exactly the case at my club.

The owners sold the amount of lots they needed to sell, and the golf club, estabilished under a different company name, was left to the bank when they cut and run.

I still see the former owner/developer out there (he's still a member) and find it amusing that he and his 15 handicap buddies still insist on playing the back tees.

[Sam Maryland]

thx Mike, very interesting.

this quote stands out for me:

"The situation at the time was wholesale member resignations, the decline of the price at which memberships could be sold, a large debt burden for the new facilities and an absolutely new property begging for its grow-in period."

I will be interested to see what happens with old-line non-real estate clubs in the NYC metropolitan region.  what with AIG, LEH, BSC, Citi down 94% from the highs, Madoff, widespread Wall St. layoffs and the stock market drop (etc...), extraordinary amounts of wealth in the region have been vaporized.   

I will not be surprised to see waiting lists drop to basically zero for all but a handful of clubs.  in turn, I wonder if clubs will have to start discounting membership initiation fees, or even eliminating them, in order to attract new members.  I suspect many clubs will have to consider admitting new members with $0 initiation as long as they are willing to start paying dues immediately -- either this or face a monthly financing gap that will have to be filled with higher dues for current members and/or an ever increasing debt load pinned on the hopes for better times.  and this is what I fear that some of the older clubs with established facilities will face...heaven help the newer clubs with big construction debts.

a question for everyone:

faced with a monthly deficit and rough economic times for the forseeable future would you vote to:

a)  admit new applicants at a discount (or for free) as long as they start paying dues right away?

b)  increase dues for current members and/or increase debt to fund the gap?


PS...I understand that the 'discount/free' option may not seem fair to those who have recently paid the initiation fee -- but there is s funding gap -- how do you fill it?  (a) or (b)?

[JMEvensky]

thx Mike, very interesting.

this quote stands out for me:

"The situation at the time was wholesale member resignations, the decline of the price at which memberships could be sold, a large debt burden for the new facilities and an absolutely new property begging for its grow-in period."

I will be interested to see what happens with old-line non-real estate clubs in the NYC metropolitan region.  what with AIG, LEH, BSC, Citi down 94% from the highs, Madoff, widespread Wall St. layoffs and the stock market drop (etc...), extraordinary amounts of wealth in the region have been vaporized.   

I will not be surprised to see waiting lists drop to basically zero for all but a handful of clubs.  in turn, I wonder if clubs will have to start discounting membership initiation fees, or even eliminating them, in order to attract new members.  I suspect many clubs will have to consider admitting new members with $0 initiation as long as they are willing to start paying dues immediately -- either this or face a monthly financing gap that will have to be filled with higher dues for current members and/or an ever increasing debt load pinned on the hopes for better times.  and this is what I fear that some of the older clubs with established facilities will face...heaven help the newer clubs with big construction debts.

a question for everyone:

faced with a monthly deficit and rough economic times for the forseeable future would you vote to:

a)  admit new applicants at a discount (or for free) as long as they start paying dues right away?

b)  increase dues for current members and/or increase debt to fund the gap?


PS...I understand that the 'discount/free' option may not seem fair to those who have recently paid the initiation fee -- but there is s funding gap -- how do you fill it?  (a) or (b)?

I'll say "A" will be the more common but it will frequently be coupled with "B" (increase dues/assessments for current members)simultaneously.Taking on debt right now to cover operating shortfalls wouldn't seem to be real prudent.

It's all about the monthly dues line for 99% of clubs.Lowered/non-existent initiation fees are now a fact of life.

As to those existing members who paid a high initiation fee,their complaints are usually quieted when they realize that there are a lot worse options than a lower initiation fee for newer members.How valuable is a high-priced certificate in a bankrupt club?

[Patrick_Mucci]

Increasing or initiating DEBT is the worst possible choice.

Clubs should PAY as they GO and AVOID DEBT.

[Justin Broderson]

Just an interesting note to add on.   I live in Wayne, NJ and made a few calls last week to see if joining any clubs has actually become reasonable with the current economic status.  I called 4 clubs that were withing 15 minutes of me and not one of them had an initiation fee lower then 25k.  I wonder if this will change after this season?

[Patrick_Mucci]

Justin,

Just wait a little longer, until after the initial bills go out for the first quarter of the 2009 season.

I suspect that clubs may drop their initiations and be happy to just get the annual dues revenue if more members drop out.

Many clubs irresponsibly used initiation fees to subsidize operating expenses.  The current crunch will now force them to reexamine their operating expenses with an eye toward having them supported solely by the dues structure.  This might lead to a responsible fiscal policies and not ones that try to make the club all things to all people.

GOLF, just might return as THE focus of the membership, as opposed to the peripheral and/or collateral activities.

[JMEvensky]

Many clubs irresponsibly used initiation fees to subsidize operating expenses.  The current crunch will now force them to reexamine their operating expenses with an eye toward having them supported solely by the dues structure.  This might lead to a responsible fiscal policies and not ones that try to make the club all things to all people.

GOLF, just might return as THE focus of the membership, as opposed to the peripheral and/or collateral activities.

I think you're right about clubs re-examining operating expenses and trying to live within the dues.My fear,however,is that a lot of clubs will look at golf as just a "collateral" activity and act accordingly.